Are you interested in blockchain technology? If you are not aware of what it is, you need to get up to date. The world is moving fast, and to keep up with it, you need to know what blockchain technology is. An ingenious idea, it transfers information from one point to another in a completely automated and safe manner. This is the most simple explanation we can give. It has changed the way digital information travels. And there are great blockchain technology investment opportunities. Are you still interested?
What is blockchain technology? What are the applications of blockchain technology? What are some of the major blockchain technology investments you need to get in on? These are just some of the questions we will answer in this comprehensive guide about blockchain technology. Read on!
What Is Blockchain Technology?
One of the greatest emerging technologies in trade finance, blockchain technology allows the dissemination of digital information in the safest manner possible. Originally, it was created so that digital currencies could not be copied. However, techies have found several other blockchain applications.
The blockchain system incorporates a number of computers to safeguard digital information. It does that by time stamping the records and making it immutable. This way, no single entity owns the information. The blocks connected in a chain are then transferred and secured by the use of cryptographic keys.
Blockchain development is such that it has truly democratized the system. Since there is a shared ledger, there’s no one central authority. The ledger technology makes everyone’s actions transparent, which leads to accountability on the web, something that seemed impossible.
How Is Blockchain Technology A Revolution In Digital Media?
One, we have mentioned already that it truly democratizes the dissemination of data. Second, if it comes at no transaction cost. Yes, blockchain architecture and blockchain implementation will come at a price but after it’s implemented, there’s literally zero cost. This is what makes the blockchain initiative so great.
When data passes from point one to two, a block is created. Millions of people around the web then verify the block. Then, it is added to an existing chain. The chain gets stored across various computers. This doesn’t just give the block its unique data, but also a unique history.
This makes it impossible for anyone to falsify or copy a record.
Bitcoin transactions use this blockchain technology to secure safe financial services. Now, people have realized the potential of this decentralized application.
The great thing about the applications of blockchain technology is that it is completely free. That means, if you are paying using the blockchain tech, you don’t need to pay an extra service charge. It basically means that any third party or a middle man taking a cut of your profit (if you run a business with the blockchain technology model) will be eliminated. Due to this revolutionary system, several apps like Airbnb and Über have felt threatened. Since there’s no use for a central authority, people don’t need third-party managers. Your digital asset will be yours.
What Are The Applications Of Blockchain Technology?
For instance, instead of paying National Geography or The Economist annually, you can simply pay the writer or the filmmaker a direct fee per article or video through blockchain technology. It will not only make things cheaper for consumers, but it will also increase profits for people who create.
Music artists can use blockchain technology to cut out distributors from the mix. This way, the transaction of digital currency will happen between the music artist and the consumers.
Artists won’t need a marketplace like Amazon for financial transactions, they can simply make a blockchain technology investment. The blockchain capability goes higher than that. Once people realize blockchain adoption, banks and stockbrokers will go out of business. The distributed ledger technology completely eliminates the need for financial institutions that take a cut simply to facilitate a transaction.
How Does A Blockchain Platform Function?
If you still find blockchain technology confusing, think of a spreadsheet. Now, this virtual spreadsheet will be duplicated over a thousand times across thousands of computers. Now, because of the blockchain architecture, this spreadsheet will be updated every time anyone engages with it. Since there’s no central authority, everyone can access this blockchain ledger. And hence, the world of virtual currency has been revolutionized.
No data is the original data. And since this distributed ledger is stored in thousands of computers, all of them stand as originals, which makes copying them practically impossible.
One blockchain developer compared the technology to a spreadsheet because it can be shared with and given access to multiple people at once. This will not only increase accountability but productivity as well. Instead of going through a central authority, again and again, people can just have direct and open access with the producer (or the consumer.)
The blockchain technology was earlier used for bitcoin cash, now, it has taken the internet by a storm because of its varied business applications.
In simple terms, the public blockchain project is hailed because no central authority controls it, the digital data is sorted using cryptographic keys, the blockchain cannot be tampered with because it is verified immutable, and because every update is transparent and accessible to everyone on the blockchain network.
