What is Blockchain?
By: Team Finllect
Tags: Blockchain, Blockchain Technology, Cryptocurrency, Blockchain Startup, Bitcoin

By Rukmini Ravishankar

Every country or even major corporation has a central financial authority that maintains a record of all financial transactions that take place. So it’s incredibly powerful. Unfortunately, it is possible that people in such central authorities can make unauthorized changes to this record/ledger. They could add or remove transactions when something doesn’t add up or to cover unlawful activity.

So, where does blockchain fit into this problem? 👩‍🏭

First off, blockchain is a set of interconnected ledgers maintained by a network of several computers, each of which is linked to the other. The more the number of units in this network (a.k.a nodes), the higher the network’s accountability.

How though? 🤷‍♀️

Each of the computers in a blockchain are programmed with some algorithms to understand and produce an answer to how they think the different transactions need to be recorded in reality.

So, having more numbers of such computers will help reduce the risk of fraud/ manipulation or, even just chances of human error in a single system, by distributing this task and reducing the central authoruty’s dependency on a single system alone.

Let’s build the blocks! 👷‍♀️

A blockchain system has three major elements 🤟:

#1. There is a set of computers, backed by another set of nodes (units) that form a peer-to-peer network. Each node (unit) is connected to several other nodes.

#2. All information stored within the system is completely encrypted and made unreadable to potential hackers. Even if they do happen to crack the code, there’s another element that prevents them from making any unauthorised changes.

#3. The nodes make an agreement about a particular mathematical problem that all of these systems need to solve, in order to make changes to the ledger. The process of solving math problems is known as mining.

What’s the cool part? 😎

Transactions in the ledger are stored in blocks of information. These blocks are arranged in a chain order, such that every block contains its own information plus the previous block. For example:

Block A — 1

Block B — 1, 2

Block C — 1, 2, 3

You know how a sitcom releases a pre- cap and the director can’t change the plot since it’s already out there? That’s how blockchains work. 💡

If you change one transaction in a particular block, you would have to change every other block’s information, which is not feasible. This would lead to a chain reaction which would ultimately prevent you from making any unauthorised change to the ledger.

Uhh…it’s got some problems too 👀

Cryptocurrencies (like Bitcoin) uses blockchain technology. A major problem with this technology is the amount of time it takes to record a transaction in the ledger. So, if you decide to pay for a cup of coffee with Bitcoin, it would take several minutes for the computer to record the payment.

With normal currency notes, each agency or company has its own ledger which is limited to transactions within the company. But Bitcoin is registered as a currency for the entire world. So, the transaction would have to go through several computers situated across the world before it gets recorded.

In a nutshell, blockchain technology is a revolutionary solution to the problem of corruptibility. Since it’s completely reliant on artificial intelligence, it is objective and universal.

So, its uses are wide-ranging and massive. You can use bitcoin for any purchase, provided both parties in the transaction have the necessary equipment — This is where blockchain hits a block. For this technology to reach its absolute potential, the whole world needs to be equipped with efficient computing systems. This step could take a very long time.

Whether the Blockchain technology is here to stay and change the world is something we are yet to see, but the rate at which information technology is progressing seems to promise a shorter wait.

Don’t you wanna try buying a cup of coffee with bitcoin? *so cool* 🤩

This article is part of the bite-size bundle ‘Invest in Bitcoin’ on the Finllect app. Find the Finllect app on Appstore today! 💁