What Is Blockchain Technology, and How Is It Related to Investing?
UPDATED: March 2022
What Is Blockchain Technology and How Is It Related to Investing? - Blockchain technology is something you must have heard about when someone talks about cryptocurrency. The software backs bitcoin and other digital currencies, but it does more than help savvy investors buy and sell cryptocurrencies like Bitcoin. We highlight what blockchain technology is and how it's related to investing.
What Is Blockchain Technology?
Blockchain uses a digital distributed ledger used to track resources. To put it simply, it allows people to hold records of each transaction in the system and is excellent for tracking assets and enabling instant and secure transactions. The stock market would benefit the most from blockchain technology, as each share would be an asset that would be digitally represented.
Blockchain technology would allow people to track all the stock shares in major companies with a distributed and trusted ledger. Every time a transaction takes place for an asset, a new record will be added to the ledger. Once several transactions occur, they will be bundled and stored as a block, which will then be distributed to everyone holding the ledger.
Manipulating the ledger would be difficult because so many people will have a copy of the ledger, making the entire system safe from any hacks. As the distributed ledger is held in several places, the transactions can be instantly verified as well.
How Bitcoin and Blockchain Are Related?
When you think about Bitcoin, you also think about blockchain, as the two are connected in every transaction that takes place with cryptocurrency. As bitcoin is a digital currency, you can convert it into any other currency after paying a cryptocurrency exchange fee. You can create new bitcoins through a method called "Bitcoin mining," and people are using this process in their homes.
Blockchain technology has enhanced bitcoin's appeal because it has made the entire process of exchanging and selling bitcoin more secure. People know that their bitcoins will not fall into the wrong hands because blockchain is protecting their investment.
Blockchain Allows More Secure and Faster Digital Transactions
Blockchain technology is expected to make its way into every other digital banking facet in the coming years. It will shape the commerce and finance industries as more business institutions start relying on this technology. Blockchain will influence everything from investments to your bank account and even your monthly credit card statements. There are endless possibilities with blockchain, and even though it has only been around for only a decade, it has opened new ways to do business.
Conclusion to What Is Blockchain Technology and How Is It Related to Investing?
Even though you should understand what blockchain is, you don't need to understand all of its mechanics to know that it will shape future transactions all over the world. Now, you can sit down at dinner with your friends and share how you think blockchain will allow more secure and faster digital transactions.
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