There is a question that many people still ask this day: what is blockchain technology and how does it works? The term ‘blockchain’ is often heard in various contexts, particularly in information and technology sector. However, the concept is yet to be fully grasped by everyone due to its complexity. If you want to learn more about this difficult topic, this passage might be able to help clearing out some of your confusions.
Simple Explanation on what is Blockchain Technology and How Does it Works?
The following explanation might be able to answer the question of what is blockchain technology and how does it works?
Concept of blockchain
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The concept of blockchain is something that is considered vague by many people. However, the general idea is actually pretty simple. This system keeps record of every single transaction that members within the chain has done. Everyone would be able see the transaction that happens to ensure transparency. However, nobody within the system would be able to tamper with the record.
Advantages of blockchain technology
There are several advantages that make this system very popular in this generation.
- System decentralization is one of the main highlights of this technology. Many people are struggling with the complicated bureaucracy of conventional banking. The blockchain system relies on mutual trust and agreement between two parties involved in the transaction and thus transaction can be done swiftly.
- Automated system makes blockchain is very convenient because you do not need to input the data of your transaction on your own. Everything would be updated automatically.
- Transaction within the system is also known to be very secure because it is authorized using digital signature. It reduces the chance of fraudulent transaction significantly.
When discussing about the mechanism of this system, things become slightly more complicated. You need to know the three main components of the system. The first one is peer to peer network which is the heart of blockchain. After that, there is a component called encryption key. Those two components are managed by certain computing mechanism.
The peer to peer network system allows parties to interact directly with each other. This helps transactions to be conducted in quick manner. Within the blockchain, members are able to make agreements about certain goods or items that they are making transaction without third party involvement.
This interaction is being facilitated by encryption key. There are two types of key known within the blockchain realm which are private and public keys. By using both of these keys during transaction, each party will be able to ensure that the transaction will successfully be made according to its intent. Everything is secured by the system.
Transaction using blockchain
Once two parties have reached agreements for transaction, the request for transaction would be sent by one of them. This request would be broadcasted to the P2P network so that everyone within the network would be able to see it. The request is then verified in order to ensure that it is not a request for fraudulent transaction. Once it has been verified, the transaction can proceed and will be recorded within the network.
Impacts of blockchain technology
There impacts of this technology can be seen in various aspects of life. In health care sector, this technology can be used to store data of patients that need to be secured. This technology can also be used within politics sector such as for public voting in order to ensure transparency and security at the same time. In the future, this system might be used to create secure payment system for many websites and organization. Hopefully, this answers your question about what is blockchain technology and how does it works?