The KEYS Token Breakdown — Edition 004
What Is the Blockchain: How Does the Technology Work?
I keep hearing about the blockchain but have no idea what it is or what it does. Is it a crypto thing? Is it where NFTs live?
If these questions look familiar, you’re in good company — at some point, most people who are looking deeper into current tech trends have wondered about similar things. Wrapping your head around what blockchain technology does and how it fits into the bigger picture of emerging technologies is a hot topic, and we want to give you the info you need. It makes sense for us to chat about Blockchain Technology after our NFT, Metaverse, and Web3 articles because we felt this intel could be the magic puzzle piece that ties it all together for you. After this quick read, you’ll have a more solid understanding of what goes into the tech you’re now familiar with and why it’s so important.
Where to Start?
Think back to our Web3 article in which we said that blockchain technology is, at its most basic, simply a system of recording information via digital ledgers so securely that the system can’t be hacked or cheated. So let’s dive a bit deeper into that. More precisely, let’s dive into why this level of security is even needed.
- It all begins with a ledger — that’s the foundation here. Humans have been using ledgers for centuries to store all kinds of information, well before the digital age. A perfect example of using a ledger is keeping track of transactions made by a business or a person. We’re about to step into the exciting world of accounting, so strap in and enjoy the ride!
- In Single-Entry Accounting, when you make a transaction, you record it on a single ledger. Easy, right? Yet although the concept is simple enough, it definitely isn’t perfect because it’s easy to make mistakes when entering the data, and nobody other than you is checking to ensure the data is correct.
- To build in a check and balance system, Double-Entry Accounting adds a second point where every entry to the ledger requires a corresponding and opposite entry to a different ledger. By always achieving a balance between the two ledgers, you’re ensuring the data is correct because both entries must match perfectly to be valid. This is a definite improvement, but the system still isn’t perfect. Either set of transactions could still be altered if desired since the data is still more or less centralized.
- So guess what’s next? You got it: Triple-Entry Accounting. A third element is added to the mix of the accounting cocktail, and that element is distribution. Blockchain transactions are made through open-source software that distributes the transactions across an entire network of computers for verification. Voilà, the danger of centralization is now eliminated. If one computer in the network has altered data, it won’t corrupt or change the data on all the other computers.
How Does Blockchain Technology Work?
To put it simply, a blockchain organizes transactions sent for validation into blocks, and those transactions cover details such as the sender, receiver, and time it was made. Every different blockchain sets its own unique parameters for information necessary to fill the block and validate a transaction.
Once the information block is filled, it is given what’s called a “hash”. This hash is unique to a specific transaction and can never be changed. Each block also contains the hash of the block that came before it, forming a chain of data known as the — drumroll — blockchain!
Every single piece of information that’s added to the blockchain and encrypted with a hash is permanent and unchangeable. It is also accessible by all other computers on the blockchain network to authenticate and validate its data. Security and reliability. These breakthroughs eliminate many downfalls of previous accounting methods and are what makes blockchain technology so attractive.
‘Just like the printing press, blockchain technology propelled us into a new era of innovation unlike the world has ever seen before. The KEYS protocol taps into a new industry that is targeted to be worth around 678.8 billion by 2030.”
KEYS Token Co-Founder and CTO
The Benefits of Blockchain
Transactions on the blockchain are approved by hundreds and even thousands of other computers, thus making the blockchain incredibly accurate while also removing the danger of human error.
Because blockchain data is, by nature, shared across a network of computers, there’s no centralized entity in charge of that data. This reduces the likelihood of data corruption and makes blockchain technology inherently safer and more trustworthy.
Most blockchains are totally open-source, which means that they can be audited freely by anyone. It’s completely normal and quite easy to track a transaction through the full scope of its history.
Where it Can Improve
Blockchain technology is still relatively new; thus, many blockchain-secured projects, such as Ethereum, have widely ranging fees to support their respective networks. These fees should decrease as blockchain technology continues to develop, but for now, they’re a necessary part of dealing with most blockchains.
Education and understanding are two of the biggest hurdles when it comes to mass adoption of blockchain technology. The full scope of transacting business on the blockchain isn’t easy for many people to understand. Until learning tools like this article become more widely available, it will take time for blockchain technology to become a common dinner-table conversation.
Every industry that transacts business on the blockchain, from retail banking to real estate, is faced with a completely different set of regulations to which they must adhere. For blockchain technology to be adopted on a massive global scale, legal and governing bodies need to accept and approve its use.
Join Us Next Time for Edition 005
Thanks for joining us in learning about the blockchain and how it works. We know it’s a pile of new information to digest, and we’ve barely even scratched the surface of what this technology can really do. The world of blockchain technology is exciting; now that you know how it works, we can’t wait to show you what it means for the world in our upcoming KEYS Token Breakdowns!
As always, we’d love to welcome you to our ever-growing Discord server, where our team and community are active and answering questions just like the ones you may have right now. We all started from a place of learning, and we welcome everyone into our community!