Blockchain, sometimes referred to as Distributed Ledger Technology (DLT), makes the history of any digital asset unalterable and transparent through the use of decentralization and cryptographic hashing.
A simple analogy for understanding blockchain technology is a Google Doc. When we create a document and share it with a group of people, the document is distributed instead of copied or transferred. This creates a decentralized distribution chain that gives everyone access to the document at the same time. No one is locked out awaiting changes from another party, while all modifications to the doc are being recorded in real-time, making changes completely transparent.
What are some advantages of blockchains?
- They’re global: which means that cryptocurrencies can be sent across the planet quickly and cheaply.
- They increase privacy: Cryptocurrency payments don’t require you to include your personal information, which protects you from being hacked or having your identity stolen.
- They’re open: Because every single transaction on cryptocurrency networks is published publicly in the form of the blockchain, anyone can scrutinize them. That leaves no room for manipulation of transactions, changing the money supply, or adjusting the rules mid-game. The software that constitutes the core of these currencies is free and open-source so anyone can review the code.
What’s the future of blockchains?
The blockchain idea has turned out to be a platform that a huge range of applications can be built on top of. It’s still a new and rapidly developing technology, but many experts have described blockchain’s potential to change the way we live and work as being similar to the potential public internet protocols like HTML had in the early days of the World Wide Web.
- The Bitcoin Cash and Litecoin blockchains work in a very similar way to the original Bitcoin blockchain. The Ethereum blockchain is a further evolution of the distributed ledger idea, because unlike the Bitcoin blockchain it’s not solely designed to manage a digital money. (That said Ethereum is a cryptocurrency and certainly can be used to send value to another person). Think of the Ethereum blockchain more like a powerful and highly flexible computing platform that allows coders to easily build all kinds of applications leveraging the blockchain.
- For example, imagine a charity that wants to send money to a thousand people every day for a year. With Ethereum, that would only take a few lines of code. Or maybe you’re a video game developer that wants to create items like swords and armor that can be traded outside of the game itself? Ethereum is designed to do that, too.