Three Major Aspects Of The Blockchain Technology
These properties can also be called the three main pillars of this distribution system.
Before BitTorrent and Bitcoin cash came into existence, almost everything worked under a centralized system. It simply means that one centralized figure will store all data. And if you need access to the data, (to share it or otherwise) you go through the central authority.
One great example of this system is the bank. You store your money with them and whenever you need to engage in any transaction, you go through them. Sure, banks work great. But, they have their own issues.
One major vulnerability of the centralized system is that since everything is stored in a single spot, hackers can easily target them. The system would be halted if it were going through an upgrade. If for some reason, the central system shuts down, no one will have access to any data until it is restored.
This is why blockchain technology works great. All the issues mentioned above disappear with the blockchain solution. Using the blockchain technology, you will be the sole owner of your supply chain, but the smart contract will be visible and accessible to everyone. There’s no chance of any hiccups.
This is the second pillar introduced by the blockchain developers. It might be one of the most misunderstood but interesting concepts. While it gives you privacy, it is also transparent.
Well, if you are completely new to this blockchain technology, it will surely confuse you. What we mean by privacy and transparency at the same time is that while data is accessible by everyone on the internet, an individual’s identity is protected via cryptography keys.
For instance, if you engage in a smart contract and transfer some money via blockchain smart contracts, your name won’t appear on the data, instead, you will be represented by your public address.
So, even though the transfer will be a piece of public knowledge, the identity of the person will not be disclosed. It simply means that the ledger will upload itself to show the latest modifications. Something like this has never been heard of in our current traditional financial system. It brings in transparency, accountability, and minimizes any chances of fraud.
Accountability has been a huge issue with some of the biggest corporations in recent times. With this private key blockchain technology, anyone can follow up on what transactions an agency is involved in (if they use this technology.)
Agencies that employ cryptocurrency have come to the forefront with blockchain technology. If the public address of an agency is known to you, you can just look for their transactions on the internet. It’s as simple as that. Blockchain technology ensures complete honesty.
However, many agencies don’t just use cryptocurrency. They employ other firms of transactions as well. Since blockchain technology is fairly new and not widespread, companies can still hide their activities. Imagine if their supply chain was integrated into one blockchain. That would change the game completely. It will ensure honesty and accountability.
So, what is blockchain technology? It’s simply a democratic system that takes out the middleman and makes you the sole owner of your profits.
When thought of in the context of blockchain technology, immutability is simply the notion that anything that has already found itself in the blockchain won’t ever be tampered with. Now, it doesn’t exactly take a rocket scientist to understand that this could be immensely valuable for any financial institution. Goes without saying, there are embezzlement cases which wouldn’t have taken place in the first place if people realized that they wouldn’t be able to snip around the books, and corrupt the company accounts. Blockchain technology is accorded this feature due to the cryptographic hash function.
For the uninitiated, hashing simply means bringing out input of any desirable length, but the output has to be something completely fixed. When you bring that into account with subjects like bitcoin cryptocurrency, every bitcoin cash transaction is seen as an input- which is then run through an algorithm for hashing- providing us with an output.
Let’s just simplify how the process of hashing works- when you think about blockchain technology. For this experiment, we will be putting in certain numbers- SHA-256.
From the picture above, it is extremely clear that SHA-256 can be extremely big, or small- but the output will still be 256 bits length. And this is something which is extremely critical when you are engrossed in a large amount of financial transactions, and data. The trick is to simply keep track of the hash, instead of the input data which could be immense.
A cryptographic hash function is a distinguished class of hash functions containing several properties- which make it perfect for cryptography. To be thought of as secure, cryptographic hash functions have to have several properties which can be read in brief all over the Internet.
But for the purposes of blockchain technology, let’s just focus on one single property for now- ‘Avalanche Effect’. What do you think it means?
