What is blockchain?
A blockchain consists of blocks that link one another through cryptography. Every block is made up of a cryptographic hash of the past block, a timestamp, as well as transaction data. It is also defined as a digital ledger of transactions that undergoes duplication and distribution across the whole network of computer systems. A number of participants manage the decentralized database which is called Distributed Ledger Technology (DLT).
Blockchain is a kind of DLT that features the recording of transactions with an immutable cryptographic signature known as a hash. The design of a blockchain is such that its data cannot be modified. The reason is that after the recording data in a block, it is impossible to undergo retroactive alteration without altering all successive blocks. The occurrence of a new transaction on the blockchain calls for the addition of a record of such transaction to the ledger of each participant.
This means that any changes made to a block in a chain would be instantly clear it had been modified. The corruption of a blockchain system requires changing each block in the chain, across all of the chain’s distributed versions.
Advantages of Blockchain
Chains are accurate
A network of numerous computers approves blockchain network transactions. This means humans are almost uninvolved in the process of verifying transactions, leading to less human error as well as a precise record of information.
Reduces Cost of transaction
Blockchain removes the necessity of third-party verification as well as related costs. Limited fees are incurred for transactions carried out via blockchain.
It is a decentralized technology
Since it copies and spreads its information across a network of computers, it eliminates centralized storage. This means it does not store any of its information in a central database, so it is difficult to manipulate.
Transactions through blockchain are completed in as little as 10 minutes, with high-level security. This is perfect for cross-border trades, which often require some days for completion due to issues related to time-zone and the need for all parties to confirm payment processing.
Ensures confidentiality of transactions
Users of the internet can see the transaction history of a blockchain network. However, they cannot view the identity of the people involved in such transactions.
Transactions are secure
A blockchain network verifies the authenticity of any recorded transactions. All the computers on the blockchain speedily confirm the correctness of the transaction details. The addition of the transaction to the block comes after its validation by a computer.
It is transparent
It is possible for anyone to see and edit blockchain code since the majority is totally open-source software. Auditors can review anything built on blockchain for security. People have the opportunity to suggest system upgrades or changes.
Disadvantages of Blockchain
Despite savings on transaction fees, the technology uses vast amounts of computational power. The electricity cost incurred by running millions of computers on the blockchain network is huge.
Blockchain network confidentiality allows for illicit trading and activity. It has been said that criminals hide under this blockchain feature to carry out illegal activities, especially through the dark web.