Understanding blockchain: how it works and why it matters

Photo credits to givingcompass.com

In recent years, the term “blockchain” has gained significant attention. It’s often mentioned alongside cryptocurrencies like Bitcoin, but blockchain’s potential reaches far beyond digital currency.

Blockchain technology has the power to change industries, including financial services, supply chains, and even philanthropy. At its core, blockchain allows us to securely and transparently share information across a decentralized network.

But what is blockchain exactly, and how does it work? More importantly, how can it help foster social and financial inclusion, which is at the heart of our mission?

In this post, we’ll break it down in simple terms, exploring how blockchain can be a game-changer for digital donations and community building.

What Is Blockchain?

Blockchain is essentially a digital ledger of transactions that is distributed across a network of computers. These transactions are recorded in “blocks,” which are linked together in a chain, hence the name “blockchain.”

Once a transaction is recorded on the blockchain, it cannot be altered or deleted, making the system incredibly secure.

Key Features of Blockchain:

• Decentralization: unlike traditional banking systems, blockchain is decentralized. This means that no single entity controls the entire network. Instead, the blockchain is maintained by a group of computers (known as nodes) spread out globally. Each node has access to the same information, ensuring transparency and reducing the risk of manipulation.

• Security: blockchain uses cryptography to secure transactions. Every transaction is verified by multiple nodes before being added to the chain. Once it’s recorded, it becomes nearly impossible to change without altering every subsequent block.

• Transparency: since blockchain operates on a public ledger, anyone with access can view the transactions. This openness fosters trust, especially in industries like finance and charity, where transparency is crucial.

How Does Blockchain Work?

Here’s a simplified step-by-step breakdown:

1. A transaction is requested. For instance, a donor wants to make a contribution to a charitable project.

2. The transaction is broadcast to a peer-to-peer network of computers (nodes).

3. The network of nodes validates the transaction based on predefined rules.

4. Once verified, the transaction is combined with other transactions to form a block.

5. The block is added to the blockchain, making it permanent and immutable.

6. The transaction is complete. The recipient can now see and use the funds.

   
   
   
   

Why Blockchain Is Important for Financial Inclusion

Blockchain has the potential to create a more inclusive financial system by enabling secure, low-cost transactions without the need for intermediaries (like banks).

This can be especially beneficial for people in developing countries who lack access to traditional financial services.

With blockchain, we can create a transparent, efficient, and inclusive way to redistribute wealth and provide financial opportunities to underserved communities.

Blockchain and Our mission

For our mission of social and financial inclusion, blockchain is not just a tool; it’s a backbone.

By using blockchain, we can ensure that donations—whether large or small—reach those in need without being lost in the system. Every donor can track their contributions, and every beneficiary can trust that the funds are secure.

Conclusion

Blockchain is more than a buzzword; it’s a transformative technology.

For our work in social and financial inclusion, it allows us to securely and transparently redistribute purchasing power.

Stay tuned for more insights on how we are leveraging blockchain to create positive change in local communities!

And you? Do you dare to share?