Blockchain technology is a relatively new way of recording data, monitoring, and securing assets.
The term was coined in 2009 and became widely associated with Bitcoin because it was the first cryptocurrency to use blockchain in its modern form. However, blockchain’s use cases extend far beyond cryptocurrencies.
It’s a revolutionary way of recording and tracking assets. This article is all about understanding blockchain.
We’ll discuss the tech, its implementation in different industries, and even its benefits for your business. Let’s go!
What is Blockchain?
Blockchain is a digital ledger that stores information. It can be about anything, for example, your assets, medical records, real estate property rights, etc.
Sounds just like any other database, right?
This is where it gets interesting. Unlike other databases, blockchain is a decentralised database.
It’s a peer-to-peer network built on a large number of computers that store information in different chunks.
The information is stored on different blocks, which are stored on different computers.
Every computer on the network has a copy of the ledger and all the information stored on it.
Practically, it’s incorruptible and what’s once stored on blockchain will always remain there. Like etched in stone.
When the information is altered, the blockchain also records that. This means that no person can access and meddle with the data independently.
There are different types of blockchain networks. Let’s explore them:
- Public Blockchain Networks
These are open to access for anyone. In fact, Bitcoin is a classic example of a public blockchain network.
People can join this network from anywhere in the world and even track transactions that happen on the network. Public blockchains aren’t suitable for businesses because they lack privacy, and anyone on the network can see the activities.
- Private Blockchain Network
These are decentralised networks built within organisations.
It follows the peer-to-peer model, but whoever builds it controls who can join the network.
Companies that build private blockchains can also have added layers of security and host them on private servers, making them super secure.
- Consortium Blockchains
Consortium blockchains are ones where several companies or organisations decide to build and maintain a blockchain. These are great options for secure collaborations and industry-wide data sharing.
Consortium blockchains are also ideal for businesses that want to create strict network access, and only those with permission can access them.
How Does Blockchain Work?
Blockchain has a unique mechanism for storing information, making it highly secure, transparent, and resistant to tampering.
As the name suggests, blockchain is a chain of blocks where the information is stored. It works by storing data, hash, and previous hash in a single block. Let’s see what these things are:
- Data
This is the relevant information about a process or a transaction. For example, if a Bitcoin transaction occurs, the block will contain pertinent information such as the amount of the transfer, who sent it, who received it, etc.
- Hash
Hash is a unique code that each block contains, which helps identify the block. It’s like a block’s fingerprint. This helps identify the data.
- Previous Hash
This information maintains continuity. Every block also has the hash number for the previous block, which helps identify the chain of blocks.
These things make blockchain unique and hard to tamper with. If someone tries to change information in a block, then every block will generate a new hash.
Changes can only be made when everyone on the network agrees with them. This is possible on private blockchain networks but extremely difficult on public chains like Bitcoin.
Essentially, this is known as cryptography.
Why is Blockchain So Secure?
Blockchain is secure because of 2 major reasons.
1. Cryptography
As explained above, blockchain secures data using advanced cryptographic techniques. Each block is linked to the previous block via a unique hash number.
If someone tries to make a change, it revises the hash numbers and makes the changes detectable.
This cryptographic security makes blockchain a reliable and safe way to store sensitive data.
2. Decentralisation
Blockchain operates on a decentralised network, meaning no single entity controls the entire system.
Instead of storing data in one central server, copies of the blockchain ledger exist across multiple nodes (computers).
Since it’s decentralised, the risks of fraud and manipulation are greatly minimised. Even if one node gets compromised, the other systems keep the chain intact.
What Are the Uses of Blockchain?
Blockchain technology has far-reaching applications in various industries. Several businesses have implemented it, and many are looking for potential applications for their businesses.
Here are some examples of uses of blockchain:
- Finance & Payments
Blockchain has revolutionised financial transactions. With cryptocurrencies like Bitcoin and Ethereum, people can now send millions worth of money in a few minutes to anywhere in the world.
Previously, it could take days and so many bank verifications to successfully transact such amounts of money. Smart contracts can also automate transactions, which reduces the need for manual checks even more.
- Supply Chain & Logistics
Companies like IBM and Walmart use blockchain technology to enhance their supply chain and logistics. It helps track products in real time and reduces the risks of fraudulent activities.
- Real Estate
Blockchain simplifies property transactions by digitising contracts and reducing paperwork. It also helps reduce property fraud and payment delays.
With its ability to enhance security, transparency, and efficiency, blockchain is transforming industries worldwide.
In fact, there are now suggestions for conducting voting processes on blockchains to avoid tampering and manipulation.
Many businesses also now accept Bitcoins and cryptocurrencies as payment and a substitute for bank and cash payments.
How Does Blockchain Impact Our Lives?
Blockchain is impacting lives at a much faster rate than people realise.
It’s such a remarkable phenomenon that even countries are interested in it. For example, El Salvador has even made Bitcoin the country’s official currency.
Many financial institutions are also utilising blockchain for faster and more secure transactions. Some big names include JPMorgan Chase & Co., HSBC, and the Swedish Central Bank.
So, blockchain is seriously impacting our lives. Here’s how:
- Secure Digital Transactions
It enables safe and transparent transactions without involving middle entities like banks or brokers. Transfer fees are drastically low, and the transactions are significantly more secure.
- Supply Chain Transparency
Businesses can track their products and goods in real time. In fact, blockchain assists with preventing counterfeits from entering the markets. It also helps with imports from around the world with quicker and more secure payments.
- Healthcare Data Privacy
Data privacy is crucial for the healthcare industry. However, keeping data secure and protected from breaches is challenging. With blockchain, healthcare facilities can ensure tighter data security and that no one manipulates the data.
- Decentralisation
Decentralisation in blockchain helps people record and protect their transactions while keeping their identities anonymous.
What Are the Challenges of Blockchain?
Blockchain is not free from challenges. While the technology is groundbreaking, there are barriers to implementing it on a larger scale.
- High Energy Consumption
Blockchain networks require immense computational power to validate transactions. This leads to high electricity consumption, which threatens environmental sustainability.
However, people are addressing this issue using greener energy sources for blockchains.
- Regulatory Uncertainty
Many governments and financial institutions still haven’t established clear laws and regulations for blockchain technologies. Some countries have banned blockchain, while others keep changing policies, making it challenging for the tech to flourish.
- Cost Of Implementation
Developing, implementing and maintaining blockchain infrastructure can be costly. Only companies and businesses that see long-term benefits can recover costs over the long run.
- Lack of Skilled Professionals
Many people still find blockchain a tricky concept. It requires specialised expertise, and there is a shortage of skilled professionals.
What’s Ahead for Blockchain?
Even with all the challenges and roadblocks, blockchain is a promising technology that will see broader adoption in the future.
Businesses have already realised its benefits and are implementing the tech into their operations.
It’s just a matter of time before it becomes widely accepted and implemented.
Because the use case and the tech’s benefits are undeniable, blockchain has potential implementation everywhere, including in healthcare, fintech, and entertainment.
The interest in the field is also increasing, and more people are inclined to build careers in the field. New solutions are coming up to make blockchain more friendly.
Wrapping Up — Want To Explore Blockchain Deeper?
Truth be told, blockchain is a massive topic to cover in just a single blog.
The information above discusses all the basics of understanding blockchain and its global impact. However, if you are keen to know more and want to explore its full potential, contact us.
We can also give you insights into how you can use blockchain to grow your business or personal projects.
