Blockchain is a trusted approach due to the following reasons:
- It is easily compatible with other business applications due to its open-source nature.
- It is safe, hacking proof and encrypted.
- There is no central authority to control it.
- All participants agreed to how a transaction inserted into the blockchain.
- The transaction is immutable means once the transaction inserted into the blockchain, we cannot change it.
Blockchain is considered a trusted approach for several reasons:
- Decentralization: One of the key features of blockchain is its decentralized nature. Unlike traditional centralized systems, where a single authority controls the entire network, blockchain operates on a distributed network of nodes. Each node on the network has a copy of the entire blockchain, and decisions are made through consensus mechanisms. This decentralized structure makes it difficult for a single entity to control or manipulate the system, enhancing trust among participants.
- Immutability: Once data is added to the blockchain, it is extremely challenging to alter or delete it. Each block in the chain contains a unique cryptographic hash, and changing the data in one block would require changing the information in all subsequent blocks, which is computationally infeasible. This immutability ensures that the historical record stored on the blockchain is secure and trustworthy.
- Transparency: The data stored on the blockchain is visible to all participants in the network. This transparency ensures that everyone has access to the same information, reducing the chances of fraud or manipulation. Participants can verify transactions and the state of the blockchain independently, fostering trust in the system.
- Consensus Mechanisms: Blockchain relies on consensus mechanisms to agree on the validity of transactions and additions to the ledger. Popular consensus mechanisms include Proof of Work (PoW) and Proof of Stake (PoS). These mechanisms ensure that all participants in the network agree on the state of the blockchain, adding an additional layer of trust to the system.
- Security through Cryptography: Blockchain uses cryptographic techniques to secure transactions and control access to the network. Public and private key pairs are employed to authenticate users and ensure the integrity of data. This cryptographic security adds a layer of trust to the system by protecting against unauthorized access and fraudulent activities.
- Smart Contracts: Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically execute and enforce the terms when predefined conditions are met. Smart contracts enhance trust by automating processes and reducing the need for intermediaries, minimizing the risk of human error or manipulation.
In summary, blockchain is considered a trusted approach due to its decentralized structure, immutability, transparency, consensus mechanisms, security through cryptography, and the ability to use smart contracts for automated and secure transactions.