What is a blockchain?
The blockchain is a specific type of database. It differs from different types of databases in the way that it stores information. The blockchain stores information. Blockchains play an important role in cryptocurrency systems such as Bitcoin because they maintain a safe and secure record of all transactions. Different types of information can be stored away safely on the blockchain for different types of transactions across a peer-to-peer network.
If we take a look at Bitcoin for example, its blockchain is used in a decentralized way so that no person or group has full control over everything. Using this technology we are able to confirm transactions without a central clearing authority. All transactions are secure, private and efficient.
How does a blockchain work?
Blockchains actually store data in blocks that are chained together. When new data comes in and enters into an empty block it will get filled and then chained into the previous block which makes the data chain together in chronological order. That way you can see every transaction happening on the blockchain and its process from start to finish such as which transactions have happened, where they’ve gone, how much has been sent and all the different wallets interchanging moving the value around. The key difference between a typical database and a blockchain is how the data is structured and set up. Because blocks have certain storage capacities, once they are filled, they are closed and linked to the previous filled block, which then forms a chain known as the blockchain and it continues that same way. When a block is filled it becomes part of the blockchain and cannot be reversed. So for Bitcoin, for example, this means that all transactions are permanent.
Blockchain vs. Banks
• When it comes to hours of operation, banks are open for a certain amount of time and sometimes open on weekends with only a certain amount of hours and all banks are closed on banking holidays, whereas with the blockchain there are no set hours, it is open all the time all year round.
• For certain services with the banks there are different transaction fees that range from low to high depending on the type of transaction whereas fees that happen on the blockchain are determined by miners and users.
• Banking transactions can take anywhere from 24-72 hours depending on the type of transaction. Transactions on the blockchain can take as little as 10 minutes to a little over an hour depending on the amount of transactions going through at that time.
• Transfers through a bank require specific documentation, a bank account, and a mobile device whereas transfers on the blockchain only need a mobile device and internet connection.
Advantages and Disadvantages of using a blockchain:
• It provides great trust among participants and greater security among data so it is safe and reliable.
• It’s extremely quick and provides immutable records.
• The cost of production is low.
• It is not possible to change or modify the data.
• The owner cannot access the private key if they forget or lose it.