Blockchain technology has garnered significant attention in recent years due to its potential to enhance trust in record keeping and financial transactions. This system involves recording information in a way that makes it highly difficult or even impossible to tamper with, cheat or hack. Essentially, blockchain constitutes a digital ledger of transactions that is duplicated and distributed across an entire network of computer systems. Each block in the chain contains numerous transactions, and when a new transaction occurs on the blockchain, a record of it is added to every participant’s ledger. As such, blockchain represents a type of Distributed Ledger Technology (DLT) that is characterised by its decentralised database.
One of the key features of blockchain is the use of an immutable cryptographic signature, called a hash, for recording transactions. This makes it easy to detect any attempt to tamper with a block in a chain since any change would be immediately apparent. Hackers attempting to corrupt a blockchain system would need to change every block in the chain across all the distributed versions of the chain. Examples of blockchains include Bitcoin and Ethereum, which are continually growing as new blocks are added to the chain, thereby enhancing the security of the ledger.
The technology’s potential for enhancing trust is significant, and it is no surprise that it has garnered so much attention. However, the hype surrounding blockchain technology should be examined critically.
Trust is the primary challenge when it comes to creating digital currency, as there is no guarantee that the issuer will not abuse their power. If someone creates a new currency, how can we be sure that they will not give themselves an unfair advantage, such as awarding themselves a million X dollars or stealing other people’s X dollars? Blockchain technology solves this problem by using a decentralised database, whereby nobody is in charge. The system is run by the people who use it, rather than a centralised authority that can alter the entries.
In conclusion, blockchain technology is an innovative and promising system that has the potential to enhance trust in record keeping and financial transactions. However, it is important to critically examine the hype surrounding the technology and understand its limitations. Trust remains a central challenge when it comes to creating digital currency, and blockchain represents a viable solution to this issue. While there have been attempts to create digital money in the past, blockchain represents a significant breakthrough due to its decentralised nature and use of an immutable cryptographic signature. It is clear that blockchain technology has significant potential, and its future applications are exciting to contemplate.