What Is Blockchain?
A Blockchain at its most basic is a series of blocks that contain information. This technology is intended to timestamp digital documents to prevent backdating or tampering. The purpose of Blockchain is to solve the double-recording problem without requiring a central server so it runs on a system recording information that making it difficult or impossible to change, hack or cheat.
Blockchain is made up of a digital ledger of activities that are replicated and spread across a network of computer systems on the Blockchain. It is a new model for information sharing and coordination and designed for a connected global future.
Blockchain is used to securely transfer items such as money, property, and contracts without the need for third-party intermediaries such as banks and governments. Once the data is registered inside the Blockchain, it is too complex to change it.
Blockchain is a protocol of software (like SMTP of email). However, a blockchain cannot be run without the Internet. It is also named meta-technology because it influences other technologies. The Blockchain comprises several parts, including databases, software applications, and several connected computers.
It may refer to a Bitcoin blockchain or Ethereum blockchain, or it may refer to other virtual currencies or digital tokens. However, most of them refer to distributed ledgers.
History of Blockchain
Blockchain technology has become the new favorite of the 21st century. But long before this technology came into existence, there was a system called the digital cash that David Chaum envisioned in 1983 to deal with the concept of double-spending (the risk that a digital currency can be spent twice). Even at that time, advanced cryptography existed, but it was not compatible with centralization, did not offer the the anonymity of transactions, or mitigate the risks of double-spending.
Blockchain Step by Step
- A computer that wants to share data launches the same blockchain software and joins the network. For example, when people use or send money to get data into the network.
- The data is put together in blocks and verified.
- Every few minutes or seconds, the connected computer will vote for the data in the current block and say, “Yes, everything looks good to me” (or “No, something looks sketchy”).
- If the modern block is denied, the network will decide again when the next block is sent.
- If the current block is approved, if the network agrees that the data it holds is valid, the block is added to the entire history of valid data blocks in the system’s past.
- In this way, data is “chained.” Finally, a long connected chain of blocks is formed.
- The chain is stored on each computer on the network and is added with a cryptographic feature that makes it easy to tell if any changes have been made to past transactions.
- The blockchain stores that data on the blockchain in a ledger. This means the entire network is checked for data integrity every time a block is added.
Types of Blockchain Networks
- Public Blockchain Network
- Public Blockchain is a blockchain that anyone can participate in, like bitcoin. Disadvantages include significant computing power, little transaction privacy, and poor security. These are important considerations when companies are using Blockchain.
- Private Blockchain Network
- A private blockchain network is a decentralized peer-to-peer network, similar to a public blockchain network. However, one organization manages the network and controls who is allowed to participate, the execution of consensus protocols, and the maintenance of shared ledgers. Private blockchains can run inside corporate firewalls and can also be hosted on-premises.
- Allowed Blockchain Networks
- Companies that build private blockchains typically build a permission blockchain network.This limits who can join the network and what transactions can be made. Participants must have an invitation or permission.
- Consortium type blockchain
- Multiple organizations can share the responsibility to maintain the Blockchain. These pre-selected organizations determine who can send transactions and access data. A consortium-type blockchain is ideal for businesses where all participants need to get permission and share responsibility for the Blockchain.
Why is Blockchain Important?
All businesses run on information—the faster and more accurate the information, the better. Blockchain is ideal for providing information as it provides immediacy, share-ability, and complete transparency of that information stored in an immutable ledger that only authorized network members can access. Blockchain networks can track a variety of information, including orders, payments, accounts, and production. Administrators also share a single view so that you can see all the details of the deal to the end, increasing reliability, new efficiencies, and opportunities.
Significant Elements of Blockchain:
- Dispersed ledger technology
- All network associates have access to the distributed ledger and its permanent transaction records. This shared ledger records transactions only once, eliminating the duplication of work standards in traditional business networks.
- Unchanging record
- Participants cannot change or tamper with transactions recorded in the shared ledger. If there is an error in the transaction record, you must add a new transaction to correct the error, and both transactions are visualized.
- Smart contract
- A set of commands named intelligent agreements are saved in the Blockchain and performed automatically to make transactions faster. Smart contracts allow you to define the terms of transfer of bonds and to include the terms of payment for travel insurance.
Blockchain Privacy and Security
Blockchain security relies on two aspects: the structure of the block and the peer-to-peer network that maintains it.
