In case you aren’t a blockchain expert or need a refresher, here’s a brief overview of blockchain in simple, non-technical terms.
The blockchain is essentially a way that people or companies can create and verify transactions. With this system, they can also enforce these transactions without an intermediary, making this a genuinely decentralized monetary system. Whenever a transaction such as exchange of money, property or anything that requires a contract is made, it is recorded in the public ledger.
The blockchain is made up of data blocks. This collection of blocks is ever-expanding, and each of them hold information about transactions made within the network. For example, if you were to purchase a truck, the information about the purchase would be stored on a central computer at the DMV.
With the blockchain, however, that information is split up amongst all of the blocks on the chain. No single party has control over this information, which makes the ledger truly decentralized, and why it is so trusted amongst users.
So, how is this information kept secure? This is where cryptography enters the equation. Cryptography is a mathematical method or key that is not dissimilar to the protection your favorite online store uses to protect your credit card information.
There are typically two keys: one that you’ll have that ensures that only you can make a blockchain entry involving your personal assets, and another that a different user uses to confirm your identity as the owner of the assets.
Another important concept of the blockchain you should know about is hashing. Hashing is the method used to reduce long strings of data into manageable characters. These random characters are unique, and if you were to change only one of the letters, you would have a completely different hash. It is impossible to move backward to find the original data from a hash without the key. Hashes are linked together throughout the blockchain and whenever a change is made, all of the blocks after the hash are alerted.
If you wanted to lock down a single block on the blockchain so no one else could change it, you would need to look into mining. Mining is the process of having a computer solve complicated mathematical puzzles to verify transactions on the blockchain.
For example, if you or another user were to announce a transaction to the blockchain network, computers on the network will fire up and work to solve these equations. This verifies the transaction and ensures that the same assets aren’t used more than once.
Many think that the blockchain is only useful if you plan to create or exchange crypto, but that’s not the only benefit. The blockchain can improve your small business’ security, privacy, efficiency, and more.