What is Blockchain? How does it work? For everything you have probably heard about Bitcoin, Ethereum and other cryptocurrencies, you should really pay attention that Blockchain is the technology behind all these cryptocurrencies.. We will tell you more about what it is and how it works.

What is Blockchain?

Some believe that blockchain technology has the potential to change every aspect of our lives, beyond cryptography’s impact on our financial wallets, the core technology that many cryptocurrencies run on, and its unique way of securely recording and transmitting information.

This technology allows records to be kept across multiple computers called “nodes”, each user of the blockchain has its own agreement, but its operation requires a lot of computer power and the agreement validates, approves and stores data on the blockchain. From the traditional way of saving data through files or servers on computers.

A blockchain organizes the information added to it in the form of blocks or sets of data, and each block can only contain a certain amount of information, so new blocks are continuously added to form the chain.

Each block has its own unique identifier “hash”, which not only protects the information within the block from anyone who doesn’t have the required token, but also protects the block’s location along the chain by identifying the block that came before it.

In short, in answer to the question of what is blockchain, it is a technology that allows consumers and companies to track financial transactions from start to finish without the need for consultation from a central authority to manage data encryption. Providing an element of transparency in transactions makes them more secure and protected.

See also: What is the first layer of blockchain?

How does blockchain technology work?

Here is an example of how blockchain can be used to verify and record Bitcoin transactions as one of the most important cryptocurrencies:

1. Consumers buy cryptocurrency (Bitcoin).
2. Transaction data is sent through a network of decentralized Bitcoin nodes.
3. The contract validates the transaction.
4. After approval, the transaction is aggregated with other transactions to form a block, which is added to an ever-growing chain of transactions.
5. The completed block is encrypted and the transaction history is always consistent; It cannot be removed or replaced.

However, the Bitcoin blockchain is public, meaning that any investor who owns Bitcoin can view the transaction history, but the identity behind any account is difficult to trace, and the blockchain allows any user with computer power to approve and record transactions. On that technology..

But this means that all baskets of blocks are public, like Bitcoin, where a blockchain can be designed to be private, but it is still decentralized in any way, meaning that while private, it maintains the security of any data stored. database using the same encryption methods.

Features Blockchain

While mentioning what is blockchain, we mention that there are several advantages related to blockchain technology which can be briefly summarized as follows, namely:

• Ability to detect errors in financial transactions and verify their validity.
• Prevent data leakage, hacking and hacking.
• Any process that takes place in any network is traceable due to the element of transparency, which prevents fraud from occurring.
• There is no middleman, that is its working principle.
• It is considered cost effective compared to other technologies in the banking sector.
• Protecting property rights, because it records operations from start to finish, making it easier to know their origin and avoid theft.
• Data is not stored in one place, but in every device involved in this technology, preventing any attempt to hack and we mean by decentralization.
• Uses a high level of security and encryption.
• Transactions can be sent and received within minutes, unlike the system in the banking sector.

See also: What is Ethereum?

The future of blockchain

After we learned what Blockchain is, we pointed out that this technology gives us the technology to transfer information with a high level of security, and it has a complete comprehensive evaluation to ensure the validity of any information that needs to be protected.

If banking information is stored on the blockchain when opening an account with a new financial institution or transferring information between institutions, this technology can help ensure that the transfer is accurate and legal using your information already stored when available. Security and speed factor, as well as ensuring that:

• Costs and expenses
• Opportunities for fraud

In the meantime, you can bet on the power of blockchain by adding a blockchain-based cryptocurrency like Bitcoin to your wallet, though this isn’t the only way, as you can tweak more traditional investments as you go along with it.

It is worth noting that there are some statistics that indicate that more than 150 billion dollars will be saved by 2025 after the adoption of blockchain.

Blockchain’s impact on business

There are a few ways blockchain will affect traditional business, now and in the future, and once we know what blockchain is, we can shed light on its role in business:

1- Zone administrative

One of the benefits of blockchain is that it simplifies the business process by tracking the information and resources you need and concluding smart contracts to automatically execute business contracts.

It makes it possible to build trust among the parties involved in the commercial process without knowing each other and it came within the framework of facilitating trade exchange.

2- Marketing sector

In the field of marketing, blockchain technology can make an impact by developing it and finding solutions to ad fraud, as well as helping advertisers and marketers reach real marketing goals by managing marketing campaigns and eliminating middlemen.

3- Accounting field

This is one of the most difficult areas, so a technology like Blockchain is needed to be able to increase the level of accuracy in it, along with the transparency provided by technology that helps financial accountants, along with streamlining accounting procedures. To reduce the time spent on checking accounting operations.

4- Human resource management

This technology helps employees in managing human factors, providing accurate information without the intervention of intermediaries, developing accurate software, and paying employees’ salaries after completing their work without any significant error. concerned authority.

5- Commercial and financial sector

Undoubtedly, Blockchain facilitates the completion of purchases through smart contracts and cryptocurrencies without the intervention of intermediaries or receiving any commission, while payment is made directly and automatically through algorithms, as well as processing payments with greater efficiency.

Challenges for Blockchain

Thus, as we have learned in detail about blockchain, along with its key features and important role in the digital world, it is undeniable that it is a real added value for organizations when applying it, but it faces some challenges as follows :

• While blockchain technology is concerned with reducing the role of middlemen involved in transactions and subsequently reducing the cost of payments, banks are the biggest challenge for this technology, as the banking system achieves huge amounts through the role of middlemen in financial transactions.
• Lack of regulatory oversight, due to the absence of relevant laws, makes the use of blockchain in organizations still apprehensive by some.
• Technology is a little complex for the average user, so it is natural that they find it complicated to estimate the benefits of that technology.
  

  While blockchain still doesn’t guarantee returns, it’s a more conservative alternative to putting your money directly into the cryptocurrency market, which is volatile.