Summary
Blockchain is a ledger or database that stores data in blocks that are sequentially linked together, making it easily retrievable and difficult to compromise or amend. It can be either centralized, controlled by an authority, or decentralized, not controlled by any authority. The most common application of blockchain technology is cryptocurrency, where value is transferred without the need for a middleman. Other applications include supply chain management and storing digital collectibles. Blockchains have become a significant technology in recent years, but still lack widespread adaptability.
Think of blockchain as a database that has the potential to store data in a way that is easily retrievable, very hard to compromise, and difficult to amend once published. One of the most common application of blockchain technology is cryptocurrency.
You have probably heard the blockchain and have gone thinking about what on earth it's all about. Your confusion is not unwarranted. In fact, several people who know about cryptocurrencies today fail to understand what blockchain is, how it works, and its major applications. If any of these questions ring a bell, then don't worry. We're going to break each of them down in this section.
What is a blockchain?
A blockchain is a ledger. A database. Think of an excel spreadsheet with hundreds of columns and rows running across each other. While excel helps store information in the neatest and most organized manner, a blockchain is different. In the latter, data is stored in blocks that are then chained together to create a sequence. So, you can think of several rows being chained to one another in excel.
Now, it is the sequential nature that makes blockchain different. Let's say that you just bought an apartment and have its agreement under your name (since you are the owner now). If the information about the previous owners were stored on a blockchain, then you'd very easily trace who the owner was even 20 years ago! This sequential nature of storing data helps in easy retrievability.
And if the blockchain is decentralized (which means it is not being controlled by anyone), then no one has the right to amend the data on the blockchain. But, with centralized blockchains, editing data is very much possible. This brings us to the next section.
What are the different types of blockchains?
There are primarily two types of blockchains: permission and permissionless; naturally, permission blockchains are ones that are being controlled by an authority, and permissionless blockchains are ones that are not controlled by any authority. A permission blockchain can be controlled by any organization such as a corporation or even the government.
In general, the blockchains that we know of and use daily are decentralized (or permissionless).
What are the applications of blockchain?
The biggest and one of the most common applications of blockchain is cryptocurrency. For the uninitiated, in cryptocurrency, you are not transferring physical money, such as any fiat currency, from one point to the other. Rather, you are simply transferring value (in the form of money). Because cryptocurrency blockchains are decentralized, this creates a very efficient way of transferring value without having to depend on any middleman.
In addition to being used for cryptocurrencies, it could also be used in storing other information (like we mentioned above). The second most talked-about application of blockchain is supply chain management. And the list goes on and on.
The Bottom Line
Blockchains have become the most significant technology to speak of in the past few years. They are not just being used for cryptocurrencies but are also being utilized for accessing and storing digital collectibles. While the technology is certainly revolutionary, it still lacks wide-scale adaptability.