Introduction To Blockchain Technology
Simply put, blockchain is the backbone of cryptocurrency. The term first came to light in October 2008 as a part of the Bitcoin proposal. Aimed at creating peer-to-peer transactions without involving banks, it was essentially a blueprint for a revolution. Blockchain solves the age-old trust issue. It allows people and institutions that do not know each other, live in different countries, are subject to different laws and have no legally binding agreements with each other to interact over the Internet without the need for trusted third parties such as banks, Internet platforms, or other types of clearing institutions.
Sounds like something you would like to get into? We got your back! Here is everything you will ever need to know about blockchain technology.
What is blockchain?
A blockchain is a distributed database that is dispensed among computer network nodes. Like a database, information is stored electronically in a digital format in blockchain. Blockchain has been popularized by its role in crypto systems like Bitcoin. They are instrumental in securing and keeping decentralized records of transactions. Blockchain’s USP lies in the fact that it provides security and safety without involving a third party.
The data in blockchain is structured very differently from the way it is done in a traditional database. Blockchain collects information in groups that are known as blocks. These blockers hold sets of data. Once a block reaches its storage capacity, it is closed and linked to another filled block. A chain of data is thus formed. All new information that follows that newly added block is compiled into a newly formed block, which is then added to the chain once it is complete.
In a database, this information is usually structured into tables. In a blockchain, however, blocks are strung together. When implemented in a decentralized manner, the data timeline created becomes irreversible. Once a block is filled, it becomes a permanent part of the timeline with an exact time stamp.
Why is blockchain popular?
Imagine you have to send across some money to a friend in need. You log onto your online banking website and transfer the money using your friend’s account details. Once the transaction is completed, the bank updates its records.
You did not take into account a major issue.
It is extremely easy to tamper with such transactions. Many people tend to be very cautious while using online banking services. This has led to the rise of third-party payment apps in recent years.
This is where Blockchain steals the show.
Data and transaction record-keeping is an important aspect of any business. This information is frequently handled in-house or passed through a third-party such as brokers, bankers, or lawyers. This is time-consuming and incurs extra costs to the business.
On the other hand, blockchain avoids this tedious process and allows swift transactions, saving both time and money.
Features of Blockchain Technology
Blockchain is the new kid on the block. Everyone wants to be its best friend. In this increasingly competitive digital world, blockchain has a lot to offer. Some of its benefits include:
Blockchain uses a digital signature feature which makes fraud a very difficult task. Without obtaining this specific signature, changing or corrupting an individual’s data is basically impossible.
Traditionally, you need approval from regulatory authorities like banks to carry out a transaction. Blockchain, however, only requires mutual consent of the 2 parties involved. Ergo, you get swifter and safer transfers.
Blockchain is programmable. This means that it can automatically generate systematic actions, events, and payments once the trigger criteria are met.
How does blockchain work?
While blockchain enables digital information to be recorded and distributed, it cannot be edited. In this sense, it is an immutable ledger i.e. the records of transactions it keeps cannot be changed, deleted, or destroyed. Therefore, Blockchains are also called distributed ledger technologies (DLT).
In recent years, many businesses around the world have adopted Blockchain technology. If you too are looking to take the plunge, now is the time!
Essentially, Blockchain consists of three core technologies:
- Cryptographic keys are used to generate a secure digital identity reference. This identity is the digital signature we talked about before. These keys are necessary to carry out transactions.
- These keys are then used to perform various types of digital interactions across the peer-to-peer network.
- The last step involves a method of computing for storing network transactions and records.
Types of Blockchain
Private blockchains run on closed networks and are best suited to private businesses and organizations. These can be used by companies to tailor their accessibility and authorization preferences, network parameters, and other critical security features. A private blockchain network is managed by a single authority.
Bitcoin and other cryptocurrencies make use of public blockchains. Public blockchains also contribute to the elimination of certain challenges and issues, such as security flaws and centralization. DLT distributes data across a peer-to-peer network rather than storing it in a single location.
Permissioned blockchain networks, also known as hybrid blockchains, are private blockchains that grant special access to authorized individuals. This setup allows organizations to take advantage of the best of both worlds. It allows for better structure when determining who can participate in the network and in what transactions.
