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Watch this video if you want to understand the essence of Blockchain in a very non-technical way.
The more technical explanations are as follows –
What is Blockchain Technology?
- It is a decentralized digital ledger that records transactions on thousands of computers globally in such a way that the registered transactions cannot be altered retrospectively.
- It is a secured way of conducting online transactions and its use removes the characteristic of infinite reproducibility from a digital asset.
- In the case of cross-border remittances, its use enables instant transfer of money as against the current system that takes about a week for the same.
- It is the technology behind crypto-currencies, for example, Bitcoins.
- *Each block comprises of a hash pointer that acts as a link to a previous block. Along with those it comprises of a timestamp and transaction data.
- *Blockchains are resistant technologies to modification of the data.
What is Bitcoin?
- It is an electronic or digital currency that works on a peer-to-peer basis. It is decentralized and has no central authority controlling it.
- Bitcoins can be sent digitally to anyone who has a bitcoin address anywhere in the globe. One person could have multiple addresses for different purposes – personal, business and the like.
- A bitcoin is not printed currency but is a non-repudiable record of every transaction that it has been through. All this is part of a huge ledger called the blockchain.
- Bitcoins are available in bitcoin exchanges. They can be purchased from other users. A bitcoin is generated when an entity, i.e. a person or a business, uses software power to solve a mathematical puzzle that makes the blockchain more secure. The difficulty level of solving the problem is high enough to ensure that it takes time to do it.
Advantage Associated with Bitcoin
- Limitation of 21 M bitcoin currency that will last till 2040
- It is possible to launder money and buy illegal products. Since Bitcoins can be spent on the Internet without the use of a bank account, they offer a convenient system for anonymous purchases.
- Money laundering
- No regulation
- Possibility of Hacking
- Degree of acceptance – Many people are still unaware of Bitcoin.
- Ongoing development – Bitcoin software is still in beta with many incomplete features in active development.
- Volatility – The total value of bitcoins in circulation and the number of businesses using Bitcoin are still very small compared to what they could be. Therefore, relatively small events, trades, or business activities can significantly affect the price.
Q.) What do you understand by bitcoin’s ‘hard fork’? Is ‘hard fork’ a good development? Examine.