Bitcoin and other cryptocurrencies, I can say anecdotally speaking, we’ve all heard of.
However, most of us don’t really know how it works. It has been often assumed Blockchain and cryptocurrency are the same, but in fact Blockchain is the technology Bitcoin and other cryptocurrencies depend on.
Blockchain technology is a decentralised, distributed ledger (or database). Blockchain at its simplest is, a record of transactions made on and secured by a network.
It consists of three elements: the record; the block and the chain.
To explain in the language of cryptocurrency, a block is a record of a new transaction or information, that could mean the location of the cryptocurrency. Once each block is completed, it’s added to the chain, creating a chain of blocks – The blockchain.
The idea behind blockchain
The Internet made it possible to liberally distribute data online, blockchain does the same thing, but for money.
Global and national news is run by huge corporations that operate our newspapers, television and radio, we used to rely on these corporations for news, but the internet made us not so reliant, and gave everybody a platform to voice and communicate news.
Cryptocurrency and blockchain technology made it possible to transfer money around the world, while bypassing the normal middlemen like banks and governments.
ALSO READ: Why Blockchain Technology could positively impact the Mortgage Industry?
How public and private keys work
Bitcoin, as well as all other major cryptocurrencies that came after it, is built upon public-key cryptography, a cryptographic system that uses pairs of keys: public keys, which are publicly known and essential for identification, and private keys, which are kept secret and are used for authentication and encryption.
Online Forum Bitcoin Talk, explained how public and private keys work, which is useful to know.
Imagine a bunch of safes in a room. Each safe has a unique identifying number and a slot that allows people to drop money into it.
The safes are made of bullet proof glass, so anybody can see how much is in each safe and anybody can deposit money in any safe.
When you open a bitcoin account you are given an empty safe, and the key to that safe.
You take note of which number is on your safe, and when somebody wants to send you money, you tell them which safe is yours and they can drop money into the slot.
What sectors can blockchain technology positively impact?
Virtual currencies have been the first users of blockchain technology. However, the technology has many potential applications.
- Health Care
- Elections and voting
- Supply chain management,
- Property records
Blockchain technology and blockchain accelerators aren’t yet standard in the mortgage industry but they show promise.
ALSO READ: Why are mortgage transactions taking so long? Plus: would new technology such as blockchain, help speed things up?