Blockchain Technology, Its Purpose And Working – Unraveled!
Until a few years ago ‘block’ and ‘chain’ with two distinct words that did not have any context when talked about together. Today, blockchain has a lot of implications in the field of technology, finance, supply chain, and almost every other vertical where there is a need for integrating transparency and accountability with security.
What Is Blockchain?
Blockchain, as we all know is a decentralized ledger technology that is extremely secure, transparent, and immutable. These attributes make it a numero uno choice for a lot of financial applications. What makes blockchain powerful is its dependable consensus mechanism. A blockchain can only be updated by a consensus between all the participants in the system if data needs to be updated. In addition, the data that is once updated can never be erased, leaving a permanent mark on the blockchain for later reference. In short, it is a write-once, append-many technology making it auditable and verifiable.
Although the proposition sounds extremely lucrative on paper, it has to be accepted that blockchain has its own limitations right now as the technology is in its most nascent stage. It is expected that in the near future, blockchain will evolve to scale up and become optimized for accommodating the humongous volume of transactions that need to be handled when taking over mainstream finance.
Every block in the blockchain is connected by a cryptographic hash. These hashes ensure that the chain cannot be broken or intervened by malicious forces because to gain access to the change at any level, it is important to have access to the complex hash and have it solved. These hashes are extremely complex and require high computing power period even if the hacker did gain access, it is no use when one block alone is compromised because if the other blocks do not agree to the change, the intervention cannot happen – this is one of the strongest notions or concepts that assure data security on the blockchain.
Bitcoin – Brand Ambassador For The Blockchain
Blockchain would not have achieved so much of hype and the media attention if not for bitcoin. Bitcoin is the first cryptocurrency to have ever been introduced and it can be considered the gold standard for crypto assets. It was introduced by Satoshi Nakamoto in the year 2008/09 and has gone through a series of ups and downs in terms of its value. However, undeniably, it has established the supremacy and the utility of blockchain as a new technology that might have applications in various fields.
Capitalizing on the wave of blockchain created by the bitcoin, new cryptocurrencies like Ether based on the Ethereum blockchain was also created. These blockchain technologies did not focus on value but rather on the technological advancements that it can provide – Ethereum is still the most preferred choice for creating self executive programs for the blockchain called smart contracts.
Today, blockchain technology companies focus on creating solutions for supply chain management, authenticity verification, finance, and even medical health records. Blockchain technology service providers have dedicated themselves to making this technology more dependable and mainstream. They have been working to address the issues of scalability, efficiency, and ease of coding.
Classification Of Blockchain
Blockchains are mostly classified under two major categories: private and public blockchain. As the name implies, public blockchains or for anyone to access, and every user, in essence, is an administrator. They are commonly used to create smart contracts and decentralized applications.
Private blockchains, otherwise called permissioned blockchains are created by private companies centrally administered their own transaction network. It could be either between their own employees between their exclusive set of clients. Anything said, no outsider can have access to the private blockchain, leave alone making changes.
Deep Dive Into Smart Contracts (What is Smart Contracts In Simple Words?)
It must have been inferred that we have been talking a lot about smart contracts. Smart contracts are self-executing programs that run on the blockchain and are designed to execute upon certain conditions being met. Smart contracts reduce the need for human intervention and the consequential errors associated with it. Walmart and IBM created supply chain blockchain after customers became sick from equally from a specific batch of lettuce. This enabled them to track the supply chain right from the farm until the buying by the end customer – a simple but stunning case of how smart contracts could be extremely beneficial without any room for human errors.
Smart contracts also have a role to play in proving the authenticity of an item considering the fact that the counter feet market is worth more than $1.8 billion annually. De beers, the diamond giant controls about 35% of the global diamond production. They have launched a blockchain-based supply chain to track diamonds for their authenticity to avoid blood diamonds being circulated in the mainstream market.
Tokenization – The Icing On The Cake
Perhaps one of the greatest manifestations of the new technology is that it can break down tangible assets into small representative tokens that can be treated just like stocks. However, these tokens can help fractionally trade an illiquid asset like real estate. This also ensures global reach and round the clock trading, possibly enhancing liquidity.
This application opens not just a new avenue but a new paradigm for investors. Commercial real estate and collectibles are no longer confined to institutional investors – even retail investors can participate and reap profits out of the returns.
How Does The Future Look?
When the first car was created by Daimler, they would never have imagined a Koenigsegg or a Pagani today! It’s the same case with blockchain. It is at a nascent stage and even at this level, the utilities look promising. There are issues with scalability – while bitcoin can only process a maximum of seven transactions per second, Visa can process 1700 transactions per second.
If the issues of scalability and adaptability are addressed effectively, it is quite sure that blockchain will be the order of the future! The growing number of blockchain platform providers and the number of blockchain technology service providers steadily growing is standing and resounding testimony to the fact that it won’t be long before a lot of processes are centralized under this decentralized ledger!
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