What is Blockchain Technology and How Does It Work?

What is Blockchain Technology and How Does It Work?

Blockchain technology is constantly referred to as the reason why crypto investment is safe and NFTs are tamper-free. How does Blockchain ensure that cryptocurrency exchanges work safely for investors? Let’s find out today!

Welcome to Sunrise Financial, and today we’ll be explaining to you what is Blockchain technology and how it all works. Don’t forget to subscribe to our channel and turn on the notifications bell to always be updated on the latest goings of the crypto and blockchain world!

Without further ado, let’s get started!

Tim Draper has said that blockchain will be one of the most powerful tools in times of the worldwide financial crisis, but oh, is he saying the truth with that? 

“Entertainment for while you are holed up. When the world comes back, it will be Bitcoin, not banks and governments that save the day.”

Knowing that Bitcoin and other cryptocurrencies are in their heyday, it’s important to learn how the technology that makes them exist actually works.

Enter Blockchain!

What’s Blockchain?

First of all, what is blockchain? 

Blockchain is a tamper-free ledger used for record-keeping. It’s impossible to hack into Blockchain or manipulate the data stored within its records, making it 100% secure and impossible to edit.

If you’re into NFTs, you might be aware that it’s impossible to edit or change an NFT after you mint it, the only way being to burn it and minting another NFT with your desired edits. 

Blockchain and its ledger technology works in a specific way:

First, a participant has to input a transaction that’s authenticated by the technology. One possible authentication method is through smart contracts, which allow for the exchange of crypto tokens that follow a protocol.

The authentication generates a block. This block is a representation of the transaction or the data being sent. The block is forwarded to every computer node in the Blockchain network.

That’s why it’s called Blockchain. The blocks are chanted together and the transaction is verified using authorized nodes. These nodes add the block to the existing network. Nodes are also called miners, and they are the reason why the “gas fee” used for crypto transactions exist.

The fee for paying the miners is nothing more than a requirement to satisfy their conditions for verifying the transaction, usually through the Proof of Work method. Proof of Work involves emitting a certain amount of energy for the transaction to be fulfilled.

The update is distributed across the blockchain network, making it official. It cannot be modified after this process is done, which is why Blockchain is considered “tamper-free.” The blocks can be used as a reference for future blocks, but in no way can they be modified.

These steps take place in real-time and involve several elements at play.

Blockchain ledgers possess two types of records: individual transactions and blocks, with blocks consisting of a header and data that belong to transactions taking place inside a set time period. The time period is verified using an alphanumeric string known as a hash.

Once the first block has been created, every other block in the ledger uses the previous hash to calculate its own time period and create a new hash, and so on.

This is Blockchain technology 101, but how does it work with Bitcoin and other cryptocurrencies?

Let’s remember that Bitcoin and Blockchain aren’t the same! Bitcoin is a cryptocurrency that is used for digital payments in Web2 and Web3. It has real value in fiat currency and can be purchased on most cryptocurrency exchanges: Coinbase, Gemini, Crypto.com, and more.

On the other hand, Blockchain is the name used for the technology that allows Bitcoin and other cryptocurrencies to exist. Blockchain technology can be used in other contexts outside of cryptocurrency, but Bitcoin and other cryptos will always rely on Blockchain to function properly.

How is blockchain used besides crypto?

The reason why both of these are constantly related to each other is that Bitcoin is the first major product that employs Blockchain technology to its fullest potential. The popularity of Bitcoin as a form of cryptocurrency is what also drove the popularity of Blockchain

Both of them are related!

However, this also means that Blockchain can be used in other fields that aren’t related to crypto to a great degree. You could be working in an industry that’s using blockchain technology for safekeeping and not know it yourself.

In universities, for example, Blockchain technology is used in the education industry to generate blockchain transcripts and diplomas, and also grant exclusive access to alumni and enrolled students to their academic information. Maryville University became the first institution of higher learning, in 2019, to adopt Blockchain technology for these purposes. 

In a way, Blockchain could be considered a type of database but it differs from conventional databases in the ways it stores information. An excel spreadsheet stores data in rows and columns, but blockchain stores them in blocks that are chained together using the verification method. 

Any type of industry that requires stored data in a safe place will benefit from using blockchain. And since data is king in this age of digitalization, almost every industry can find a way to use blockchain technology for their benefit.

Logistics companies can use blockchain to trace their goods as they move through a supply chain. Even the entertainment industry is using blockchain through NFTs to provide ownership of digital assets or even serve as tickets for events.

The main use of Blockchain technology is, after all, the immutability of data, safekeeping of permanent records, and the elimination of fraud. It can be used to keep certificates, credentials, and important documents intact.

Does blockchain have a future?

Most people are currently wary of investing in crypto and blockchain technology precisely due to the recent crypto crash in May 2022.

On the other hand, most Blockchain industry experts are bullish on the crypto market. Jihan Wu, the Founder of very originally named Bitcoin mining giant Bitman, gave his first interview of 2020 at a Chinese blockchain media event. He was hopeful for a crypto market bull run over 2020, perhaps inspired by the Chinese New Year.

Turns out that Tyler Winklevoss (funny last name right there), the co-founder of Gemini cryptocurrency exchange, tweeted that Blockchain and crypto are the only vaccines in the world that can give you immunity to the money printing disease. A clever joke in fact, but also contains a high degree of reality in its words. 

Also, Cointelegraph, a leading independent digital media resource about blockchain technology, reported that blockchain will be the most in-demand hard skill in 2020, along with cloud computing, analytical reasoning, and artificial intelligence.

In short, blockchain has a future even if it’s not directly related to crypto. It can be used as the safest ledger to keep data for a company or even an academic institution.

What do you think of today’s video? What other uses do you imagine for Blockchain technology? Let us know in the comments below!

Also, don’t forget to leave us a like, share this video with your friends and subscribe to our channel for more insightful takes on blockchain technology. We hope you enjoyed today’s video, feel free to watch our other playlists on Blockchain and crypto!

Author Bio

Sebastian is a wordsmith and B2B SaaS article writer & scriptwriter for podcasts, channels and social media and Blogs He also writes for finance, entertainment and motivational clients. In his spare time, you can find him coming up with ways to improve his mental health.