What are the advantages of Blockchain?
Blockchain needs no introduction to digital age investors. Not many technologies have succeeded in capturing the imagination and interest of people as has blockchain. Many instantly relate bitcoin to blockchain which has been the most highly identifiable of all digital currencies which succeeded in creating new millionaires in 2017.
Blockchain forms the backbone of most other cryptocurrencies including bitcoin. The advantages of blockchain go beyond just being a backbone for bitcoin.
What is blockchain?
A blockchain is a chronologically updated and distributed digital record that comes with cryptographic protection. It can be compared to a linear chain of blocks where every block stores information and is connected to another block and the entire network is shared among the participants.
This chain of blocks, called a ledger, records and houses the data that is transferred amongst the participants. Each of the participants in this shared network is able to see the original information. Although everyone in the shared network can see the record, a majority of the participants have to consent before any updates are made to this record. A case in point: when 80% consensus was not reached on a Bitcoin blockchain upgrade, Bitcoin split into two different currencies of bitcoin cash and bitcoin were born.
Just as each block in a building is based on the block below, each block in a blockchain is based on the data stored in a previous block. This means that blockchain data cannot be altered.
It is possible to store data such as physical assets, purchases, ownership status, transactions, supply chain, warranties among others by building programs into the blockchain.
After data is entered into the record, it cannot be deleted. Every block in the blockchain has the permanent timestamp that indicates authentication and verification.
Top advantages of the blockchain
These are the top features and advantages of blockchain:
Decentralised: As one of the most interesting aspects of the blockchain, decentralisation is also its key advantage. Instead of being stored in any one single point, blockchain system is entirely decentralised, which means that it is not possible for an overarching authority to advance its own agenda and control the network. Decentralisation also translates into more security besides being a fair system of distribution.
Peer-to-peer (P2P) network: As information is exchanged and constantly recorded among network participants, the network becomes stronger with increasing number of participants. A P2P network is an integral and critical part of blockchain technology. The term “peer” refers to the computer system within the blockchain network. In this network, a user makes use of and provides the network’s foundation simultaneously. Each peer is called a node, and every one of them is considered equal.
A peer provides to other users part of resources such as bandwidth, processing speed and disk storage without central coordination on any servers or hosts.
Although nodes are equal, each can assume different roles of a full node or as a miner. In the instance of a full node, the entire blockchain would be copied into a single device in the connected network. This means that blockchain data cannot be destroyed or lost as it entails destroying every full node within the network.
The greatest advantage of blockchain is that as long as a single node exists, information or records are also intact, making it easy to rebuild the entire network.
Security/immutability: Once every block is sealed cryptographically, it is impossible to copy, delete or edit, ensuring the immutability of the digital ledger. Because of the very nature of decentralisation of networks, there can never be central points of error or failure within the system. With an absence of weak points within the system for hacking, there can be zero chances of malicious, which boosts the network’s reliability. On top of this, every transaction needs the digital signature through both private and public keys which utilise different cryptographic schemes ensuring complete encryption.
Open source: Blockchain being open source software, there are reduced entry barriers that lead to stronger developer base and enhanced transparency. Open source software is shared freely, collaboratively produced, transparently developed and published for the community good instead of being a single organisation or individual’s property with the aim of making a profit. No single individual or a company develops, sells or owns the software which removes any chokepoints or bottlenecks in the open source software development process.
Trust: As the participant’s identity remains confidential, everyone can deal freely with another through the secure network. Complete anonymity and transaction security are among the top advantages of blockchain technology. It is crucial for participants to maintain privacy and anonymity for many reasons. With every transaction on centralised networks, the address is given out, which means the details of the user can be found out by hackers. Blockchain protects addresses in a given wallet by changing addresses constantly which makes it difficult for payments or transactions to be traced.
Ease of use: With competent integration capabilities, blockchain has the advantage of being easy to use and fast. The flow of data or money is quicker because of the absence of middlemen. In traditional banks, transactions of huge volume take multiple days to complete owing to different protocols or transferring software. Besides, financial institutes have defined working hours while online transactions are also not allowed on holidays in some countries.
Blockchain technology operates on a 24×7 basis, which means any day or any time, transactions can be made quickly and safely.
Transparency: It is possible for users to verify and track transactions in the public, decentralised ledger. Any individual can view the entire record of transactions. Besides, the software, being open source, any alteration of data is incredibly difficult. With multiple eyes glued to the network, any alteration in the logged data is sure to be seen, which adds to the transparency and security of blockchain.
As a revolutionary technology that is poised to create disruption as yet unseen, the impact of blockchain has been felt across the globe and in all sectors including consumers, governments, private industries and communities.