What is Blockchain Technology?
Blockchain technology is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that are duplicated and distributed across the entire network of computer systems on the blockchain.
The technology offers a secure way for individuals to deal directly with each other, without an intermediary like a government, bank, or other third parties.
For a blockchain to function it's dependent on three components: data, a block hash, and the previous block hash.
Each block on the blockchain contains data. The amount of data in each block varies depending on how many transactions and the size of the transactions. Each block is like a package of information all wrapped up and the chain links them all together. When each block is created it’s given a hash which is like a fingerprint.
If changes are made to the block at a later date then its hash will change alerting those running the blockchain that the information has been tampered with. The hash of the previous block on the chain is the final piece that’s needed. This leads to the creation of a chain of blocks and as a result, these aspects make it extremely secure to trust and use.
Cryptocurrency is one aspect of this technology and it’s the currency side of it. A cryptocurrency is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank to uphold or maintain it.
Each cryptocurrency has a supply of coins most of which are capped. Your government can just print more money as and when they wish but it’s not like that in the crypto world. The value of a cryptocurrency is determined by its supply and demand. When there’s more demand for a certain currency the price increases because the whole printing more thing very rarely happens in the crypto space.
Smart Contracts are the main aspect of this technology and the one that will change the world. A smart contract is a computer program or a transaction protocol that automatically executes when triggered. When triggered it will execute a series of steps and provide an outcome to the party who triggered it or several parties.
It can be something as simple as a transaction or as complex as the delivery of a shipping container from one side of the world to the other. You can literally write a smart contract for pretty much anything which is why we’re going to see business models around the world change drastically over the next decade once they realize how valuable this technology is.
NFTs are another aspect of this technology. Pretty much anything can be an NFT. In the future, your passport, driver's license, and even your medical records might be NFTs.
Blockchain Technology is the next version of the Internet which is why it's known as Web3. The current Internet is known as Web2 and took decades to get to where it is today. Over the next couple of decades, Web3 will change the way we do things all around the world and before we know it everything will be built on this technology.