What is Blockchain? Why Blockchain is used?

A blockchain is a distributed and decentralised digital ledger that keeps track of transactions over a computer network. It creates a transparent and safe chain of information by using cryptography to link and secure data chunks. This technology provides safe and impenetrable record-keeping across a range of businesses, and it is the basis for cryptocurrencies such as Bitcoin.

 

Types of blockchain

• Public blockchain: These blockchains are public and permissionless, meaning anyone may sign up, take part, and approve transactions. Ethereum and Bitcoin are two examples.
• Private blockchains: These are blockchains that are permissioned and restricted, allowing only particular parties to participate and approve transactions. To keep a closed network in place, these are frequently utilised in consortia or commercial contexts.
• Consortium blockchains: These are a semi-decentralised method in which the blockchain is cooperatively controlled by a number of groups with similar goals. It offers a middle ground between private blockchains' limited access and public blockchains' transparency.

 

Features

Decentralisation, immutability, transparency, security via encryption, and consensus processes are some of the main characteristics of blockchain technology. Together, these characteristics create a distributed ledger system that is resistant to tampering, facilitating safe and effective transactions in a range of industries outside of cryptocurrency, including supply chain management, medical, and financial.

 

How is blockchain used? 

Using blockchain technology to enable safe and transparent transactions, the development and usage of digital currencies like Bitcoin are the most well-known applications. By automating and upholding an agreement's terms, these self-executing contracts eliminate the need for middlemen in commercial and legal transactions. Blockchain is being investigated for trade finance, settlement systems, and remittances since it makes cross-border transactions faster and more secure. It ensures data integrity and privacy by providing a safe, compatible method of managing medical records.

 

Pros

• Participants trust is increased by the decentralised and transparent structure.
• It helps in decreasing costs. Blockchain technology can save costs by doing away with middlemen and streamlining procedures.
• Decentralisation reduces the possibility of a single point of failure by doing away with the necessity for a central authority.

Cons

• It doesn't has scalability. Present blockchain networks have trouble processing a lot of transactions rapidly.
• It has regulatory uncertainty. Blockchain and cryptocurrency laws and regulations are continually developing.
• It has privacy concerns. Even with pseudonymous transactions, privacy issues persist, particularly on public blockchains.

Why blockchain is important? 

It does away with the requirement for a central authority, lowering the possibility of a single point of failure and boosting participant trust. Due to the use of cryptographic algorithms, blockchain offers a high degree of security for data and transactions and is impervious to manipulation. Because everyone in a blockchain network has access to the same data, transactions are more transparent and accountable. Data contributed to the blockchain is very hard to remove, protecting the accuracy of the historical record.