Blockchain Technology

What is Blockchain Technology?

Blockchain networks are used to maintain growing lists of records. This is performed through a network of computers connected to the main blockchain network. Each computer stores a copy of the list of records. Any new entries are recorded in all copies of the record. In essence, the blockchain is a peer-to-peer network used to store and verify records.

What are the Uses of Blockchain?

Blockchain is currently predominantly used in cryptocurrency networks. This technology was popularised with the advent of Bitcoin.

Blocks are the backbone of Bitcoin that enable the cryptocurrency to remain secure and, therefore, in demand as a store of value. Other alternative coins, or altcoins, have followed Bitcoin in using the technology to power their cryptocurrency networks. Some, like Ethereum, have made changes to their network by adding features.

Blockchain, however, also has other uses. Because of the built-in authentication feature, it is also being used to verify logins or website certificates.

How Does Blockchain Work?

Computers are voluntarily added to the network for the typical Blockchain network and given a copy of the existing list of records. These records are known as blocks. New records or blocks are added to the chain – hence the name. When new blocks are added, the computers follow a specified protocol to verify and record the new block into the chain.

New blocks are added on top of old blocks. This structure makes it very difficult to alter old blocks. In fact, old blocks cannot be modified without changing the data in subsequent blocks that follow it in the chain.

Furthermore, all computers in the network must agree to change this old block. This is what prevents fraudulent data.

If a counterfeiter attempts to create a fake record of cryptocurrency, the computers in the network will disagree with the change in an old block. The fake record will be invalid and not recorded in the network.

Blockchain in Cryptocurrency

In cryptocurrency, computer users part of the blockchain network are known as miners. Because they take part in verifying and recording cryptocurrency transactions, they are compensated with a small amount of the cryptocurrency in question. The act of mining, thus, involves offering your computing power to the network in exchange for some cryptocurrency.

Different cryptocurrencies have different verification and recording protocols. Because of this, the computing power and hardware required for each block network can differ. Additionally, the confirmation speeds for transactions under different cryptocurrencies can also vary.

Bitcoin confirmations may take between 10 minutes to an hour or more per confirmation. In contrast, Ethereum confirmations are generally much quicker. Usually, there is a tradeoff between security and speed and mining fees and speed.

Check out this course on Application of Blockchain for Accountants