Like permissioned blockchains, consortium blockchains also have both public and private components. Although these blockchains are more difficult to set up at first, once operational, they can provide greater security. Furthermore, consortium blockchains are ideal for collaboration among multiple organizations.
1. Monetary transactions: This was the original reason for the development of blockchain. Money transfers using blockchain can be less expensive and faster than traditional methods. A blockchain transaction takes only a few minutes.
2. Financial exchanges: Multiple companies offer decentralized cryptocurrency exchanges. This does not require investors to deposit their assets with a centralized authority. Therefore, they can maintain greater control and security over their belongings.
3. Loans: Lenders can use blockchain smart contracts to execute collateralized loans. Certain events can be automatically triggered by smart contracts built on the blockchain. As a result, loan processing is faster and less expensive, allowing lenders to offer lower interest rates.
4. Insurance: Smart contracts on blockchain for insurance are a great way to improve transparency. Recording the claims can speed up the process of claiming payments and keep both parties bound to the conditions of the contract.
5. Real estate: The use of blockchain technology to record real estate transactions provides a more secure and accessible method of verifying and transferring ownership. This can help to speed up transactions, cut down on paperwork, and save money.
6. Artist royalties: The use of blockchain technology to track creative work products distributed over the internet can ensure that artists are compensated for their efforts. Because blockchain technology was developed to ensure that the same file does not exist in more than one location, it can be used to aid in the reduction of piracy.
7. Non-fungible tokens: NFTs are commonly thought of as methods of acquiring the rights to digital art. Putting an NFT on the blockchain ensures that only one copy of a piece of digital art exists. This can make it similar to investing in physical art but without the disadvantages of storage and maintenance.
8. Tracking logistics: Tracking items as they move through a logistics or supply chain network can provide several benefits. Since data is available on a secure public ledger, it facilitates communication between partners. Blockchain can be used for building a transparent supply chain since it provides greater security and data integrity.
9. Secure networks: The Internet of Things (IoT) has made our lives easier, but it also allows malicious actors to access our data. By storing passwords and other data on a decentralized network, blockchain technology can provide increased security.
10. Data storage: Including blockchain technology in a data storage solution can boost security and integrity. Since data will be stored in a decentralized manner, hacking will be next to impossible. It also allows for greater accessibility and lowers costs.
Top 5 blockchain platforms of 2022
Blockchains have established themselves as ways of streamlining supply chains, simplifying trade, improving traceability and financial transactions. Here are some of the best performing blockchains of 2022:
Ethereum, which was introduced in 2013, is one of the most established blockchain platforms. It offers a decentralized blockchain network and supports smart contracts. Apart from underpinning the enterprise applications it also has its own cryptocurrency, ether. It also has a vibrant developer community led by the Enterprise Ethereum Alliance, which has over 250 members, including Intel, JPMorgan, and Microsoft.
2. IBM Blockchain
IBM Blockchain is a private, decentralized blockchain network that has had the greatest success with less risk-averse enterprise clients. The IBM Blockchain developer tool was created to be versatile, functional, and adaptable. IBM has also invested in developing a user-friendly interface to make critical tasks like configuring, testing, and rapidly deploying smart contracts easier.
3. R3 Corda
R3 employs a novel mechanism in which transfers are cryptographically linked but does not batch multiple transactions into a block regularly. According to the official Corda website, it is “both a blockchain and not a blockchain.” One of the primary advantages of this method is that all transactions are processed in real-time. This leads to better performance as compared to other blockchains. Bank of America, HSBC, Intel, and Microsoft are among the most vocal supporters of this blockchain. It supports business logic automation tools that can run across company boundaries.
Tezos is a blockchain platform that supports decentralized applications, smart contracts, and novel financial instruments such as NFTs. The platform includes modular software clients that allow it to adapt to new uses. The Tezos community has been rapidly improving the platform, with recent performance improvements and increased the size limit on smart contracts. It has also created tools to aid in the automation of the process of incorporating NFTs into enterprise supply chains.
