Introduction to Blockchain Technology
It is no longer a Myth that Blockchain has come to stay. Blockchain has provided a lot of changes and transformation in various sectors ranging from finance, technology, education and even the e-commerce sector.
Some expert in the field of Blockchain already believes that blockchain allows us to design and paint our financial life and future. Blockchain is just like you standing in front of the frame of Dubai, opening doors to endless opportunities.
If you are someone who has been wondering about what blockchain is, you have come to the right place. In this article, I am going to explain the world of blockchain technology in digestible bits using the terms you are familiar with.
What is Blockchain Technology?
Blockchain technology is referred to as an advanced database mechanism that enables the secure and open storage of digital transactions over a decentralized network of computers.
Although it became well-known as the foundational technology for cryptocurrencies, especially Bitcoin, its uses are much broader than just digital currency.
Important of Blockchain
Blockchain is a particularly groundbreaking and promising technology because it provides scalable security, fraud prevention, and transparency. Blockchain facilitates the authentication and traceability of multistep transactions that require such features.
It can expedite the processing of data transfers, lower compliance costs, and offer secure transactions. Blockchain technology as applications in contract management and product origin auditing. It can also be utilized for handling titles and deeds, as well as voting platforms.
Uses of Blockchain
Currently, Blockchain powers over 23,000 other cryptocurrency systems. Yet as it happens, blockchain proves to be a dependable method of preserving information about many kinds of transactions.
Food Industry
Many outbreaks of E. Coli, salmonella, and listeria have been reported in the food company; in certain instances, dangerous substances have unintentionally found their way into food products.
Finding the cause of these outbreaks or the illness resulting from people’s diets has in the past taken weeks.
Walmart, Pfizer, AIG, Siemens, and Unilever are a few businesses that are experimenting with blockchain technology. For instance, IBM developed the Food Trust blockchain to track the path taken by food products to reach their destinations.
Brands can follow the journey of a food product from its source to each stop along the way, to delivery by utilizing blockchain technology.
Furthermore, because these companies can now see everything else they may have come into contact with, the problem can be identified far earlier, possibly saving lives.
Banking and Finance
The banking sector may be the one with the greatest potential to gain from incorporating blockchain technology into its operations.
Banks are only available during regular business hours, which are typically five days a week. As a result, you probably won’t be able to see the money in your account until Monday morning if you try to deposit a check on Friday at 6 p.m.
Due to the enormous amount of transactions that banks must settle, even if you make your deposit within business hours, the transaction may still take one to three days to validate. Conversely, blockchain is a 24/7 system.
For Instance, Blockchain technology is being used by Singapore Exchange Limited, an investment holding company that offers financial trading services across Asia, to create an interbank payment account that is more effective.
They overcame several obstacles by implementing blockchains, such as batch processing and the laborious manual reconciliation of thousands of financial transactions.
Healthcare
Medical records of patients can be safely stored by healthcare professionals using blockchain technology.
Patients will have the assurance and confirmation that their medical records are unchangeable when they are created, signed, and stored on the blockchain.
To protect privacy, these confidential health records might be encrypted and kept on the blockchain using a private key that only certain people can access.
Media and Entertainment
Blockchain technologies are used by media and entertainment companies to handle copyright data. Verifying copyright is essential to paying artists fairly. To document the sale or transfer of copyrighted content, many transactions are required.
Blockchain services are used by Sony Music Entertainment Japan to improve the effectiveness of digital rights management. They have effectively reduced expenses and increased productivity in copyright processing by utilizing the blockchain technique.
Smart Contracts
A computer program called a “smart contract” can be included in the blockchain to enable contract agreements. Users accept a set of terms that govern how smart contracts function. The agreement’s terms automatically take effect once those requirements are satisfied.
Consider the following scenario, a prospective renter wants to rent an apartment through a smart contract. The renter and landlord agree that upon payment of the security deposit, the tenant will get the apartment’s door code.
When the rent is paid, the smart contract would instantly provide the tenant with the door code. It may also be configured to alter the code if other requirements or unpaid rent are satisfied.
Types of Blockchain Networks
- A public blockchain: sometimes referred to as an open or permission-less blockchain which allows anybody to freely join and create a node. Due to their open structure, these blockchains need to be protected via cryptography and a consensus mechanism such as proof of work (PoW).
- A private blockchain: This is also referred to as a permission blockchain. Every node must receive approval before joining a private or permissioned blockchain. The security layers do not need to be as strong because nodes are presumed to be trustworthy.
- Consortium blockchain networks: Blockchain consortium networks are managed by a collection of organizations. Determining data access rights and blockchain maintenance are shared responsibilities of preselected organizations. Consortium blockchain networks are generally preferred in industries where a large number of firms share the same aims and use shared accountability.
