The blockchain technology is, nowadays, a word on everyone’s lips. However, a surprisingly large number of people haven’t got the slightest idea of how it actually works. Sure, they know it’s something related to the world of cryptocurrencies and that it’s way of protecting data from being tampered with, yet, the potential of this amazing trend still eludes them. In order to help bring you one step closer towards understanding the blockchain, there are five things you need to learn about it first.
1. How do they work?
The first logical question about the blockchain technology is how it works and this is a surprisingly easy question to answer. Namely, two parties are first required to agree upon a transaction, which is then followed by the validation process. As soon as this is over with, the transaction is added to the block in the chain (hence the name), which has its own sequence. In a way, this guarantees that the information cannot be tampered with. Needless to say, with more and more resources poured into the world of cryptocurrencies, this kind of safety handle was more than necessary.
2. Avoiding intermediaries
The main downside of the traditional payment gateways was the fact that they required an intermediary, a third-party as a guarantee of a successful and safe transaction. The problem with this lies in the fact that it makes no sense for someone to do this for free, which, in return, means that transfer fees were just the industry standard that can’t be bypassed. With the help of blockchain technology, middlemen can finally be excluded from the equation, due to the fact that a higher level of trust now exists between the two original parties.
3. Not just for virtual currencies
In one of the previous segments, we explained both how this system works and how it affects the world of online transactions. So, this leads us to the next logical question – is blockchain exclusive to cryptocurrencies? The answer to this question is – of course not! Cryptocurrencies have, so far, only been a vessel, an incubator of sorts, for this outstanding idea. In the future, the blockchain technology might take an entirely different direction. At the moment, the hottest debate is the one regarding the public blockchain governance, which is something that you can read more about at portals like The Blockchain Review.
4. Transparency and decentralization
Apart from a higher level of trust between complete strangers on the internet, there’s more that blockchain can offer. First of all, it’s a decentralized technology that works on a peer-to-peer network system. This gives that old slogan “by the people for the people” a completely new meaning. As you can already see, blockchain is all about trust, which is something that just can’t be done with a sufficient amount of transparency involved. Sure, most people enter this industry for the anonymity alone but blockchain doesn’t actually have to be anonymous (at least not completely). However, this debate on anonymity vs. pseudonymity is a story for another time.
5. Numerous uses in IoT
At the end of the day, when we speak about present-day technologies and their application in symbiosis with blockchain, it’s inevitable to briefly reflect on the internet of things (IoT). Smart lock technology, enhanced with the internet of things can create a completely new rental system that’s much more convenient for both landlords and tenants. The tenant arrives at the place, inspects it and makes the blockchain-governed payment, which is immediately followed by the landlord giving them a temporary access to the place. This is just the tip of the iceberg of all the possibilities that are out there.
As you can see, some of the above-listed issues are still hypothetical, while others deal with technical issues regarding the technology itself. Even though it may currently be fully functional, and it might not be quite adequate to call the blockchain technology a prototype, there’s a lot of development to be done until this trend reaches its final stage. Until then, it’s definitely one of those things that are worth keeping an eye on.