As the popularity of Bitcoin, Ethereum, and other cryptocurrencies grow further, more and more people are asking about blockchain technology. After all, most of the most popular cryptocurrency coins run on blockchain technology.
So what is the blockchain? Why is it important? And, what are its pros and cons? In this article, you will learn the answer to these questions and more.
The Digital Problem
The digital age is one of the most significant technological achievements of mankind. Information and data can be duplicated instantly and at almost zero costs. However, there’s also a downside to digital technology.
As it turns out, there is information or data that you don’t want to duplicate. One glaring example is currency or money. For example, if person A has $1,000 in his online bank account, you don’t want anyone to duplicate that $1,000 for person B with a few mouse clicks. That’s a recipe for disaster from a macro-economic standpoint. You can easily hyperinflate your currency if anyone can do such. This is where blockchain technology comes in.
One of the goals of blockchain technology is to eliminate the easy duplication, tampering, or editing of digital information. The way it solves the problem is nothing short of revolutionary.
To make it simpler to understand, you can think of the blockchain as a ledger. Just like any ledger, it contains the necessary information to keep its system running. Also, just like a regular ledger, it needs to be updated when there’s a new activity or transaction.
When this “update” happens, a new “block” is created, and it’s then connected to the old one. If you zoom out, it will look like a chain of blocks, which is why it’s called the blockchain. Here comes another important part of the recipe – the ledger keepers, which can be called nodes or other similar terms.
Every ledger keeper has a copy of the blockchain history. Every time the blockchain updates, a new “official” copy of the ledger is then distributed to the ledger keepers. With the blockchain and ledger keepers, you can theoretically eliminate duplication, altering, or tampering through practical means.
For example, if you want to duplicate your money, you can’t just make the changes in one ledger because the other ledgers in the network will say, “Uhmm… that information is not accurate in my ledger copy.” And, the other ledgers will also say the same thing. Hence, the network will simply discard your changes as most ledgers are not agreeing with it.
Theoretically, you can still make the changes if you attack or hack more than 50% of the ledger keepers in the network, forcing the network protocol to honor your changes. However, in large networks like Bitcoin with hundreds of thousands of ledger keepers, there’s no practical way of attacking the system.
Pros Of Blockchain Technology
- Practically Eliminates Duplication Or Data History Tampering – as explained above, blockchain solves this problem, which is valuable in the digital realm.
- Increased Security – since blockchains are generally decentralized, this means that there’s no single point of failure. Hacking one computer is a lot easier compared to hacking hundreds of thousands at the same time.
- Resilient – another valuable property of decentralization is it’s tough to bring down or kill. As an example, no one owns the Bitcoin network. Hence, there’s no one to attack, imprison or sue to bring down the network.
Cons Of Blockchain
- Like most things, there’s always a downside that comes with the upside. Most of the cons with blockchain also stem from its strengths. For example, the decentralized nature of blockchain allows it to be very resilient and secure, but it also makes it inefficient.
- With a traditional system, you only need to make changes in one or several computers, nodes, or servers, and the effect will be instantaneous and require fewer resources. With blockchain, synchronizing all the ledgers takes more time and resources.
Wrapping It All Up
Blockchain is perhaps one of the greatest innovations in the digital age. It’s a relatively new technology with many potential applications yet to be discovered. For now, blockchain works well with currency and money.
It’s the reason why most of today’s popular blockchains are currency-related, like Bitcoin. With Bitcoin, which is acting like a global currency that is not owned by any nation, it can easily cross borders. Thus it paved the way for many industries to flourish like a Bitcoin casino. Online casinos usually run into problems with government-owned currencies due to anti-money laundering laws.
While it is true that blockchain has its downsides, it brings enough advantages to the table that it will likely have a place in the world of tomorrow.