Our tech expert, Nyika Allen, President, and CEO of the New Mexico Technology Council joined New Mexico Living to explain what blockchain technology is.
What is Blockchain Technology?
Blockchain is “a technology that allows people who don’t know each other to trust a shared record of events”. This shared record, or ledger, is distributed to all participants in a network who use their computers to validate transactions and thus remove the need for a third party to intermediate.
Blockchain technology could revolutionize the future of data. It is a technological database which maintains a constant record of transactions. Those in the finance industry are the most interested in this technology because it allows transactions to take place without a middle man. This was an idea taken from BitCoin and is just the beginning of what it can offer businesses and people.
How Does a Blockchain Technology Work?
In his original Bitcoin white paper, Satoshi Nakamoto defined an electronic coin – the Bitcoin – as “a chain of digital signatures” known as the ‘blockchain’. The blockchain enables each coin owner to transfer an amount of currency directly to any other party connected to the same network without the need for a financial institution to mediate the exchange.
We can illustrate how a blockchain works by using Bitcoin as an example, as shown below. Bitcoin, like other blockchains, uses cryptography to validate transactions, which is why digital currencies are often referred to as ‘cryptocurrencies’. Bitcoin users gain access to their balance through a password known as a private key. Transactions are validated by a network of users called ‘miners’, who donate their computer power in exchange for the chance to gain additional bitcoins using a shared database and distributed processing.
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