When blockchain technology first emerged, many people thought that it would just disrupt the fintech sector — it has done way more than this. Blockchain is one of the technologies that has completely transformed the world of banking and financial services. That being said, becoming familiar with what blockchain is and how it works is crucial.
What is blockchain?
Blockchain is a special form of decentralized database where a digital ledger of transactions (data) is structured and stored in blocks that are chained together. Once a block is filled, it will join the chain of data, the ‘blockchain,’ and will be added to the timeline of data. Information that is added after a block fills will be added to a new block which will then be added to the chain once it is filled. This design of blockchain is to prevent users from changing, hacking, or cheating the system.
Why is blockchain so great?
Blockchain is decentralized, providing a ledger that nobody administers, which allows it to provide financial services without the need for a bank. Blockchain technology also allows cryptocurrencies, such as Bitcoin, to operate without a central authority. The database makes decentralized transactions much more secure and easier for all parties involved. In addition, it eliminated the need for any transaction or processing fees that typically had to be paid.
What are the different types of blockchain?
There are four different types of blockchain: public, private, hybrid, and consortium. A public network is decentralized and is open for anyone to participate. A private network allows a single organization to read and write on the ledger and is more centralized. A hybrid blockchain combines elements of both private and public networks, allowing a single organization to control what information is open to the public and which is only for certain users to see. A consortium blockchain combines elements of both private and public networks as well but allows multiple organizations to govern the network.
Read more in-depth about the four different types of blockchain networks here.
Which industries use blockchain?
Blockchain is known for its use in the banking and financial services sector, while it is used in many other industries including automotive, government, healthcare, insurance, and retail.
Blockchain continues to rise in popularity, being adopted by more sectors as we speak. It will be interesting to see how it expands within the next couple of years. According to a CB Insights article, “90% of members of the European Payments Council believe blockchain technology will fundamentally change the industry by 2025.”