What is Blockchain? Step-by-Step Guide for Beginners

Problems Solved by Blockchain Technology

Blockchain technology’s breakthrough was so revolutionary, that it provided a solution to the double spending problem which has plagued our financial system since its dawn. Digital money (like Bitcoin) is just like a simple computer file. so it would be easy for somebody to just “counterfeit” it by copy and paste it into a different system. Before blockchain, the solution was for banks to keep track of the money in everybody’s accounts so that nobody could spend money twice. What the blockchain does it make these “transaction books” or ledgers public so that everybody can verify that nobody is spending more than what they have!

Aside from addressing the double spending problem, blockchain technology also completely disregards the middle-men involved and directly executes transactions by connecting affiliated peers. Not needing a third party (like a bank) to handle accounts and transactions has a lot of benefits:

• Transactions can be faster and cheaper since there is no middleman
• Plus, your personal information becomes more private since no bank has to store it

You’re probably beginning to see this is such an important technology.

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How does Blockchain work?

Now that we understand why blockchain was invented and what kind of problems it solves, let’s take a broader look at how exactly it solves these problems.

For this, let’s imagine a scenario where there are four strangers in a room sitting at a table. Each person has a notebook in his hand. 

• Strangers are analogous to the participants of the network
• Notebooks are analogous to the transaction list (ledger) maintained by the participants of the blockchain

• Every time somebody spends some money, it is publicly announced to the rest of the strangers
• The strangers compare their notebooks to decide whether a transaction is valid or not
• If all four books don’t match up after a transaction, it is considered invalid and rejected

This technology works exactly like the notebook example. Each user has an identical copy of the blockchain “notebook” which publicly records all transactions. All notebooks get constantly compared to make sure they match. Additionally, the blockchain stores all past transactions permanently so that there is a record of where all digital property (like Bitcoin) currently is. This proves who owns what. In short, this technology knows where all digital property recorded on it is at all times. This is very powerful since it proves ownership without needing a third party.

Future of Blockchain Technology

Blockchain technology can be used to remove the middle-men and centralized third parties that handle transactions in various industries. This may result in lost jobs in the future but the pros heavily outweigh the cons. Let’s take a look at a few industries that it promises to drastically change 

The Entertainment Industry – With blockchain implemented in the entertainment industry, people could directly pay authors and artists without the need of record label or third party firm handling them. At this moment services like Spotify and Amazon take 95% of artist revenue. 

International Payment – With blockchain, international payments by individuals and companies become cheap, fast, and secure. Blockchain technology can automatically ensure that money changes hands fairly, and since it removes the middle-men too transaction costs become cheaper too

Identity Verification and KYC –  KYC has become a tedious job to do, as we have to do it a number of times for different parties whether it be your different banks and digital asset providers. With KYC on the blockchain, a person has to do KYC only once and can be assured that whenever his identity proof is needed it’s just a few touches away.

If you wish to learn Blockchain and build a career in this field, then check out our Blockchain Training in India which comes with instructor-led live training and real-life project experience. This training will help you understand the technology in an extensive manner and help you achieve mastery over the subject.

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