Three things make blockchains a game changer:
- Level of transparency
- Extensive record keeping
- Integral connection
In our video titled ‘What Is A Blockchain?’, we compared a blockchain to a traditional ledger.
A single block in a block chain is equivalent to a page of a ledger.
In a traditional ledger, you can change one entry and succeeding entries won’t get affected.
That doesn’t happen in a blockchain. Each block contains records of the previous blocks.
You can’t erase or change a transaction recorded in a block without altering succeeding blocks.
Another layer of security is transparency. Anyone can join a blockchain. When you join, you get a copy of the whole blockchain. You can then verify that everything is still in order. Once everything is, you can then create your own block and you officially become a node.
Blockchain creates trust in the data
Now, before you go in and join a blockchain to create your own block, you need to know more than just wordpress or basic HTML codes.
You need to solve a cryptographic puzzle.
The computer that solves the puzzle shares the solution with all the other computers in the network. This solution is called the proof-of-work or PoW.
Imagine your work getting verified by thousands of nodes who all had to solve a cryptographic puzzle to be one.
That’s as reliable as you can get. You can’t cheat your way into this.
Verification of the PoW
If 51 percent of the network testifies that the PoW was correct, the new block is added to the chain.
The combination of these complex math puzzles and verification by many computers ensures that users can trust each and every block in the chain is correct.
Blockchain Is Not Perfect
Blockchain sounds grand and superior but it’s not perfect. And because My Digital Money is here to provide you balanced and complete information, we will tell you about it. We believe that you need to see the complete picture to make an informed decision.
Here are some of the issues and barriers that blockchain has to overcome.
Blockchain transactions are slow and expensive. For example, the Bitcoin network is capable of processing a maximum of seven transactions per second — for the millions of users worldwide.
In 2018, Nasdaq delisted one blockchain company due to concerns that the company made “public statements designed to mislead investors and to take advantage of general investor interest in bitcoin and blockchain technology.”
And the Securities and Exchange Commission has taken action against companies that have made false and misleading statements about blockchain technology in an effort to pump up the price of the stock.
Not that it’s a new thing.
Many companies, not just cryptocurrency companies, changed their direction midstream to take advantage of a trend or specific market need that just sprouted.
They make baseless claims to attract new investors to pump, and then dump, the stock.
There are also some who have attempted to capitalize on the mystery and excitement around the term blockchain to target investors. Again, that’s nothing new.
Scammers have posed legitimate websites that provide services to cryptocurrency users to target unknowing users.
So, no, blockchain is not perfect. But for now, this is better than any system we are using.