Technology is on the rise, and it’s influencing the financial world, especially when it comes to investing. The way we use money is changing, and as new industries overhaul how business transactions work, we should brace ourselves for this shift. Of course, I’m talking about blockchain technology.

One of the most confusing yet innovative technological advancements, blockchain tech is a fast and secure way for peers to conduct business by trading digital goods. Often confused with “bitcoin,” while it is related, blockchain is an entirely different tech altogether. If you’re curious about blockchain technology, here’s a rundown of how it works, and five reasons you should invest in it.

What is Blockchain?

Blockchain is, simply put, an algorithm and data structure. It facilitates cryptocurrency and other digital transactions without the need of a third-party intermediary. Every time an owner has a trade with another user, the details of that deal – source, destination, and timestamp – are added to the “chain” as a new “block.” This new block contains the transaction information and additional details of similar exchanges that have recently occurred. For example, if these transactions are from Bitcoin, the recent history may last about ten minutes. Timespans are dependent on the specific blockchain.

Blockchain acts as a digital ledger, recording any and all transactions made with cryptocurrency. Any time there is an exchange of digital currency – selling coins, transfers, or purchases – the blockchain creates a new block to add to the chain. These blocks are intricately encrypted and are recorded in a decentralized fashion without the need of a third-party, like a bank.

What are Bitcoins?

Often confused with blockchain, bitcoins are entirely different, though they are connected. Bitcoin is virtual currency – or cryptocurrency. While it isn’t the only cryptocurrency available, it is the most well-known. As a decentralized form of exchange, bitcoins make it easy for owners to make transactions or exchange funds without a third party. Unlike with credit cards, which charge a percentage fee, cryptocurrency doesn’t suffer from intermediary interference.

All exchanges are logged on the public ledger – or the blockchain – to protect users from fraud. The blockchain technology proves the authenticity of the transaction. This budding technology is still fresh on its legs, and it can prove to be a lucrative investment, and here’s why.

1. Difficult to Impossible to Hack

Blockchain technology is so heavily encrypted; it’s nearly impossible to hack. Once you make a transaction, the block immediately becomes a part of the chain. If a fraud wanted to hack into your account, they would have to successfully change the original block and all the changes that follow. If someone were to try and hack the account, any action would record a new block. Once a new block is created, it’s impossible to delete it. This is the perfect hand caught in the cookie jar scenario. As a public ledger, any attempt can be spotted in the chain.

2. Eliminates Third-Party Verification

Investing in blockchain and cryptocurrency takes out the middleman. This substantially lowers the cost. There’s no percentage on a purchase, no transaction fees, and no third-party to pay. The blockchain technology takes out the third-party and lowers the overall cost. The best part? The transaction only takes about ten minutes. Instead of waiting a few business days for your funds to clear or your check to cash, this system is quick, easy, and exchanges happen in no-time.

3. Secure and Private transactions

Bitcoin transactions operate in public database. While the public can seem a bit scary, the transactions are private. Though the details of your exchange are listed in the block, outsiders cannot access your information. It’s important to note; the transactions are confidential – not anonymous. As the chain updates, it will not contain your personal information – so you can worry less about hackers.

Additionally, each block is unique – and when that code changes, a new block is made. This process makes any change noticeable. If there is an attack on your account, you would easily notice it. The algorithm is tricky and extremely difficult to hack. That makes blockchain an incredibly secure exchange.

4. Decentralization of Information

Storing all your important financial information in one place can not only be a hassle, but it can also be crippling should anything happen to the institution. With blockchain technology, there’s not just one place for storage. The network is everywhere across a network of computers. With widespread information, the information is difficult to break into. So, if someone were to hack into the chain, they would only get access to part of the puzzle, not the entire mainframe.

5. Market Transparency

The blockchain network is an open exchange. With such a large community on the network, it makes hacking into the information incredibly tricky. Also, with so many eyes on the chain, it would be effortless to notice if something was amiss. The market is open and easy to access to other users. These options make investing in blockchain technology a must.

Blockchain Roadblocks

As with every investment, there are some downsides when it comes to blockchain technology. With technology so new and ever-changing, it is very costly, especially when mining bitcoin. The cost of purchasing cryptocurrency varies from month-to-month. You could be putting down a hefty sum one day and getting a steal the next. As a new market, it can be volatile. Also, while the exchange is fast, the transactions are slow to a crawl. With the system, it may only allow around seven transaction per second. It takes some time to add a new block to the chain. Carefully weigh the options before deciding if this investment is right for you.

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As a relatively new technology, the sky’s the limit when it comes to blockchain. As we look toward the future of financials and how it may advance, cryptocurrency may very well be the future of monetary exchange. In the meantime, with careful consideration, this asset can be lucrative should you choose to invest. Of course, perform your due diligence and consult a trusted financial advisor before you make any investment decisions. Take a chance on the currency of the future.