How Does Blockchain Technology Work?

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Blockchain began with the advent of Bitcoin, a global internet currency in 2009, with blockchain being its underlying technology. However, what many people may not know is that blockchain technology can be used for other purposes. Blockchain, as suggested by some, is really going to take the world as-we-know-it by storm.

What is it?

Blockchain is basically a long string of “blocks.” A block, in the context of blockchain, is a compiled block of information created by  users and added to a growing data chain. The information is time stamped and considered current as it sits as the newest block on a chain containing other blocks of subsequent information. The current block directly connects to the block that came before it, which, in turn, is connected to the block that came before that back to the beginning – the “genesis” block.

Having a Growing History of Events Creates Trust

We have, in effect, a long string of events. All data added to the blockchain infers the entire network’s past and becomes part of its irrefutable chain. Additional information can be included with the creation of new blocks in the chain. This data is added to the honest chain which grows in length and therefore trust every day.

Bitcoin Represents Blockchain’s Usefulness

A new chain may be created by “forking” the existing Bitcoin chain, but will not surpass bitcoin’s length unless the new chain replaces the old one and is used for a longer period of time. The longer the chain gets, the harder it will be for a hacker or attacker to misrepresent data as all users have access to the full event-chain.

This is not to say that blockchain does not have uses outside of currency; it certainly does. However, from a semantics point-of-view, this digital currency application is currently using the longest existing blockchain. Other technologies may eventually cause the name and application of this paradigm to change, but its use may be similar.

Blockchain’s Other Uses

Any individual or entity can create their own unique chain using this protocol at any given time. Some have called these “forks.” Anyone can create a new chain of verifiable information at any given time. This new chain, which can go by any name, will grow longer as it grows in trust. The burden of proving the new chain’s advantages over a previously used chain falls on the creator of the new chain. Why? Because users are already using the longest and most trusted chain, why would they want to switch to yours? This is something unique that will play out in interesting ways in the coming years as everyone is scrambling to come up with practical applications for this technology.

If voting moves over to a blockchain, we will simply have more honest elections. Blockchains can be used by those wanting to prove their identity or work by referencing data on the chain. Property owners can place their ownership documents in a blockchain.

Any data placed on a blockchain is subject to scrutiny by the rest of the network. This is why verified data on a blockchain is simply more valuable than sitting on a piece of paper in a desk or on a centralized server. Moreover, a decentralized network never has a single point of failure.

A Bright Future

A world that makes use of blockchain will be a world where individuals trust each other more. Honesty will no longer be optional, it will be required. However, the most beautiful thing about blockchains and other decentralized networks is that they are not cruel, but simply fair. All information is always taken into account and a majority must reach true consensus if data is to be validated. As we continue to move into a more digital focused world we can expect to continuously improve  old systems, and that is the beauty of blockchain.

Article written with insights from Jessica VerSteeg, the CEO of Paragon Coin.