Simplified Explanation of Blockchain Technology
In this article you will learn the following:
· What is Blockchain Technology
· History of Blockchain Technology
· Component Of Blockchain
· Public Blockchain
· Private Blockchain
· Why Blockchain Technology
· Disadvantages of Blockchain Technology
· Applications of Blockchain Technology.
Blockchain technology gained momentum mostly after it was used as the technology that powers bitcoin, it is one of the most advance technology in 21st century. The use of blockchain technology has gone beyond just cryptocurrency has it was before.
What Is Blockchain Technology?
Blockchain is one of the distributed ledger technology which enables sharing of an immutable ledger among network participants. The ledger is used to keep track of assets and document transactions throughout a company network. In blockchain technology applications, the assets in question might be both tangible and intangible.
Cash, a house, property, or a car are examples of tangible assets. Intellectual property, trademarks, copyrights, and patents, on the other hand, are examples of intangible assets. Because it can track and trade nearly everything of value on a virtual platform, blockchain is the way of the future. Interestingly, blockchain eliminates the risks and expenses associated with such transactions in the past.
Different ways could be used by businesses to create blockchain networks. The public blockchain networks allow anyone to connect to the network. A private blockchain network is governed by a specific entity. Participants in permission blockchain networks must first receive permission or an invitation to join the network. Blockchain networks could also be consortium blockchains, which are created and maintained by a group of people.
History Of Blockchain Technology
The first blockchain-like protocol was proposed by cryptographer David Chaum in 1982. Later in 1991, Stuart Haber and W. Scott Stornetta wrote about their work on Consortiums.
But it was Satoshi Nakamoto (presumed pseudonym for a person or group of people) who invented and implemented the first blockchain network after deploying the world’s first digital currency, Bitcoin. Cryptography is a deep and fascinating discipline with a history that goes back further than blockchain.
Fundamental Components Of Blockchain
· Transaction: In a Blockchain, a transaction indicates the activity performed or triggered by the participant.
· Block: In a Blockchain, a block is a collection of data that records the transaction as well as other parameters such as the exact sequenc, timestamp of creation etc.
A public Blockchain, like Bitcoin, allows all users with read and write permissions to view it. Some public Blockchains, on the other hand, restrict access to either reading or writing.
A private Blockchain restricts access to a small group of trusted participants, obfuscating the identities of the users. This is especially true in the case of governmental institutions and related sister enterprises, as well as their subsidies.
One of the most significant advantages of the Blockchain is that it, as well as the technology used to build it, is open to the public. Each of the involved entities has an up-to-date complete record of the transactions and blocks. As a result, the data remains unchanged because any modifications will be publicly visible. The data in the blocks, on the other hand, is encrypted with a private key and hence cannot be read by anyone.
Why Blockchain Technology?
Blockchain is an open, shared, and extremely secure technology. Any network transaction is visible to all participants. The approved participants, on the other hand, could only view a transaction on the blockchain.
1. Trust: Only a majority of network participants could approve the addition of new information to the blockchain ledger. After receiving reliable assurance that the cryptographically sent information is accurate, network participants approve transactions.
2. Immutability and Transparency: Immutability and transparency are the next two crucial characteristics that will determine the future of blockchain. Because a blockchain is immutable, new information can only be added to the previous data. Furthermore, once data is added to the blockchain network, it is difficult to change or lose it. The fact that any network participant can audit the updates on the ledger demonstrates blockchain’s transparency.
3. Significant Improvement: The value benefits of blockchain technology in terms of cost reductions and transaction speed are undeniably prominent. Blockchain has the potential to eliminate intermediaries, resulting in significant cost savings. Furthermore, blockchain allows for seamless corporate transactions at any moment. The most fundamental benefit of blockchain is that it allows for faster transactions involving money or other assets.
4. Decentralization : Decentralization is perhaps the most important component for the future of blockchain technology. The blockchain ledger is not maintained by a single person, organization, or corporation. On the contrary, all of the machines in the network are responsible for maintaining the blockchain network. As a result, any two parties could engage in transactions without the need for a centralized authority to create confidence.
Disadvantages Of Blockchain Technology
1. Environmental Impact: Decentralization is, without a doubt, the most important component for the future of blockchain technology. The blockchain ledger isn’t managed by a single person, organization, or corporation. The blockchain network, on the other hand, is maintained by all of the computers that participate in the network. As a result, transactions between any two parties are possible without the need for a centralized authority to create confidence.
2. Cumbersome: Blockchain is not easily comprehended, and its operation necessitates extensive understanding.
Application Of Blockchain Technology
These blockchain applications are contracts that automatically execute without an intermediary once conditions written into the computer code are met.
1. Decentralized Banking: Blockchain technology is increasingly being used in banking. Many banks, such as Barclays, Canadian Imperial Bank, and UBS, are interested in how blockchain can improve the efficiency of their back-office settlement processes.
2. Video Games/Art: Crypto Kitties, a game based on the Ethereum blockchain, may have caught your attention. One of the game’s virtual dogs was sold for more than $100,000.
3. Peer-to-peer Energy Trading
4. Supply chain and logistics tracking: Blockchain is being used to track the provenance of precious metals and foods. Walmart and IBM, for example, collaborated to develop a food traceability system based on open-source ledger technology that makes it easier to track down damaged food.
5. Healthcare process optimization: Blockchain has the potential to reduce the time it takes to settle health insurance claims to patients and to securely store and distribute medical data and records.
6. Real estate processing platform: On the blockchain, property ownership data may be securely recorded and validated. Because these documents can’t be tampered with, you can trust them to be correct and verify property ownership more readily.
7. NFT marketplaces: These are online marketplaces where you can acquire non-fungible tokens (NFTs), which are digital representations of items like paintings and clothing.
8. Music royalties tracking: The blockchain can track music streams and pay those who contributed to a song right away.
9. Anti-money laundering tracking system: Because every transaction on the blockchain is recorded and provides a tamper-proof trail, authorities can more readily track the original source of money.
10. Personal identity security: Traditional identity management solutions are unsecure and fragmented. Blockchain offers a single, immutable, and interoperable platform for securely storing and managing documents.
11. New insurance distribution method: Peer-to-peer insurance, parametric insurance, and micro insurance are examples.
12. Automated advertising campaign : Advertisers can use smart contracts to automate advertising campaigns, such as showing an ad to a certain audience only if certain criteria are met.
The Blockchain concept and technology are now being used for more than just Bitcoin production and transactions. Its security, privacy, traceability, inherent data provenance, and time-stamping qualities have led to its adoption outside of its original application areas. The Blockchain and its derivatives are currently being used to protect many types of transactions, including human-to-human and machine-to-machine connections. With the global emergence of the Internet of Things, its adoption appears to be assured. Its decentralized implementation across the existing global Internet is also very tempting in terms of data redundancy and thus durability. The Blockchain has been noted as being particularly useful for underdeveloped countries where guaranteeing confidence is a big challenge. As a result, the advent of the Blockchain might be considered as a critical and much-needed addition to the Internet, which previously lacked security and trust. As new applications continue to be adopted internationally, BC technology is still not mature, with a five-year estimate.