Blockchain technology is fundamental in today's world because of the security and transparency that it provides users. The information on the blockchain can be accessed immediately on a shared ledger that network members can only access.
Let's look at a common banking scenario: you transfer money to your family from your bank account by logging into the banking portal and transferring the funds using their account number.
Once the transaction is complete, the bank updates its records for you to see that the money went through. However, there are some potential issues with this process.
Someone can easily alter and tamper with this type of transaction, which is why the market demanded blockchain solutions to fix the manipulation problem. In addition to security, blockchain avoids this long process and allows for faster movement of transactions, saving users time and money.
Blockchain is essential for several other reasons, including:
- Immutable records
- Distributed ledger technology
- Smart contracts
- Improving efficiency
Since blockchain doesn't store its data in a central location, the information is copied once and then spread across a vast network of computers, making it very difficult to alter. A decentralized public blockchain ensures your data is protected on a secure database.
Blockchain users don't need to rely on any other institution or government to complete the transactions. The decentralized nature of blockchain allows users to conduct transactions quickly and securely in ways that a centralized system cannot.
The openness of data on the blockchain also doesn't exist within the financial system.
But how is blockchain data made transparent?
It's through network participants accessing holdings and transactions of public addresses that are used to search through blocks of the blockchain and their details. The data is on a decentralized network, meaning anyone on the public blockchain can view it.
No one can change or alter any blockchain transactions after they are distributed to the shared ledger. A new transaction must replace previous transactions that contain errors, and both transactions will be visible.
Distributed ledger technology
All users in the network can access the ledger and the records it contains. The shared ledger only records transactions once, which eliminates the unnecessary effort that traditional networks require.
Smart contracts are sets of rules stored on the blockchain and executed automatically. They work by allowing all participants to be immediately sure about the transaction's outcome without any third-party involvement.
Smart contracts are stored on the blockchain and executed automatically, improving efficiency for everyone on the blockchain. Network members share the distributed ledger, which helps eliminate time-wasting activities like record reconciliation. Blockchain is also operating 24/7, so you'll see your transactions completed usually in 10 minutes or less.