It has been making waves in the business world for well over a decade. You’re likely to hear mention of it at least once in the news, on social media, or in any conversation that has to do with modern finance or business. Yes, it’s Cryptocurrency. And as the world is becoming more digitalized in how business is conducted, Cryptocurrency is becoming a highly lucrative industry with an estimated value of almost $160.4 billion. But this digital method of moving money would not be possible without something called Blockchain Technology.
What is Blockchain Technology and why it is important? It is an ingenious system of moving information digitally that will change the traditional way of how business is done.
To make simple of this complex process, let us begin with a definition:
A Blockchain is a collection of records, linked to each other. This collection is strongly resistant to alterations and is protected using cryptography.
Here is a breakdown of how it works.
Susan sends some money to John and she does so by sending him Bitcoins (a very popular Cryptocurrency). When the Bitcoins are sent, a record is created. This record is called a block and it will contain information such as:
- The number of Bitcoins Susan sent to John
- The number of Bitcoins Susan had left in her digital wallet.
- The number of Bitcoins John now has in his digital wallet.
This is almost like an entry in a digital ledger to which anyone has access.
Now let’s say that James also needs to send money to John and uses Bitcoins to make his payment. A new block of information is created showing the relevant information. Additionally, the first block will be linked to this one since they both are related to John’s digital wallet. John’s number of coins will go up and this will be reflected in all the blocks instantly. The more transactions being made the more blocks and links that are created. All the participants have access to all these links and all the updates that come with them. If someone tries to send more coins than they have the transaction will be flagged and will not go through.
The amazing thing about this system is that all the blocks of data are encrypted. Trying to alter any one piece of data would mean having to alter all the data, which would be vertically impossible to do. Since all the blocks of data are updated simultaneously and instantaneously, changing its content would be a hackers’ nightmare.
Now that we understand how it works, what makes Blockchain technology so game-changing? Here are 3 of Blockchain technology benefits:
- Faster transactions
The Blockchain network does not work with a central network that needs to process all changes. Instead, all users are connected to each other and all changes are received instantly. This means no waiting for transactions to be processed by a slow main sever.
- No processing fees
The transactions are free. That’s right, free! How? Well, if someone can pay you directly with Cryptocurrency then there is no need for a processor or the processing fee. Think of all the money you could save if all of your payments did not have to go through a bank, PayPal, Credit card transaction, stockbrokers, or any other business that makes their money by charging processing fees. The possibilities are endless. This could change the way the world does business.
- It’s a safe and private way to move money.
Blockchain includes a Public Distributed Ledger which is a public record of all transactions. Anyone access this record, so it is very easy to follow your money. All participants will have a public address that anyone can look up but a private key which will be used for sending and receiving currency. This can be a significant plus in combating crimes like embezzlement and money laundering.
There are so many other ways that Blockchain Technology can change the way the world economy works. There is no doubt that it’s a real game-changer in the modern business world.