To outsiders, the concept of the blockchain often seems complicated. Yet truthfully, it’s quite a simple concept, which is why it has caught on so rapidly and with such success.
Whether you’re a budding investor, a trader, or simply curious, here’s the essential facts everyone should know about the blockchain.
How does the blockchain work?
Put simply, the blockchain is a digital database. This database is quite different from traditional forms of a database, storing information in ‘blocks’ which are subsequently ‘chained’.
Each new piece of data in the blockchain is represented by another block. When that block has been filled with data, it likewise becomes chained to the last block, chaining each piece of data together with a straightforward chronology.
Many different types of information can utilise the blockchain, but so far it has mostly been used to facilitate and track transactions as a form of ledger. In the case of most cryptocurrencies, the blockchain is decentralised technology that ensures no single person or party has control of the data – it is controlled instead by the collective.
When data is entered into a blockchain, it cannot be changed. Each transaction is recorded permanently, making it easy to track and trace every action using this process.
What makes blockchain different?
This technology is still quite new. Yet the possibilities for how it can be used are almost limitless, providing space for many different transactions as diverse as transferring money, property, and other essential and non-essential goods.
Blockchain is also considered a potential way to help reduce financial fraud, due to the fact each transaction is carefully and accurately recorded.
The blockchain looks set to go increasingly mainstream, which means more and more of us are getting to grips with what it means for our financial lives.
In theory, anyone with a computer and internet access should be able to access the blockchain, invest, move their assets around and create new transactions.
However, a relatively small amount of worldwide GDP is located in the blockchain. Over the next ten years, it is predicted that a larger number of people will engage with blockchain assets. This change is thought to be spearheaded by traditional financial institutions such as banks, and more pioneering technology firms.
Due to the accessibility of the blockchain, we can all take part in investing and trading cryptocurrency.
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