Published 1 year ago
With all the hype surrounding crypto in the past few years, you’ve probably heard the term ‘blockchain technology’ floating around.
You may not want to admit to your friends that you don’t fully understand how blockchain works, but as crypto continues to gain worldwide acceptance, now’s a good time to familiarise yourself with this term and why it’s important.
What is blockchain technology?
Blockchain is the technology that enables the existence of cryptocurrency. It was first popularised by an anonymous developer under the pseudonym of Satoshi Nakamoto to support Bitcoin.
The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. Essentially, it is a digital ledger of transactions shared across a network of computers in a way that makes it difficult to hack or alter.
This offers a truly secure, decentralised, and the only way for individuals to exchange value on the internet without the need for a third party, bank, or government.
Sounds complicated? This analogy by Built In explains the concept well — Imagine blockchain technology as a Google Doc (we all use it right?). When a document is created and shared with a group of people, the document is distributed instead of copied or transferred.
This creates a decentralised distribution chain that allows everyone access to the document at the same time. Nobody is locked out of the document while awaiting changes from another party, and all modifications on the document are recorded in real-time, making any changes completely transparent.
Of course, this is an oversimplification of blockchain but it’s an analogy you can easily use if you’re trying to explain blockchain to your parents.
Why is blockchain an important technology?
Instead of relying on third parties and potential human errors, a computer never makes mistakes. All transactions in blockchain are cryptographically secure and difficult to manipulate or alter information.
Decentralisation and transparency
Decentralised exchanges don’t rely on any bank, company, third party, or centralised authority. Instead, it uses a widely distributed and interwoven network of users and their devices, giving users an equal share in ownership and eliminating dependence on any third party.
Immutability and accuracy
Traditionally, you would have to put your trust in the system administrator not to change or alter the data. People are also naturally subject to human error. But with blockchain, it’s virtually impossible to change or alter the data, as the data stored inside the block is permanent. Instead, you put your trust in the cryptographically secure algorithm.
Unlike banks, blockchain is open for business 24 hours a day, 7 days a week, and 365 days a year because of its peer-to-peer network.
The terms blockchain and cryptocurrency often go hand in hand. Although they’re interrelated, each one has its distinct characteristics.
Cryptocurrency is a decentralised digital currency that can be used over the internet. Launched in 2008, Bitcoin was the first cryptocurrency and remains the most well-known. To date, there are over 19,000 types of cryptocurrencies in existence. Crypto uses blockchain to act as both a public ledger and an enhanced cryptographic security system, so online transactions are always recorded and secured.
Blockchain is the foundational technology that enables the exchange of cryptocurrency in a secure, immutable manner.
Used cases of blockchain that you may come across on a daily basis:
Cryptocurrency (we did just talk about it in this article 😉)
NFTs — Non-fungible token powered by blockchain
DeFi — Decentralised finance. Removing middlemen from banking services like lending, wealth management, and more.
Stablecoins - Stores of fiat currencies on the internet
Supply chain/logistics — Used by IBM’s Hyperledger Fabric, a solution from IBM to make it easier for institutions to incorporate blockchain in their operations.
Healthcare — Medical record access, chain of custody in drug shipments, tracking clinical trials, and more.
Property — Dubai aims to be the first city 100% powered by blockchain
Soulbound tokens - Just like the badges you collect when you achieve a milestone in a video game, soulbound tokens are real-life NFT badges stored in your blockchain wallet.
Many more — Every year, we see blockchain adopted into a new market. In fact, the Collins Dictionary word of 2021 was NFT!
There you have it! Your questions about blockchain technology and how it relates to crypto have been answered.
If you’re wondering how to buy crypto in Malaysia, check out our comprehensive guide here.
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I’m Sabrina, a versatile writer with 7+ years of experience and I’ve been published by household names such as Tatler, Harper’s Bazaar, Mindvalley, and Cosme Japan.