To keep things simple, a blockchain is similar to a database. It is a way of storing user transactions and the records of cryptocurrency values associated with them. However, simply stating that the blockchain is a new database type is not enough. Yes, it does store this information, but it really doesn’t explain all of the out of the box things that the blockchain is able to do and the unique way that it can store transactions and other information.
The Blockchain Substitutes Important Functions for Modern Transacting
Traditionally, when a transaction was placed on a database, people would need to rely on some kind of the third party, such as the government, a bank, or another company, to record the information for them. These third parties are utilized to create trust between the medium of exchange and the end users. In some cases, such as like with a bank, the government will ensure that the money inside is safe even if the bank runs into some trouble.
When we transfer money in order to pay for services and goods, we have been conditioned to trust the banks and credit card companies to handle every aspect of the transaction. We have grown to trust that they will always take out the right amount from our bank accounts and deposit it over to the account of the seller. On the other side of things, the seller is going to trust that the credit card company will end up paying them the money they need, and if a dispute comes up, the company will take care of the transaction.
People trust the banks and the credit card companies to keep their personal information safe. They trust that the databases that these companies use will accurately maintain their transactions so that they always have the right amount of money in their account for payments. This trust, has created a dependency on these institutions, and a reliance in them for our monetary transactions. This takes the power out of our direct control, and places it within the control of these third parties, and for the service they take a fee of our transactions.
Why Blockchain Technology is Important
Currently cryptocurrencies are not backed by a bank, credit card Company, or any other financial institution, which is some of their charm. However, there must be a method to protect both sides of any transaction or investment. This is where the blockchain comes into play. The blockchain is the secret that helps these cryptocurrencies to grow.
The decentralized database that is the blockchain allows the user to have trust in the system without needing banks and other governments. Everyone who is using the blockchain can view and check up on their transactions, which helps to create this trust and transparency.
Performing transactions between two different parties without the aid of an intermediary used to be a risky and daunting endeavor. Doing so over the internet or some other long distance method used to be very risky and complicated. However, since the advent of blockchain and cryptocurrency technology – this practice has become extremely safe and fairly simplistic.
The blockchain provides viable trust and security on a network that is sometimes hard to trust. Cryptocurrency has grown in popularity over the past few years due to that fact. This new form of revolutionary currency allows you to work with people all over the world, transferring money, making purchases and more. As this new monetary medium evolves and is utilized by more and more individuals, the blockchain will stand as the backbone of the whole cryptocurrency revolution.
As a technology, it has freed us from the reliance on third parties, and it has given us the ability to practice commerce on our own terms, without fee’s or caveats. This is something that has long been desired, and finally we have technology working for us, and not against us!