Basically, it means that for every slight change in the input, the hash changes would be immense. You could test it out with SHA-256.
Isn’t it exciting? Even if just the first alphabet of the entire sequence is changed, the entire output would be completely different. Now, going back to our earlier comment on blockchain technology, and blockchain technology-
A blockchain technology is simply a linked list which includes a hash pointer and data- which work in tandem to locate its previous block. This creates the chain. Also, a hash pointer is simply a pointer with added benefits. Instead of simply being a pointer and containing addresses of the previous blocks, it also brings with itself the data hash from the previous block. And this very minuscule change is what makes blockchain technology trailblazing, and reliable.
Let’s just think for a second that a hacker might just attack a certain block 3- and then try to sift and shift the data. But due to the hash function properties, the slightest shift in the data will also change the hash completely. And this leads to an Avalanche, or Domino effect. For, a change in the data of block 3 would lead to significant changes in the hash of block 2, which would then change the hash and data of block 2, and then block 1- and so on.
Considering this will definitely change the entire sequence and chain, this is highly impossible due to the blockchain technology- which is why it has immutability.
Maintaining the Blockchain Technology– Network, and Nodes
Every blockchain technology is maintained and balanced by a network that is peer-to-peer. A network is simply an amalgamation of nodes which are connected to one another. Nodes, on the other hand, are computers which would gather input and then perform a function after which they would happily give out the output. Since the blockchain technology uses this network to partition its workload to every ‘peer’- there is no central server. Every single peer is distributed and decentralized.
Why do people use the peer-to-peer network for Blockchain Technology?
Torrenting is one of the biggest uses of a peer-to-peer network which is also called file sharing. This is much better than using a client-server model in order to download. Now, this model can get extremely slow- apart from being heavily dependent on a server’s health. And finally, there is censorship which acts on it.
On the other hand, a peer-to-peer blockchain system has a decentralized authority which entails that they have a lot of other peers in the event one is compromised. Since it doesn’t uphold the ideal standards that are in place by a central authority system, it doesn’t have to deal with censorship. The decentralizing aspect of a peer-to-peer network can get heavily important when we realize that it has actually changed the way we see money. The very idea of combining such a network with a system deliberately used for payment has revolutionized the entire financial sector through the birth of digital currency.
The use of networks and nodes in cryptocurrencies
A cryptocurrency’s peer-to-peer structure is heavily structured on the consensus mechanism which is being used. Bitcoin and Ethereum are forms of virtual currency which utilize a proof-of-work consensus process- meaning every single node holds the same amount of power. The main idea behind this is to create something egalitarian. While none of the nodes are given any added power or privilege, their responsibilities may be different. The entire network works on no centralized servers, therefore there is no hierarchy. For those well aware of the phenomenon- this is a flat topology.
The cryptocurrencies are a form of decentralized blockchain applications so that they remain faithful to the philosophy which granted them existence. The main agenda is the creation of a singular currency system which has no higher power controlling it. This would also prevent the value of that currency from fluctuating based on a single whim.
But this begs the question- if there is no single body governing them, how does information pass through this blockchain initiative? Well, they use the blockchain protocol of gossip. If person A sent a couple of Ethereums to person B, then the nodes surrounding person A would mention it to their adjoining nodes. And this will lead to them mentioning it to their surrounding nodes. After a while, everyone would be able to know of a transaction.
So, when you discuss Ethereum, what is a node? In this context, a node is one of the computers that is a participant in this network. And this mere participation can take three forms.
1. When you keep a shallow-copy of any blockchain platform- Light Client.
2. A Full Node- where you keep the full copy.
3. Mining– the hardest part of the job where you have to verify every single transaction.
But this design has several issues- the foremost amongst them being unscalable. This is exactly why most of the new generation cryptocurrencies have been adopting a consensus mechanism which is mostly leader-based. In several cryptocurrencies like Cardano, EOS, and Neo, the nodes are in charge of electing a supernode, which would then be in charge of the network health. And while these cryptocurrencies do work extremely fast, they are not decentralized.
