Bitcoin Blockchain Technology Explanation
Blockchain is a relatively new technology. This new system enables faster and safer global transactions. Blockchain has become known worldwide as a result of the popularity of cryptocurrencies, but it is important to know that its use is not limited to one industry. In the future, we will undoubtedly hear much more about the blockchain and successful ICO projects that build a block business. But, for starters, it would be nice to figure out how the blockchain works.
Bitcoin is a fully digital currency. This means that these digital coins can be exchanged between computers on a peer-to-peer network (P2P) around the world. Many people become familiar with the P2P network if they use BitTorrent to share files directly with friends or other people from anywhere in the world.
Bitcoin is a data string that cannot be duplicated, since it is an entry in a public book (assembly of financial accounts) called blockchain. When a transaction is recorded, it remains in the block chain forever.
Imagine a scenario in which 4 people play a monopoly (this is a board game). There is no money on the table, and no one trusts each other, so everyone takes a sheet of paper and begins to record every transaction that occurs in the game. So, blockchain works by a similar principle.
So, imagine that each player has 5 Bitcoins (BTC) at the beginning of the game. We have players A, B, C and D. At the end of each round, players compare their results. If most players agree with the results of the round (3 players in our case), then the “result // transaction block” is added to the block chain.
In any case, the BTC balance of the last round will be added at the beginning of the next round or block No. 2 in our case. At the end of the game, each player will have information about all the blocks of all game transactions. At the same time, players will be able to track each transaction before the start of the game, so data on the blockchain network is almost impossible to manipulate.
An example of how the blockchain works in the real world
Suppose you want to send 10,000 euros to your friend Adam, who currently lives in London.
In the current banking system, this process is as follows:
- You can make international transfers only during strictly defined official hours.
- The next hurdle is that transactions can take several days.
- Your euros will be converted into GBP at the exchange rate calculated in favor of the bank.
- You will have to pay the bank for other expenses.
As you can see, this money transfer system is extremely inefficient and favors banks. Using the blockchain, this process is really simplified, since the original bitcoin blockchain is an open source technology that offers an alternative to traditional coin transfer. The broker is being replaced by a group verification system that provides a high degree of tracking, security and speed.
In our case, we can send our cryptocurrencies to Adam directly through the block chain without hard imitation of banks.
Transfer speed and rates will depend on the cryptocurrency used. But even at minimal cost, the transaction will be extremely fast. We simply send our crypto coins from our wallet to Adam’s wallet. The nodes (or people) on the network confirm this transaction, ensuring that the funds are displayed on Adam’s account. If Adam decides to dispute our transaction for any reason, we have a public history of transactions.
Why is it profitable to use blockchain technology
Blockchain technology is more than the financial sector itself. It can be used for all multi-level transactions where high traceability and visibility are required. Blockchain technology can be used in the product supply chain to help verify the origin of the product.
The blockchain can also work for the benefit of voting platforms or the management of medical documents and identity cards. Future practical examples of blockchain applications are expected to grow. Blockchain can also be used privately.
The exponential growth of blockchain technology in the future will be associated with public and private convergence of blocks in an ecosystem where enterprises, customers and suppliers can work together in a secure, verifiable and virtual way.