Stellar is a relatively newer blockchain platform that has been optimized for a variety of DeFi applications. It employs a protocol that shortens the time taken to process and finalize transactions. It also includes security mechanisms for preventing bad or questionable actors from participating in a financial transaction. Several companies have adopted it for international trade and cross-border money exchange.
The transfer of control and decision-making from a centralized entity to a distributed network is referred to as decentralization in blockchain. Blockchain decentralization has multiple benefits such as:
A secure way of transacting
In a decentralized blockchain network, each member has a copy of the same data in the form of a distributed ledger. If a member’s ledger is changed in any manner, the members will reject it.
Improved data reconciliation
Companies frequently share data with their partners. This data is typically transformed and stored in each party’s data silos. Each time the data is transformed, the possibility of data loss or incorrect data entering the workstream increases. Every entity has access to a real-time, shared view of the data in a decentralized data store.
Resource distribution optimization
Decentralization can also help optimize resource distribution, resulting in better performance and consistency, as well as a lower likelihood of failure.
Blockchain and Cryptocurrency
The terms blockchain and cryptocurrency are frequently used interchangeably. While they are two distinct technologies, they are also inextricably linked to one another.
Blockchain is essentially a digitized, decentralized, public ledger. It is a collection of digital information, or blocks, stored across a network of computers to form a database. When verifiable transactions occur, the information is stored in blocks, which are added to the chain once they are full. As a decentralized, digital system, cryptocurrency operates via the blockchain. Crypto is a digital or virtual currency that employs cryptography for security. It is not controlled by any single authority, making it difficult for governments to manipulate.
Blockchain is a core feature of cryptocurrency. The popularity of blockchain has been fuelled by crypto’s reliance on it to exist. However, it is critical to understand that the usage of blockchain extends far beyond crypto applications. It offers multiple solutions that are continuously disrupting a variety of service markets. Since Bitcoin was one of the first use cases of blockchain, people tend to get confused between the two. However, cryptocurrency coins are just one of the many applications of blockchain technology.
Blockchain gaming derives true item ownership from the same technology that supports cryptocurrencies. It is a game-changing innovation for players who previously accepted that their items would be stuck in games indefinitely.
NFT enthusiasts have begun to flock to blockchain and NFT gaming because it allows them to do something that gamers have wanted to do for decades: move and sell items. There is work to be done to obtain these items, but there is also money to be found. Cryptokitties is one of the oldest known blockchain games.
Unlike traditional games, blockchain games are decentralized. Blockchain game assets are distributed among players. These assets have monetary value and are built on blockchain technology. Cryptocurrencies are used for in-platform payments. Players own in-game assets that can be exchanged for cryptocurrency and real-world money. NFTs can be earned or purchased in blockchain games. Once this is done, they own the asset and it has its own in-game value. Players gain full ownership of these assets the moment they receive an NFT reward.
Players can earn rewards in Play-To-Earn games. In NFT-based games, for example, players can earn various in-game assets. These assets are the players’ compensation for participating in the game. These assets are valuable, and players can decide how to manage them. Crypto-based games, on the other hand, reward players for participating in the game with small amounts of cryptocurrency. The earning process in these games is typically long and slow, but the payouts are genuine.
In play-to-earn games, players must make an initial investment in an in-game asset. This concept is primarily seen in NFT-based games. The earning potential of these games is based on the value of in-game assets purchased by the players. These assets’ value can increase over time. Players can either continue to play and upgrade them to increase their value, or they can get rid of them as soon as they want. These assets can be transferred outside of the game and sold to other people without informing the game developer.
Both of these types fall under the ambit of GameFi. The term is a blend of two words- “gaming” and “decentralized finance”. It is used to describe all the games that allow players to earn profits while playing.
A blockchain wallet is a digital wallet that allows users to store, manage, and trade cryptocurrencies. Users of Blockchain Wallet can manage their Bitcoin, Ether, and other crypto assets balances. Blockchain Wallet includes several security features to protect against theft, including theft by company insiders.
