Blockchain Technology Explained In Simple Language
Blockchain has been immensely buzzed about in recent years. Speaking plainly, this is a technology that allows data to be recorded and stored, while keeping it “carved in stone”. The data secured by blockchain is safe from manipulations, such as deletion or forgery. This blog post aims to provide an easy-to-understand blockchain explanation.
How blockchain works
Here are the basics of what you need to know about blockchain technology’s main principles and design. Blockchain features a chain of records, or blocks of information, in which each successive block builds upon the previous one. The records are organized in a decentralized way, and are stored on multiple computers linked to each other in a peer-to-peer network. The blocks are linked in a certain way using cryptography. This design provides an unprecedented level of information security, making a chain of blocks, or a blockchain, resistant to modification. It is impossible to alter all the records in a chain simultaneously to conceal the modification or deletion of a single block. This would not only require access to the whole network, but would also take unimaginable computational power for decryption. Currently, there is no software or cloud solution capable of providing the same information security level.
Blockchain technology is inherently a distributed base of encrypted data. It was not until the invention of Bitcoin that the technology acquired the name under which it is known now. Transaction security provided by blockchain is the main reason why Bitcoin has become so popular and valuable. 2017 saw Bitcoin exceed 16 million units in circulation (statista) and break the mark of 20 thousand dollars per unit (statista).
However, the cryptocurrency is only the most buzzed about use case of blockchain technology which is capable of improving literally every field of life when data permanence matters. The use of blockchain technology in applications that are not built around crypto is now known as Blockchain 2.0.
How to use blockchain technology to secure your deals
One of the most popular blockchain uses is smart contracts. They can be used to secure the exchange of information or anything of value.
Technically, a smart contract is a blockchain algorithm allowing for the creation and execution of all types of business logic. Let’s take the process of buying a house as a very simplified example. This works as following:
- You specify the price and the seller’s information in a smart contract.
- The smart contract sends you payment details.
- You provide payment.
- The payment is transacted to the seller and is guaranteed to reach them.
- The smart contract, not the seller themselves, assigns you a new owner automatically.
Smart contracts are much more secure than papers, which are subject to destruction, loss or even forgery. Contract terms and operations history are permanently stored in a network of multiple computers, which nips in the bud all attempts to challenge the buyer’s right for the property in the future. The seller also profits from using smart contracts by getting a guarantee of their interests being served. While terms and conditions are publicly accessible, all personal information from the parties is kept completely confidential, thanks to blockchain security.
By securing deals and operations, blockchain technology takes trust between parties to the next level and reduces the costs and time required for contract management and dispute settlement. Smart contract parties are relieved from multiple annoying bureaucratic procedures, such as lawyer-assisted contract formation, notarial certification, sending the original papers by courier, in- and outcoming document registration, and all sorts of correspondence should disputes arise.
Smart contracts are complex blockchain software, and there is no way at the moment you can handle them without the help of programmers. Should you have a business idea built around smart contracts, we are here to help.
Other Blockchain use cases
We have already mentioned that blockchain application is not limited to smart contracts. It is expected to change the whole lot of areas in the feature, including politics, finance, medicine and more. Let’s take a look at the most obvious blockchain technology usage examples.
Elections
The major challenge faced by elections is popular distrust of executive bodies which have a power to manipulate with the returns. Blockchain software can help secure the process by making sure that there is a real person behind each vote.
Fundraising through ICOs
Crowdfunding platforms have been a powerful tool to kickstart a new project, or startup for years. Open to innovation (and driven by it), they were meant to become part of the crypto madness. One such platform, Indiegogo revealed late in December that it was going to begin offering services to projects looking to use the blockchain funding model. This model allows startups and innovative projects sell their own digital tokens which are nothing else but crypto, accepting payment in Bitcoin and other cryptocurrencies. All operations are powered by smart contracts. This model is known today as the ICO, or Initial coin offering which has, as obvious, emerged from the long-known term of the initial public offering (IPO). While crowdfunding unicorns, such as Indiegogo, are taking cautious steps to ICOs, we are about to see the rise of the new type of fundraising platforms based mainly on the ICO model, such as KICKICO and ICOBOX. As you can see, thanks to blockchain technology, crypto exchange becomes another opportunity provided by crowdfunding platforms, thus boosting interest in innovative projects.
Project Management
Blockchain software can help make relations between a client and a service provider more transparent by storing the track of critical activities by each of the parties.
Insurance
Group insurance becomes more available and easy to manage, thanks to smart contracts based on blockchain. They allow profiting by reinvesting a group’s capital.
Payment Systems
Bitcoin’s huge popularity is largely due to close-to-instant transactions across the globe, lowest transaction fees and eliminated risk of transactions being declined by bank. Another perk of your blockchain account is, there is no central financial control which means that your account can’t be blocked.
Conclusion
Blockchain technology does have its flaws. These include, for example, the dependency on the ongoing performance of computers in the peer-to-peer network. However, we believe that capabilities of blockchain are worth all the effort. The potential of the technology is sure to unfold quickly before our very eyes, and we will soon see the skyrocketing growth of applications based on Blockchain 2.0.
Originally published at devvela.com.
