Blockchain Technology: What is it and Its Purpose?

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Blockchain is a technology that allows safe, transparent, and secure peer-to-peer data transfer without trusted third parties. The technology concept appeared in 1991, but the real blockchain boom happened in 2009.

Today, each respectful IT specialist of high qualification should have a mention of blockchain in their CV. If professional requests "write my resume for me," they should ensure the presence of work experience with blockchain.

However, what is blockchain exactly? How does it contribute to the IT industry and beyond it? This article overviews blockchain technology. It explains why this trend is one of the vital technological advances of the twenty-first century.


How Does Blockchain Work?

We can imagine blockchain as a database spread across different network nodes. Each node stores its piece of the chain's data, and each node has a limited capacity, which is the chain's main trick.

As soon as one of the nodes is full, it closes and becomes a part of the chain, and the next block opens for receiving data. As soon as the block closes, data within becomes uneditable, and the block becomes a part of a common, irreversible timeline. This technology allows storing and reading data but not editing it once data storage is complete; it also helps keep the most valuable data safe.

For example, the modern way of keeping data includes servers and hard drives with enormous storage capacity. A company that owns the storage has full access to the data and can edit it.  However, if something happens physically or a massive hackers attack breaches the company's security, the data is lost. Due to its decentralized nature, the blockchain helps to prevent such accidents.


Security and Transparency

Blockchain creation is a transparent process in which viewers are special programs. They help to see all the data transferred within the blockchain. Therefore, users with access to it can trace and cross-reference each piece of data in the chain.

Yet, this transparency does not mean that anyone can access the data. The data in the blockchain has special encryption, and each block transforms data into a hash stream of letters and numbers. Only the chain owners can decrypt it with their pair of public-privacy pairs of keys.

In combination, these two features make blockchain technology virtually unhackable. Of course, a hacker may try to break into the blockchain. But a hacker needs to overwrite more than 50% of the blocks simultaneously, making it discreetly and quickly. All of these factors are impossible to combine. In addition, such an operation will require enormous resources and be unsuccessful.


Blockchain Usage

Blockchain technology has close links to Bitcoin. The first cryptocurrency introduced blockchain technology in 2009 and revolutionized the IT world. Since then, thousands of projects have aimed to incorporate blockchain technology.

It should be mentioned that Bitcoin uses blockchain protocols to store transaction data. Cryptocurrencies are one of the many ways this technology can be implemented in everyday life.

The financial sector is one of the first to benefit from blockchain's active inclusion. Blockchain technology reduces the times of transactions, increases the security threshold, and consumes much fewer resources. Besides, security concerns become less pressing as the technology is protected by design.

Smart contracts are another option for blockchain usage. Smart contracts are algorithms that start to work only when all the conditions within the blockchain are met—for example, payment of the security deposit for the rent in exchange for the door code. The absence of a third party makes the deal clear and transparent for everyone.

Smart contracts can work well on the job market as well. This technology will help hiring managers and job seekers find the best options for each other and avoid confusion with ATS bots.

The security properties make blockchain a great option for voting. The idea can be realized through crypto coins and wallets. For example, each voting citizen can receive a unique token, and candidates will have individual wallets. Voting transactions cannot be tampered with and will show clear and honest results.

The way blockchain stores information may be in use as well. For example, food tracking is one field that uses this technology. Each point of destination, from warehouses to factories, to shopping malls, can be traced via blockchain. Such technology usage helps find any shortcomings in the supply chain and fix them.

Besides, the healthcare system may benefit from blockchain technology. For example, storing a patient's data in a blockchain will help track all the steps in medical history without fear of the data being compromised.

Advantages and Disadvantages of the Blockchain Technology

The blockchain has undisputable advantages that are:

- Decentralization

- Security

- Transparency

- Reduction of transaction costs


Yet, several issues require addressing as well:

- Legally grey zone

- Data storage limits

- High cost of the technology itself

- Usage not only by official bodies

The decentralization of blockchain makes third parties redundant in any transaction. Yet, this feature opens space for illegal operations as well. As a result, not only regular users but online criminals and active participants may use blockchain technology for criminal activities.

This phenomenon raises another issue - the legalization of blockchain. It is challenging to stop the technology's growth or to control any given chain without special permission. Therefore, blockchain products have become the subject of debate in the juridical field.

The technology is imperfect also. For example, a blockchain consumes a tremendous amount of energy. While cryptocurrency mining may cover the expenditures, any social program that involves blockchain will require sufficient investments.

Finally, the data processing is relatively slow. It takes approximately ten minutes to add a new block to a chain. On average, a blockchain can manage only seven transactions per second. However, the speed leaves much to desire. The amount of data that a single block in the chain should contain is a subject of discussion also.


Bottom Line

Blockchain technology is a natural answer to data transparency and security requests. Decentralization makes blockchain a perfect way of data storage, and transparency makes the technology ideal for working with vital data. Certain issues present in the technology, such as legalization and technical limitations, will be addressed as the technology evolves. 

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