Who Will Use The Blockchain Network Technology?
Blockchain technology is extremely useful since it is a part of web infrastructure. It doesn’t make sense for you to wait until it becomes important for you to know it. In the present economy, the financial sector has been offering the most cases for technological needs. The World Bank has estimated that close to $430 billion have been sent via money transfers for the year 2015. Goes without saying, there is a great demand for blockchain developers at this point.
Blockchain implementation is fool-proof, for it cuts out the middleman when these transactions are brought out. Since personal computing became possible only after the GUI was developed, the GUI for a blockchain technology is the wallet application- which can be used by users to purchase things via Bitcoin, and have it stored en masse with other cryptocurrencies.
What is Blockchain Technology good for?
There are several advantages of Blockchain technology. It not only enables the authentication of digital information but also has the ability to create value for it.
Blockchain Smart Contacts:
If specific conditions are fulfilled, a technology that uses a distributed system for blockchain ledger will enable simple contracts coding. One of the biggest open-source blockchain adoptions is Ethereum, which has been built specifically for this purpose. While it is still a fledgling, it has the potential to use other blockchains as leverage to change the world.
Considering the development of blockchain technology at the current level, one can use smart contacts to work out simple functions.
Sharing economy has become a major success throughout the world- with AirBnb and Uber proving it correct. But in the present world, if you have to avail any ride sharing service would have you searching for an Uber. Here, the presence of a peer-to-peer network system would negate the middleman- thereby decentralizing the whole economic structure. OpenBazaar is one such app which uses blockchain technology to bring out a peer-to-peer eBay.
Gofundme and Kickstarter are two crowdfunding blockchain startups which have been emerging out as the best business applications for the peer-to-peer economy. Since these sites maintain quite a huge popularity, it goes without saying that the general public does want to have a voice in the development of products. Public Blockchain technology takes this development further- creating capital funds which are mostly crowd-sourced.
Database technology which is distributed can definitely help make results more publicly accessible as well as transparent. Smart contracts which are Ethereum based can make do with such automated processes. Boardroom is an app that enables decision-making on the organizational level and serves as one of the blockchain capabilities. This results in the governance of the company turning completely verifiable and transparent- when one is managing information, equity, or digital assets.
Auditing the supply chain:
Since most companies make immense ethical claims, it is only natural that consumers would want to validate that statement. Distributed ledger technology is a form of blockchain which would help one verify if the products we are using are authentic or not. Transparency on products are readily available if one were to check the timestamping on a date and location, and then matching it with the product number. Provenance is a UK based supply chain that offers auditing a huge range of consumer goods.
When the file storage system is decentralized throughout the internet, it brings with itself several benefits. One of them being that distributive data throughout the peer-to-peer network would prevent it from getting lost. IPFS is a file system that makes it extremely easy for the uninitiated to conceptualize just how a distributed web network would function. Just like BitTorrent shuffles data throughout the internet, IPFS also negates the need for a client-server relationship. And this can totally ramp up the speed used in transferring files.
If you want to score high on event probability, the best way to go about it would be to crowd-source it. Since the opinions would be quite average- it would cross out the biases that haven’t been examined yet, and distort judgment. In fact there are several prediction markets around the net where payout occurs according to the outcomes of the event. Blockchaintechnology hence can be considered a technology that believes in ‘wisdom of the crowd’.
Protection of Intellectual Property:
With the internet helping one duplicate information and spread it throughout the net, the need for private key ownership and privacy has skyrocketed. As everyone can get hold of some information that should have been the sole ownership of one individual, smart contracts come into play. This private blockchain technology helps protect the copyright of a product, while automating its sale on online creative works- thereby eliminating the unnecessary risk of redistribution, as well as file sharing.
Therefore, we can see that Blockchain technology comes with a whole host of benefits that are not only useful in the financial services but also would be important for sole ownership of data. Blockchain solutions can be the be-all and end-all of cryptocurrency.