Why blockchains?

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5:15 minutes
Watch Video
5:15 minutes

Why are blockchains used? The primary reason that blockchains are useful is their ability to store, verify, distribute, and permanently record large amounts of data. Storing data on third-party platforms (such as the Cloud) is effective, but if the goal is to store sensitive data without any possibility of data corruption, no alternative is as efficient or as powerful as blockchain technology. What problems do blockchains solve? It's important to understand that by acting as distributed ledgers of all transactions, blockchains solve a key problem of digital currencies called "double-spending." Digital currencies are essentially just files. Before blockchain technology, these digital tokens could be duplicated or counterfeited. Now, with distributed ledgers that are continuously being verified, the problem of double-spending has been solved. What is decentralization and why is it important? One aspect of blockchains that is necessary to understand is decentralization. By distributing their ledgers across all computers that run their code, blockchains remove the need for centralized authorities and third parties. Without the middlemen (central authorities and third parties), users can interact with each other directly without needing to trust or compensate anyone for allowing them to do business. What types of new abilities do blockchains give their users? Unlike banks, blockchains give individuals the capability to carry out transactions anonymously and use their money in any way they see fit. One notable example of a banking failure is the Wikileaks example. Individuals that wanted to donate to Wikileaks (a bold non-profit journalistic organization) in 2010 using traditional banks found their funds frozen. However, Bitcoin provided an alternative that allowed these same individuals to make donations to Wikileaks without issue. As the first platform utilizing a blockchain, Bitcoin serves two main purposes. It is both a way to store value and a method to transfer value between parties. Since Bitcoin's launch, blockchain technology has been adapted for numerous different purposes with many different cryptocurrency projects. We're now seeing blockchains as a way to host decentralized apps, execute smart contracts, and perform many additional functions that were impossible before blockchain technology.

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