- In a blockchain, each new block is added to the chain in a linear, transparent and time-coded manner. Since every block is connected to the prior block, a bad actor trying to tamper with the data must decrypt the previous block and rewrite the chain forward, persuading all other nodes before they reach the desired data.
- Blockchain security is made up of two things:
- It is technically challenging to tamper with data.
- It is also economically unrealistic to tamper with data, as it becomes cost-prohibitive every time data is added to the Blockchain.
- In addition, a copy of the Blockchain is held by many other users in the blockchain network. To successfully change the data in a block, hundreds of thousands of copies must also be changed. To destroy the entire network, would require a massive number of resources, coordination, and planning. Therefore, malicious changes to the ledger are virtually impossible.
- Blockchain technology establishes digital trust by securely recording information in public places. This allows the data in the Blockchain to exist in a distributed state while being continuously collated.
- Blockchain security is made up of two things:
- A vital privacy feature of the Blockchain is the use of digital signatures. A global peer-to-peer network can see the contents of a public ledger but, they cannot access information identifying their transactions unless they identify and associate their identity with a key. The permission-less nature of blockchain networks allows users to generate keys but do not associate them with their identity, making their transactions more private.
- These digital keys are generated by the network’s hash algorithm and are used to authorize transactions. The technical and economic security of the network makes it difficult for a malicious person to decrypt a key and make a fraudulent transaction. In addition, each block has a unique code to distinguish it from other blocks in the chain, reducing the risk of a hacker infringing your data or public ledger to near zero.
Blockchain and Bitcoin
Blockchain is a technology that promotes Bitcoin, but the version of the blockchain decentralized ledger system on the market is not only Bitcoin. Several cryptocurrencies have their Blockchain and distributed ledger architecture.
On the other hand, the decentralization of the technology also caused some breakup and divergence within the Bitcoin network, creating a ledger split where one miner used the Blockchain of one rule and another miner used the Blockchain of another.
This means blockchain is a technology that enables Bitcoin. Bitcoin is a digital mark, and Blockchain is a ledger that accounts for who holds the digital token. Bitcoin without Blockchain is not possible, but Blockchain without bitcoin is possible.
Other Prominent Cryptocurrencies
- Bitcoin Cash
- Light coin
How to invest in blockchain technology?
While blockchain technology and equity will be a lucrative investment, there are several ways to take the next step towards buying a first-time blockchain investment. When someone thinks of investing in blockchain technology Bitcoin usually comes to mind first, but don’t overlook other digital currencies. Besides Bitcoin, there is also an option to invest in cryptocurrency penny stock such as Altcoin and Litecoin. Some apps and services use blockchain technology to raise funds before development. As an investor, you can buy coins in anticipation that prices will rise if the service or app becomes popular. Another way to invest in blockchain technology is to invest in startups that utilize blockchain technology. Finally, there is also the option of investing in pure blockchain technology.
Limits of blockchain technology
Now, in this tutorial for blockchain beginners, you will learn about the limitations of blockchain technology.
- High cost:
- Nodes seek higher rewards to complete business transactions that operate on the principle of supply and demand.
- Transactions are slow:
- The node prioritizes transactions with high rewards, and backlogs of the transactions are accumulated.
- The ledger shifts less:
- It is not reasonable to copy the Blockchain effectively, changing immutability, agreement, etc.
- Transaction Costs, Network Speed:
- Bitcoin transaction costs are pretty high, which was said to be “almost free” for the first few years.
- Risk of errors:
- As long as human factors are involved, there is always a risk of error. If the Blockchain acts as a database, all incoming data must be of high quality. However, human involvement can resolve errors quickly.
- It’s a waste:
- Every node that runs the Blockchain needs to maintain consensus across the Blockchain. It results in minimal downtime, and data stored on the Blockchain cannot be changed forever. However, each node repeats its tasks to gain consensus, so all of these are wasted.
What are the business benefits of Blockchain?
The main benefit of Blockchain is its ability to act as a database for recording transactions, but its benefits go far beyond traditional databases. Most noteworthy is to eliminate the possibility of tampering by malicious actors and provide the following business benefits:
- Save time:
- Blockchain reduces trading time from days to minutes. It does not require verification by the central authority, which speeds transaction settlement.