- Hybrid blockchain networks: The components of both public and private networks are combined in hybrid blockchains. Alongside a public system, businesses can also build up private, permission-based systems. They can thus limit access to particular data recorded on the blockchain while maintaining public access to the remaining data.
Difference Between Bitcoin and Blockchain.
In 1991, researchers Stuart Haber and W. Scott Stornetta presented their initial ideas for blockchain technology. Their goal was to create a system that would prevent tampering with document timestamps.
However, blockchain did not find its first practical use until January 2009, when Bitcoin was introduced, some two decades later.
Bitcoin Network
A blockchain is the foundation of the Bitcoin protocol. Bitcoin was described as “a new electronic cash system that’s fully peer-to-peer with no trusted third party” by its anonymous developer, Satoshi Nakamoto.
All Bitcoin transactions are kept on a public ledger, copies of which are stored on servers across the globe. The servers resemble financial institutions.
While individual banks are only aware of the money their clients exchange, Bitcoin servers are aware of every Bitcoin transaction that takes place worldwide.
A node is one of these servers that may be set up by anyone with an extra computer. It’s similar to opening a Bitcoin bank as opposed to a traditional bank account.
Bitcoin Mining
By resolving cryptographic puzzles to generate new blocks, users of the public Bitcoin network mine for cryptocurrency. Every new transaction is publicly broadcast to the network by the system, which then distributes it amongst nodes.
The blockchain, which functions as the official ledger for Bitcoin, is updated permanently with new blocks that miners compile into it roughly every ten minutes.
Because of the complexity of the software process, mining takes a long time and requires a lot of processing power. In return, miners receive a tiny quantity of Bitcoin.
Transactions are recorded and fees are collected by the miners, who function as contemporary clerks. Using blockchain cryptographic technology, all network participants agree on who is the owner of which currency.
What are Blockchain Protocols?
Ethereum Blockchain
A white paper, which was published towards the end of 2013, by Canadian-Russian developer Vitalik Buterin, presented a platform that included standard blockchain features with one significant distinction: computer code execution. Thus, the Ethereum Project was created as a result.
The Ethereum blockchain now enables programmers to design complex applications that can speak to one another via the network. Like Bitcoin, it’s important to remember that the Ethereum blockchain and the Ethereum cryptocurrency are two different things.
Quorum
An open-source blockchain protocol called Quorum is based on Ethereum. It is specifically made to be used in consortium blockchain networks, in which several members each own a section of the network, or private blockchain networks, in which a single person owns all of the nodes.
Hyperledger Fabric
A collection of tools and libraries make up the open-source Hyperledger Fabric project. Businesses can use it to swiftly and efficiently develop private blockchain applications.
It is a general-purpose, modular framework with special access control and identity management features. Its qualities make it appropriate for a wide range of applications, including trade finance, supply chain tracking and tracing, loyalty and incentives, and financial asset clearing and settlement.
Corda
An open-source blockchain initiative called Corda is intended for commercial use. You may create blockchain networks that are compatible and operate in absolute secrecy by using Corda.
Businesses can deal directly and profitably by utilizing Corda’s smart contract technology. Finance institutions make up the majority of its users.
Cons of Blockchain Technology
Illegal Activity
Although maintaining secrecy on the blockchain network shields users from hackers and maintains their privacy, it also permits illicit activities and trading.
Financial accounts are accessible to everybody, yet also make transactions easier for thieves. Many have claimed that the benefits of cryptocurrencies outweigh their drawbacks, particularly given that the majority of illicit activity is still carried out using untraceable cash.
The most often cited instance of blockchain being used for criminal activities is likely Silk Road, an online dark web bazaar that the FBI shut down in October 2013 after it was operational in February 2011 for illegal drugs and money laundering.
Cost of Technology
Blockchain technology is far from free, even though users can avoid paying transaction fees.
The proof-of-work mechanism used by the Bitcoin network requires a significant amount of processing power to validate transactions. The energy used by the millions of devices on the Bitcoin network in real life exceeds Pakistan’s annual consumption.
A few answers to these problems are starting to emerge. For instance, Bitcoin mining farms have been configured to run on wind, solar or excess natural gas from fracking sites.
Regulation
Government regulation of cryptocurrencies has been a source of anxiety for many in the crypto community.
Governments might potentially outlaw cryptocurrency ownership and participation in networks, even though it is becoming more and more difficult and nearly impossible to stop something like Bitcoin as its decentralized network expands.
As major corporations such as PayPal start to permit users to utilize cryptocurrencies on their e-commerce platforms, this worry has gradually diminished.
Conclusion
Blockchain is finally becoming well-known and not just because of Bitcoin and other cryptocurrencies. The technology has many real-world uses that are now being investigated and put into practice.
Every investor in the country is familiar with the term “blockchain,” which has the potential to improve corporate and government processes by reducing intermediaries and increasing accuracy, efficiency, security and cost.