TECH UP THOUGHTS BY MEG HATTON, TECH UP FOR WOMEN TEAM
To those new to exploring cryptocurrencies, the idea of blockchain technology can seem confusing and daunting. However, this new database technology, though unique to any other, is rather simple when broken down.
At its core, blockchain is a distributed database that is shared among various parties through a computer network. As its name suggests, blockchain uses a structure of blocks and chains of data strung together in a digital format. Blocks are filled with information until they reach their storage capacity, and are linked with the blocks that came previous. Once a block’s capacity is reached, it will be added to the chain for a new block to follow. This structure forms an irreversible timeline of information, as blocks are added they are given a precise timestamp and added to the record. A blockchain then holds records of transactions that cannot be altered or deleted, and is transparently shared among all of its users.
Blockchain is an example of distributed ledger technology, which shares and synchronizes databases across multiple sites, institutions, or geographies, and is accessible to multiple people. Transactions and data stored in these databases is open to the public, and thus have multiple “witnesses” that help to ensure security and combat hacking. At each node of the network, participants can own an identical copy of recordings, and any additions or changes made are copied to participants in seconds.
Distributed ledger technology stands in contrast to centralized ledgers, which are more prone to cyber attacks as they have a single point of failure. With distributed ledgers, potential hackers would need to attack all of the copies simultaneously – a seemingly impossible task with thousands of nodes and copies.
Introduced in 2009, Bitcoin implements blockchain technology to keep track of transactions in the cryptocurrency. Since blockchain is used in a decentralized way so that all users collectively retain control, Bitcoin is able to ensure the fidelity of all data stored within the blockchain. If a potential hacker was targeting transaction records, all other existing nodes would cross-reference the incorrect information to easily spot and stop malicious activity.
With the introduction of blockchain as a modern way to store data, financial institutions are revamping the way their customers’ assets are kept. Especially given security concerns of older databases, blockchain’s distributed data qualities offer a solution to mitigate hacking and viruses. With current implementation in Bitcoin and other cryptocurrencies, the potential of blockchain technology has only scratched the surface.