Blockchain is a public, decentralized structure that performs intricate transactions in a very agile way through cryptography. It works like a shared ledger, where everything that is recorded there is immutable, facilitating the process of recording transactions and tracking assets on a network.
Its system promises to act on the transaction of currencies, contracts, and even important data, going beyond cryptocurrencies and revolutionizing various sectors. This revolution is about security and process speed, but also about another very attractive factor: costs.
HOW DOES BLOCKCHAIN WORK?
In fact, the technology works similarly to a network of blocks connected by a chain. Each of these blocks is a code that contains information, ranging from a contract to a proof of financial transaction.
This information is stored on thousands of computers all over the world. If someone tries to hack into the system to change what is written, they will have to hack into many computers with different data protection technologies.
This gets worse as more transactions are made, as new blocks emerge and more validations are performed before a new transaction is created. As a consequence, the more information is added to the blockchain, the more secure and transparent the chain becomes.
When studying blockchain, it is not difficult to come across words that refer to actions or technologies related to the subject. To avoid any doubts when a different term comes up, here are the main ones:
Public key/private key: public key cryptography uses algorithms that require two parts, where the public key encrypts, i.e., transforms the information into a code to make it impossible to read, and the private key decrypts, unlocking the content.
Consensus: indispensable for the fidelity of the transaction, it occurs when all parties agree on it, as well as on its validity.
Smart contracts: These are protocols programmed into the blockchain transaction base. They can verify and enforce the performance of a contract, and can execute it on their own.
Cryptography: in blockchain, cryptography acts mainly on the security of transactions, encrypting the information and making it unintelligible to anyone who does not have, for example, a private key made to decipher it.
Ledger: is the shared registry that stores all transactions, like a — large — Excel spreadsheet.
Mining: This mechanism is specific to the Bitcoin and NFT blockchains. In it, users (also called miners) solve cryptographic problems with the aim of helping the blockchain to function.
Proof of Work: is a protocol used to prevent ledgers from cyber attacks. In practice, it uses a system that requires proof that the miner has put considerable effort into solving the problem.
WHAT ARE THE BENEFITS OF BLOCKCHAIN?
The technology that is used in Bitcoin and other cryptocurrencies can bring numerous advantages to numerous industries, such as making transactions faster, safer, and cheaper.
The benefits are already being seen in the financial market, including in traditional institutions. HSBC announced that it has seen a 25% reduction in transaction costs thanks to a blockchain-based system for Forex trading.
Another indication that the technology will be positive for changes in the financial sector comes from a survey conducted by TD Bank, highlighted in a Cointelegraph story. According to the survey, 90 percent of technology professionals believe that blockchain will positively affect the payments industry.
There are already several use cases for blockchain technology to be used in the world. We know the challenges that lie ahead, but blockchain adoption is inevitable. From companies to governments, it would eliminate many problems of falsification and trust in data, by the end of this decade we will most likely see numerous use cases for this technology, it is worth staying tuned.