The blockchain is a breakthrough technology that powers many of the cryptocurrency networks that we recognize today. At a general level, blockchain technology showcases some of the most groundbreaking solutions to networking issues in human history. To explain what a blockchain is and how blockchain technology works, we will explain networks on an abstract level and then discuss the pros and cons.
Before Blockchain Technology – The Traditional Network SystemA network, in precise terms, is a collection of points (nodes) with connections in between certain nodes. A practical example of this that has stood the test of time throughout human history is the mail network. If you want to create and support a system that allows messages to be sent between any two parties, you must first pinpoint their locations and find a courier to carry out the transaction. All systems that allow users to make transactions of any type, such as a telephone service or a shipping agency, use systematic networks to carry out their respective transactions.
Unfortunately, networks come with a set of inherent issues. The largest of these is security, both in ensuring that a transaction is recorded and processed, and preventing any outside interference from jeopardizing the transaction.
Imagine that you want to send a paycheck to an employee who lives in another neighborhood. Firstly, if the transaction is not recorded properly, there would be no legal evidence to certify that the transaction ever took place. Secondly, if the paycheck is intercepted by a thief, the transaction is immediately compromised. Security issues like these are allow for modern-day fraud, theft and other crimes that imperil our financial security.
The next big issue of networking is network maintenance, or more specifically, how to maintain the connections, reliability and security of a network given a limited number of resources. When the Medicis ruled the financial world of Renaissance Italy, they required both thoroughly-inspected accounting books and physical groups of mercenaries to protect their wagons of gold from highwaymen en route to their destinations. It remains clear that whenever an individual or organization wishes to establish a reliable network, these issues must be taken into consideration. The blockchain as a network innovation addresses these very problems.
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What is Blockchain Technology?