With the popularity of blockchain, more companies around the world are exploring its uses. This technology is highly associated with cryptocurrencies because it is the technology which underpins the digital currency, Bitcoin. Essentially, the blockchain is a phenomenal technology that can store and transfer data seamlessly across the Internet. In this quick guide to blockchain, we will analyze the possible uses of the blockchain.
As a consumer, you don’t need to know how a television works to enjoy using one. This is also the case for many existing and emerging technologies today. If you are driving a Tesla, you don’t have to know how the electric engines work to enjoy a better driving experience. Knowing what technologies make up an iPhone is unnecessary to enjoy using it. With all of these in mind, here is a quick guide to the technology infrastructure which lies behind the Bitcoin and many other emerging platforms today.
Uses of the blockchain
To begin using the blockchain, you need to set up an account or a virtual address for yourself. This is also known as a virtual wallet. At the moment, the most popular use for a blockchain is to make micro-payments for virtual currencies such as Bitcoin. For example, you can purchase Bitcoins using physical money and then you can spend the value of the Bitcoin online using the blockchain.
To pay for anything that you want to purchase online, the process is similar to using a credit card. However, instead of using a 16 digit credit card number, you need to provide the vendor with a unique string of numbers and letters which is generated for each transaction. Using this ID, the blockchain will then verify and authenticate the transaction automatically.
There are some financial institutions who are using blockchain to make international financial transfers, but these transfers are enabled by Bitcoin or other digital currencies. To exchange real money into Bitcoin, this will incur a fee for the sender, but the benefits are high speed, security, and convenience.
Blockchain vs online bank accounts
Under financial institution rules in the real world, your bank limits the amount you can transfer. Most of the banking institutions around the world impose a limit on transactions to regulate the cash flow. Using the blockchain, there are no limits on the amount of money you can transfer.
Another distinguishing feature of the blockchain is the time it takes for money to arrive into your bank after a transfer. Under a financial institution, the transfer itself can take several days. However, with the use of blockchain, the transfer is immediate. If your bank account transfers more money than the current balance available, it incurs a debit to your bank account and your bank will charge you a fee. The blockchain technology does not allow you to transfer more than your balance. Therefore, your virtual balance wallet will never have a debit.
Bank accounts and credit cards are highly vulnerable to attacks from hackers and fraudsters. Using the blockchain is a highly secure method to store and transfer your funds, especially if you are keeping a lot of money in your virtual wallet. Hacking the blockchain is time-consuming and very expensive, which can be a deterrent for hackers.
However, one of the downsides of keeping your money in the blockchain is you will not earn interest or improve your credit ratings. Your blockchain also cannot lend you money to help you buy any assets. Using blockchain cannot substitute your bank, but very soon banks will start incorporating the use of blockchains in their systems.
Data transfer using blockchain vs email
Under normal circumstances, attaching a file to an email takes some time, depending on the size of the attachment. However, blockchain enables an immediate transfer of data, regardless of the file size. There is also less risk of viruses and there is no need for firewalls when using the blockchain.
Data storage using blockchain vs computer storage
If you lose your computer or get hacked by a virus, you can easily lose all of your data. However, the blockchain resides in a cloud. Similar to any web-based storage, you can gain access to your information simply by entering your username and password.
In the near future, blockchain will be used for online transactions. It can be used for crowdfunding. It will enable easier transfer of money for larger amounts and functions as storage of information about people, products, and properties.
Security aspect of blockchain
The process of using a blockchain requires identification and authentication from both sides of the transaction. It will not release a purchaser’s financial address unless it has verified that the vendor can deliver as promised.
There are different standards and regulations in place to ensure blockchain technology can be adapted for use in different organizations, industries, and jurisdictions. Blockchain can be private like an email, or it can be public such as Facebook. It is essential to always take precautionary steps when you are using blockchain.
When you are keeping a virtual wallet, ensure that no one else has access to your virtual currency or data. Do not provide your banking details to anyone. The blockchain technology is also most vulnerable when people see that there is a significant value stored in a single address. While blockchain may be trustworthy, the people who are using it may not be.