What is the Purpose of the Blockchain Technology?
Do you know what a Blockchain is? If you do not know, then you will be quite interested in learning more about it. A Blockchain is a public database that is maintained by several network nodes, including software developers, software testers and computer scientists. Each member of the network verifies every transaction that occurs using the protocol. Transactions are recorded in a public ledger called the block chain. The transactions are cryptographically signed using private keys that have been assigned to the owner of the relevant account.
Since the beginning of the internet, there have been different forms of currencies used in e.g. the US Dollar, the Euro, the British Pound and the Yen. However, the most common transaction that occurs online is the exchange of currencies, which can be done either manually or automatically by using some form of software. Many people also use the major currencies to trade stocks and options on the stock markets.
The idea behind bitcoins is based on the distributed ledger technology that is used in networks such as the internet. There is no centralised location where all the transactions take place because everything is controlled by the users. Basically, it is controlled by the users themselves who keep track of all transactions using various tools called ‘wallets’. A wallet is like a book where you keep all your different bitcoins. Wallets can be run on a Linux, Windows or Mac OS X operating systems.
This is the reason why people called the Bitcoins and the Blockchain as “the new internet money”. It is considered to be a protocol that enables users to transact with each other instead of having to carry out all the transactions through a centralised administrator. Transactions are carried out in the form of raw post-transactions that are broadcast to the entire network.
What makes this type of currency unique is that it is much cheaper than any other known currencies in the world. Even though the current exchange rate between the US dollar and bitcoins is around 3%, the cost of handling such a currency is extremely cheap. This is because most people are unable to store large amounts of money in their homes. They prefer to hold assets in such a way that they need not spend a large amount of money in order to make a purchase. So, for people who want to buy something just buy a burger or a beer.
Bitcoins and the blockchain technology is the best choice for storing money in the long run. This is because these currencies have no centralised administrators. So, every single day, new blocks of transactions are being created. All the transaction that is done is tracked according to a specific algorithm and is confirmed before it is allowed to be stored in the virtual currency. Hence, these currencies are useful in case of emergency situations.
The biggest advantage that is associated with the Bitcoins and the blockchain technology is that the entire transaction takes place between individuals, not between large institutions or banks. Transactions can be made between people living in different parts of the world. Also, transactions can be made securely, anonymously and without the intermediary of a middleman. Transactions are recorded on the distributed ledger, which is kept by each member, called as nodes, of the network.
The major problem associated with the new transaction method is that it takes a long time to finish. Hence, it is not suitable for large scale commercial transactions. However, certain applications of this system like for the social media marketing, online money transfer and payments, and instant payments are being used today. Therefore, the concept of the Blockchain and Bitcoins is here to stay.