A blockchain is a digital ledger that records transactions that is shaking up the process of making financial transactions. As the name suggests, a blockchain is a database system which consists of long chains of storage blocks. This new decentralized system is shaking up the culture of making financial transactions. Here is short and simple summary of some benefits of blockchain.
A blockchain is pseudonymous.
The complete pseudonymity maintained throughout the blockchain network is one of the most prominent benefits of making transactions using the blockchain. Nodes on the blockchain record every transaction coming and going from every address. However each address looks like a scramble of random letters and numbers, which protects the individuals’ identities behind the address. Everyone is notified of the exchange but no individual is aware of the participants in the exchange due to the use of pseudonyms. This helps in retaining the privacy of the transaction.
A blockchain is trustless.
The peer-to-peer system eliminates the need to rely on any third-party to keep a record of all the happenings. Conventional financial transactions rely on a third-party (e.g., bank) to be the middleman between the sender and the receiver. On a blockchain, there is no everyone is accountable for every transaction. Since everyone in the chain is aware of the updates, the receiver cannot deny receiving any money and the sender cannot deny about the money sent as everyone has the proof of each and every step taken in the chain.
A blockchain is immutable.
Blockchain involves both cryptocurrency and cryptography. Cryptography or hash function encrypts all the blocks in the chain in such a manner that nobody can alter any contents in the blocks once written. The hash function detects any changes and tampering in the block which leads to discarding that particular corrupted block.
A blockchain is completely transparent.
When a user makes a transaction on the blockchain, all fellow nodes are informed and the updates are recorded and visible to all users of the blockchain. The catch here is that nobody can make any alterations to the data. If any editing needs to be done, a fresh entry for the new transaction is appended to the chain. The bottom line is that everyone can see and add to the blockchain, but nobody can edit or delete past transactions.
A blockchain is secure.
Blockchain technology is open-source and secure. The blockchain network confirms the send and receive status of every transaction, which renders transactions irreversible. This transparent irreversibility also protects users against the problem of double-spending (the ability to spend money more than one time). Moreover, the blockchain network is not prone to hacking as there is no information to hack (i.e., there is nothing hidden to be exposed); the open-source nature of the technology ensures that all data is available to everyone. Complete transparency removes any scope of misunderstanding, cheating, and fraud.