- Save money:
- Less monitoring is required for transactions. Participants can exchange valuable items directly. Blockchain allows participants to access shared ledgers, eliminating the need for duplicate work.
- Save data:
- Blockchain protection characteristics defend against tampering, scam, and cyber-crime.
Applications of Blockchain Technology
- Settlement processing and transfer
- In no uncertain terms, the most logical application of Blockchain is moving funds from one party to another quickly. As the banks are excluded from the equation, most transactions processed on the Blockchain will be settled within a few seconds with the verification of the transactions taking place 24 hours a day, 365 days a year.
- Supply chain monitoring
- Blockchain also helps in monitoring the supply chain. The absence of paper-based records and the flow of real-time data allows companies to quickly identify inefficiencies in their supply chain and see where their products are located in real-time. In addition, blockchains allow administrators in every part of the supply chain the ability to check the status of products from a quality control perspective, from the point of production to the point of sale.
- Royalty Rewards Program for Retail
- Applying blockchain to retail companies gives the additional revenue opportunities by growing mainstream loyalty rewards. Building a token-based system that rewards consumers and storing that token on the Blockchain, instead of on premises eliminates the much of the corruption and waste often found in paper and card point programs.
- Safety of the Internet of Things network
- The Internet of Things (IoT) makes our lives more comfortable but, malicious people can access our data and control essential systems. Blockchain technology provides greater security by storing passwords and other data in a decentralized network rather than a central (hackable) server. Moreover, the Blockchain is virtually immutable so that it can be protected from data tampering.
- Data Storage
- Adding blockchain technology to your data storage solution will enable you to achieve greater security and integrity. The capacity to save data in a shared fashion makes it difficult to hack and erase all data on the network. Still, a centralized data storage provider can have only a few redundant points. Access to data is also easier because it does not necessarily depend on the operations of a single enterprise often resulting in lower costs.
- While we at Zing do not condone gambling, Blockchain is gambling’s logical next step. The most significant benefit of running a casino on the Blockchain is the transparency that provides potential gamblers. Since all activities are reported on the Blockchain, Betters can recognize that the games are not rigged, and the casino payouts are legitimate. In addition, the use of Blockchain eliminates the need to provide personal information, such as bank accounts, which is a hurdle for some gamblers who wish to remain anonymous. In addition, players can even bet anonymously, and government closures do not affect non-centralized networks to avoid regulatory restrictions.
Blockchain has a short history.
It’s only been a decade since blockchain technology emerged, but companies are exploring new ways to apply it to their business. As the amount of digital data used in our lives increases, the need for security, access, transparency, and integrity of the data Blockchain provides is growing.
IN NOVEMBER, Cryptocurrency IOTA stated a beta variant of Data Marketplace, explaining that Blockchain can be applied as a marketplace to deal or trade unused data. Since most of the company’s data is not being used, Blockchain can act as an intermediary to store and move this data and improve many industries. IOTA is still in its infancy, but it has more than 35 well-known companies (including Microsoft) and provides feedback.
Blockchain Council offers a certification for Blockchain, specifically designed for those who want to make a career in the Blockchain domain. This certification requires a deep knowledge of the core concepts of Blockchain. It focuses on Corda, intelligent contracts, Hyperledger, and Quorum applications.
Blockchain Council certification helps you work in industries such as digital marketing, healthcare, and supply chain. The training and certification provided by the organization are helpful in a variety of companies, businesses, and developers. It will be using blockchain technology in the business of a centralized and traditional working system.
As Blockchain is an emerging technology, the predictions about its potential are still mixed.
Each block of the chain holds many businesses, and every moment a new transaction happens on the Blockchain, a history of that transaction is added to the ledger of all participants. A distributed database managed by multiple participants is called Distributed Ledger Technology (DLT). Blockchain provides a way for people worldwide to maintain a database together without relying on a central authority.
According to a survey by TechRepublic Research, 70% of the respondents said they have never used Blockchain. However, 64% said they expect Blockchain to impact their industry, and most are predicting positive results. Cybersecurity is one of the most promising areas where blockchain technology is expected to grow. Data tampering is a constant challenge for organizations of all sizes. Blockchain technology can prevent tampering by keeping data safe and allowing participants to verify the authenticity of files.
This is Kenn Leuzinger. Thank you for taking the time to read my blog post. Please contact me if you want to have more of a discussion on this topic.