Users can request bitcoin or other crypto-assets from another party, and the system generates a unique address that can be shared with the third party or converted into a Quick Response code or QR code. A QR code, like a barcode, stores financial information and can be scanned by a digital device. Swapping allows users to exchange Bitcoin for other crypto-assets and vice versa. This method is a simple way to switch out crypto without leaving the Blockchain Wallet’s security. Users can also buy and sell cryptocurrency using Blockchain Wallet’s Buy Crypto interface.
Blockchain and smart contracts
Smart contracts are basically automated agreements between the creator of the contract and the recipient. This agreement is written in code and embedded into the block, making it both immutable and irreversible. They are typically used to automate the execution of an agreement so that all parties can be certain of the outcome immediately, without the need for any middlemen. They can also automate a workflow, starting it when certain conditions are met. Consider smart contracts to be digital “if-then” statements made by two or more parties. If the needs of one group are met, the agreement can be honored and the contract is considered complete.
Smart contract have various benefits. They are efficient, accurate, transparent and secure. Smart contract platforms will save businesses around the world time and money while also transforming the way they interact with their supply chain and customers. As a result, minimal human involvement will relieve key decision-makers, allowing them to focus on their day jobs.
Blockchain for supply chain solutions
Blockchain technology, according to its supporters, has the potential to boost the effectiveness and profitability of most businesses—or even disrupt the market we know it.
Most supply chains today operate at-scale without the use of blockchain technology.
Nonetheless, the technology has piqued the interest of the IT and supply-chain communities. It has also sparked numerous articles and prompted well-known IT players and start-ups to launch promising pilot projects. Experts are predicting the use of this technology to drive supply chain transparency. Here are some recent projects that use Blockchain for supply chain solutions:
- Maersk and IBM are collaborating on cross-border, cross-party transactions that will make use of this technology to improve process efficiency.
- Provenance, a UK startup, recently raised $800,000 to adopt this technology for food tracing. It had previously experimented with tracing tuna in the Southeast Asian supply chain.
But here’s the catch. Many supply chains today have good data that can be transferred across supply chain tiers at near real-time speeds. There are a few areas, however, where blockchain can add value in the supply chain world.
Supply chains can handle large, complex data sets. But many of their processes, particularly in the lower supply tiers, are slow and rely entirely on paper. It can help improve this condition.
Change is already being driven by rising regulatory and consumer demand for provenance information. Furthermore, improving traceability adds value by lowering the high costs of quality issues. Simplifying a complex supply base opens up new opportunities for value creation.
Blockchain in Logistics
The logistics industry serves as the backbone of all businesses worldwide. It is a trillion-dollar industry that is expanding at an exponential rate. Blockchain is all set to change the logistics industry’s landscape.
While companies such as IBM have begun experimenting with blockchain-based enterprise software and systems, businesses have begun to recognise the benefits of blockchain in logistics. These include:
1. Tracking Inventory- Already in practice by IBM, Walmart and Unilever.
2. Improve Freight and Shipping- Being used by Dutch Customs and US Department of Homeland Security in collaboration with Maersk.
3. Invoicing and Payments- Adopted by Visa and Tallysticks
4. Identity Verification- Being leveraged by Everledger
5. Dispute Resolution- Employed by FedEx
Industry leaders have already started using blockchain to improve their logistical standards, and the trend shows no signs of stopping.
The truth about blockchain- how will blockchain technology change the world?
Blockchain can give new meaning to wealth in a society that has seen values shift in the aftermath of the recent crisis, and the technology will emerge as a disruptive force across a wide range of industries.
Blockchain’s applications are virtually limitless because it is a peer-to-peer distributed digital ledger of time-stamped transactions. It has the potential to transform lending, security, consumerism, business models, and digital property. And this is only the tip of the iceberg in terms of its capabilities.
Blockchain marketplaces are by design more secure than traditional counterparts. The data within the blockchain is fully encrypted and protected by the nature of the public ledger, which means that no single party can manipulate the information within, making the technology ideal for startups.
As we transition from the pandemic era to the age of the ‘new normal,’ blockchains are likely to be at the forefront of our progress in addressing these new societal concerns and redefining the meaning of wealth in the new world of digital finance.
Choose any industry of your liking. Blockchain can inevitably disrupt it. This will result in a more prosperous world in which people can participate in the value they create.