How does a blockchain work- Bitcoin-mania peaked with the price of the digital currency back in late 2017 but behind the scenes, the mystical and confusing blockchain industry has been quietly gathering momentum. Unlike bitcoin and other digital currencies, blockchain has plenty of real-life usages to make all of our lives more productive.
Few people understand how blockchain works which is a shame as it represents a fast-emerging technology. But no one should be faulted for not understanding blockchain. Here is a simple explanation of blockchain.
So, what is Blockchain?
Before understanding what blockchain technology is it would be wise to discuss real-life financial transactions that we are all used to. Suppose you are selling your home to a young couple and everyone agreed to a price and date. Congratulations!
The transaction cannot be completed with an intermediary, say a notary. The notary is a trusted individual who will approve the transaction and arrange all the regulatory and legal paperwork that needs to go on behind the scenes. Essentially, all the boring stuff few care to understand.
Now, mistakes can happen during the process – as rare as it is. According to the US National Notary Association, even the smallest of mistakes can bring “dire consequences.”
Instead, a whole new process can exist in the digital world which replaces the outdated processes, called a blockchain. Blockchain in simple terms refers to a digital ledger that contains transaction details. The records of transactions are kept in “containers” referred to as blocks. And these blocks are joined together for all to see and secured using cryptography.