In the last decade, the buzzword blockchain has created many ripples across the world, not just in technology segments but across the spectrum. From being called the 21st century’s most revolutionary technology to a glorified spreadsheet, blockchain technology has been called many names by promoters and critics alike.
So, what exactly is a blockchain? Is it an enigma? Is it going to change a billion lives or just another tech jargon? With all the media hype around cryptocurrencies and excessive use of buzzwords without delving deeper into the underlying technology, it’s hard not to get all tangled up and end up being confused. But not today.
In these two-part blog posts, we’ll try to unravel all the complexities and understand the underlying concept of blockchain technology in a step-by-step manner. This blog post will be a simple explainer – understanding what blockchain technology is, its significance, and its applications. In the second part of this series, we’ll try to break it down into further components and understand the working to give you a holistic idea about blockchain technology. So let’s find out, shall we?
What Exactly is Blockchain?
In essence, blockchain is a new way to store data. Yup, that’s it. Simple, isn’t it? So in a traditional way, there’s a centralized entity or a person who’s responsible for managing the data, including making changes, adding new data, or deleting it. Whereas in blockchain, nobody’s in charge, and everyone is an equal participant. But what does that mean?
Well, in blockchain, the data is stored in an immutable way, meaning it cannot be altered. Once a piece of data is written in a blockchain, it can never be changed—more like written in stone. But here’s a catch – you cannot alter the data, but you can always view and input data.
Now, the question arises, if blockchain is just a new way of storing data, then what’s so revolutionary about it?
Well, the revolutionary idea is – solving the trust. Combine the blockchain technology with the right incentive system and a consensus mechanism ( a mode of reaching agreement across various participants). You can create a system where strangers can transfer value without trusting each other or an intermediary party.
That, my friend, is revolutionary. For the first time in human civilization, we invented a system through which we can interact with each other across borders without having to trust anyone. So what’s the use of this trustless system? What are its applications?
Applications of Blockchain
Well, if we can create a completely trustless system, the first application of this system would be no doubt – money. Here comes Bitcoin. And if you add some additional functionality such as smart contracts, you get Ethereum. That’s another application of blockchain.
How about taking data ownership back from the likes of Facebook, Amazon? What if you can prove your identity (KYC) without sharing your personal details? Well, blockchain has made that possible, too, with zero-knowledge proof (ZKP). Add decentralized storage, real-time international payment settlements, proof-of-ownership for arts (NFTs), electronic voting, decentralized finance (DeFi) – the applications of blockchain are limitless.
So, in this blog post, we understood what exactly blockchain is and its applications. In the second part of this blog post series, we’ll get our hands dirty and understand the working of blockchain.
Part 2: How Blockchain Works?