If you've heard of cryptocurrencies and Bitcoin, you've probably heard of "blockchain". It can be completely foreign and difficult to grasp for the non-technical at first glance.
In this section, we cover everything about blockchains and what they mean.
What is a blockchain?
A blockchain is a database that stores information electronically in digital format. Blockchains play a crucial role in cryptocurrency systems.
Bitcoin is a cryptocurrency system in which a blockchain maintains a secure and decentralised record of transactions. It guarantees authenticity and verifies the legitimacy of data entry without the need for a trusted third party.
The Difference Between a Blockchain and Typical Database
The main difference between a blockchain and a typical database is the structure of the data collected. A blockchain collects all data in so-called blocks with sets of information. The blocks can store a certain capacity that closes when they are filled, and then connects to the previous block that was filled. In this way, a chain of data is formed, called a blockchain.
A typical database usually structures all data in tables unlike a blockchain which does so in a chain. A block cannot be changed once it is filled with data, unlike a typical database where data can be changed.
Applications of Blockchain
The main characteristics of blockchain are decentralisation, transparency, immutability and automation. It is something that can be applied to a wide range of industries and therefore creates lots of different uses.
Below are some examples of the use of blockchain:
After decades of struggling with security flaws and slow payments, blockchain is streamlining the digitalisation of financial instruments. This increases liquidity while reducing the cost of capital for financial services.
Decentralised Finance (DeFi)
Thanks to blockchain, the transition from centralised financial systems to decentralised financial systems like DeFi can be made possible thanks to the Ethereum network. This allows new financial systems to be set up thanks to the cooperation of millions of people.
Energy and sustainability
Since oil and gas companies are currently suffering tremendously, blockchain solutions can solve process efficiency. Moreover, the energy industry can stimulate growth through its smart contracts.
Bitcoin and Other Cryptocurrenciesr
Blockchains are a bit like a ledger with a global spreadsheet where the Bitcoin and other cryptocurrencies are linked. All cryptocurrencies built using blockchain technology have their own blockchain with no central database. These run on computers that are voluntarily connected to nodes that form a network. This is how, among other things, Bitcoin transactions work.