Perhaps some have never heard of Blockchain Technology. Or maybe even though some have it isn’t clear to them, and they may benefit from a little revisit?
In 2008, an individual or group of individuals, adopting the pseudonymous handle of Satoshi Nakamoto created Bitcoin and introduced the Blockchain technology. The Blockchain is positioned to be a transactional ledger for Bitcoin cryptocurrency. It put an end to the double-spend issue that had plagued other attempts at a cryptocurrency. Double-spend refers to the digital currency being spent twice.
Think of the Blockchain as an electronic ledger of records. Each group of records or transactions constitutes a “block” and chronologically combines with the block before it and after it to form a “blockchain.” Each block contains information – a cryptographic hash – from the last block of information—I.E. timestamp, and batched transactions that are incredibly secure and tamper-resistant. “Block Time” is the amount of time it takes to generate an extra block for the Blockchain, and by the time this block finishes completion, the data becomes verifiable. Some blockchains can generate new blocks in as little as five seconds. However, Bitcoin takes approximately ten seconds per block. Bitcoin is also the most popular Blockchain in the whole crypto ecosystem.
A network of peer-to-peer computer nodes supports the Bitcoin Blockchain. These nodes consist of people worldwide running a computer (client) connected to the whole blockchain network. Each client is required first to download a copy of every transaction added to the blockchain. As new transactions become verified, added to blocks, and accepted on the Bitcoin Blockchain, they also become part of each client’s database. A subset of these nodes is “mining nodes,” They are capable of validating each transaction. When, and if successful at being the first to validate, they are rewarded in bitcoin. This serves as an incentive for their work in securing the network. Their work is known as “proof of work,” It is a “consensus algorithm” that ensures that the blockchain’s shared consensus is achieved. Proof of work is the consensus algorithm used on the Bitcoin network. However, other cryptocurrency blockchains use various consensus algorithms such as proof-of-stake, proof-of-importance, and delegated proof-of-stake.
The whole concept of decentralization of blockchain technology is manifest in the peer-to-peer nodes. Anyone around the globe is welcome to share the responsibility of validating transactions and sending blocks to the Blockchain. All the transaction data on the entire Blockchain is kept as a database on each peer’s computer, I.E., one entity alone does not centrally hold it. This fact makes it even more difficult for a hacker to corrupt the database. Blockchains are transparent, meaning anyone has access to the transactions stored and can easily be verified by others because they all have the same access to the information. Data on the Blockchain can essentially be regarded as incorruptible. Because altering any transaction would demand enormous amounts of computing power and substantial funding costs to make any alterations on the entire network.
The attributes that Blockchain Technology possess offers promising opportunities in various areas. Of course, the most popular use-case at the present time is in the field of cryptocurrency. Although, several other applications where Blockchain Technology could be utilized are:
- Supply Chain Management
- Digital Identity
- Sharing Economy
Various Types of Blockchains
Blockchains fall into three categories: Public Blockchains, Private Blockchains, and Consortium Blockchains.
- Public Blockchains – Being public means this type of Blockchain has no restrictions. Meaning anyone can access the network as long as they have a device to access the internet. They can then actualize transactions and even be validators on the network. Two of the larger and most popular Public Blockchains existing at the moment are Bitcoin and Ethereum.
- Private Blockchains – Because they are permissioned, this type of Blockchain is different than a Public Blockchain. Access to a Private Blockchain is required by invitation only from a current member. Private Blockchains are considered “middle-ground” for companies with enterprises that are not comfortable with the lack of centralization and control inherent in public blockchains.
- Consortium Blockchains – Consortium Blockchains are permissioned the same as Private Blockchains, and they have similar attributes. They are often viewed as semi-private. Consortium Blockchains are under the control of several companies instead of just one. Administrators of these Consortium Blockchains have the power to decide how many nodes can run the consensus algorithm and restrict participants’ rights on the chain.
Blockchain Use-Cases that removes the middleman:
Blockchain’s decentralized nature removes the need for intermediaries, which has clear implications in various areas such as:
Distributed Cloud Storage
Improvement in data security due to a shift from centralized to decentralized for storage of Data.
Blockchain’s peer-to-peer and decentralized nature dissolves the need for centralized entities such as Airbnb and Uber to make decisions in sharing business/economy.
Music artists can remove middlemen such as labels and publishers, and instead sell their music directly to their fans. Blockchain-based cryptocurrencies such as Bitcoin and Etherum support micropayments. This could enhance these novel artist-fan relationships.
Blockchain-based self-executing smart contracts with predefined rules could facilitate agreements between various parties, all without a middleman’s need.
More blockchain use-cases
Blockchains can provide a transparent and auditable trail for all to see clearly, to prevent fraudulent activity.
Blockchain-enabled supply chain management could prove useful in detailing a car’s history from the “new” sale to the junkyard
Transfer land titles can be digitized on the Blockchain, and this would facilitate a more efficient and transparent payment transaction process.
Internet of Things
All data from the Internet of Things can be stored on the decentralized Blockchain instead of a controlling centralized entity.
Blockchains are secure by nature and virtually tamper-proof. This makes it ideal for fighting cyber-security and its threats.
Blockchain-based smart contracts can create transactions for better clarity and more secure agreements between insurers and clients.
As time moves on, Blockchains will continue to change our lives positively. More and more use-cases will come about making our lives simpler, more cost-efficient, and much more convenient.
*photo courtesy of © Shutterstock / Alexey Godzenko