Blockchain technology is based upon the fact that data once has been entered cannot change. Hence, the only trust needed is for where user/program serves as an input. Having this element eliminates the necessity of trustworthy third parties which are usually auditors or others who have commissions and are liable to mistakes.
By the time Bitcoin was presented in 2009, blockchain’s utilization had skyrocketed; it has realized itself in the form of numerous currencies (cryptocurrency), decentralized finance (DeFi) tools and applications, non-fungible tokens (NFTs), and smart contracts.
How Are Blockchains Used?
Nowadays we know that the blocks of the Bitcoin blockchain are repositories for transactional data. Currently, in addition to our cryptocurrency, over 23 thousand other cryptocurrency systems operate on the basis of blockchain technology. On the other hand, not only financial transactions can record into blockchain, but also other types of transactions as it turned out.
Walmart, Pfizer, AIG, Siemens, and Unilever are among the many companies currently using to trial blockchain technology. For instance, IBM in its Food Trust blockchain traces various stages undertaken by food products to reach their destinations.
Why do this? Food industry which has again and again faced E. coli, salmonella, and listeria breakouts has even found hazardous agents being accidentally introduced to foods. In the past, it has taken us weeks to pinpoint where these outbreaks are coming from or the sources of sickness from the food people are in the past.
Tracking your food product using the blockchain technology not only allows brands to see where the food items came from, but also where they went and when. In addition to that, the same firms can now see everything else the product may have been in contact with that would give them the basis to make an identification earlier and possibly save lives.
Pros
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Improving the precision with the elimination of human presence in confirmation.
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The cost is reduce by the removal of third- party verification.
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The more decentralized it is, the harder it is tampering.
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Transactions have an individual privacy with no chargebacks, making them 100% safe.
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Transparent technology
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An alternative to money and a way safe to store personal and financial information for people living in countries with problematic or undeveloped governments
Cons
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Some blockchains are very expensive in terms of technology cost.
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Low transactions per second
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History of utilization for prohibited activities, for example, on the “darknet”.
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Regulation has variations across jurisdictions and at present is still uncertain.
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Data storage limitations
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Blockchain networks can categorise as either private or public.
A public blockchain, a.k.a. open or permissionless blockchain, is the one that anybody can join the network without having permission to establish a node. Blockchains need cryptography and a consensus approach (such as proof of work, PoW) because of their ability to operate in public. Differently, a private or permissioned blockchain would need each node to be verified first in order to be a part of it. This is because of the fact that nodes are considered as trusted entities and consequently, the corresponding layers of security are not so strong.
The Bottom Line
The technology already has many practical uses that are working on and explored, and this is now definitely starting to make blockchain embraced and known in part thanks to Bitcoin and cryptocurrency. Blockchain, a hot catchphrase amongst businessmen and government officials in the country, serves to improve the operations of both business and government, which are characterized by more precision, efficiency, security and low costs which guarantees fewer middlemen.
Legacy companies may be far behind blockchain technology, however, it is no longer a question of whether legacy companies will catch up on blockchain technology— it is a question of how soon. Nowadays, we witness increased amounts of NFTs issues as well as more assets to tokenized. Therefore blockchain will characterize by dramatic growth in the first decades of the future.
The key features of blockchain technology include:
- Decentralization:
Unlike the traditional centralized database, a blockchain is decentralized, that is, there is no one point of control or a single point of failure. As a matter of fact, it is not administered by one authority but by the network of nodes with every node of the blockchain copying the whole chain.
- Transparency:
All transactions on a blockchain appear to anyone with the ability to get into the network.This is the very ability to create transparency that strengthens trust and makes the information equally accessible to all the participants in a transaction.
- Security:
Security and integrity through cryptographic hashes and consensus algorithms such as proof of work and proof of stake are the main drivers of blockchain. Once a new block is added to the chain, it becomes highly unfeasible to modify or damage it.
- Immutability:
Blockchain activity is immutable, and it is neither possible to change nor erase any transaction that has been entered. Hence, ensuring fraud-proof will always keep all transactions’ history safe and untampered.
How does Blockchain work?
The blockchain technology can widely used in various aspects of our life ranging from financial services and supply chain management up to healthcare and real estate, just to name a few. Moreover, it plays the role of the crypto-currency’s point of the take off i.e. Bitcoin and Ethereum. In essence, blockchain is a digital logbook of constant transactions that are grouped in blocks and connected together creating a chain.
- Transactions are created:
The process of forwarding the electronic instruction to the system initiates the transaction. And then the message is full of data that each (sending/receiving) side will transact with, like the address of the sender, the address of the recipient, and the amount of the transaction.
- Transactions are created:
A user starts a transaction by sending a digital message across the network to the network as the first step. There is transaction information in this message, which includes the sender, the recipient, and the amount of money sent.
- Transaction is validated:
The transaction is sent to the entire network of nodes, after which, the nodes execute a series of checks to verify the transaction. Doing this can be checking if the sender has sufficient funds, telling if the transaction is properly signed and making sure it is not a double spend (which is where the same funds are spent twice).
- Transaction is added to a block:
Once the transaction is hashed and confirmed, it is included into a block with other transactions that are already confirmed within the network. The block header references the block that was generated before, the time stamp that was used while generating the block and the hash of the data that is stored in this block.
- Block is added to the blockchain:
Blocks are created within seconds and are then broadcasted to the network. Each node in the network will authenticate and add the block to their copy of the blockchain after receiving the block. They are linked in the chain since the previous block is mentioned in every block.
- Consensus is achieved:
For an agreement to be reached, all nodes need to agree on the state of the blockchain; this is why a consensus mechanism is used. It is used to decide which node among others is permitted to create the next block to the chain, and the consensus of most of the nodes is often sought after for agreement on the next block.
- Block is mined:
Mining is the term used in certain chain networks, like Bitcoin, to describe the procedure of adding a block to the chain. It is also known as a consensus mechanism used in the blockchain where the proof-of-work is used to create a proper block.
- Transactions are confirmed:
A block which is afterward added to the chain appends the transactions it carries to the record of the blockchain and they are thought to be confirmed.
- Process is repeated:
This process goes on for each fresh transaction created until each such transaction is put in a block and then a new block is added into the chain over time.
Conclusion
All in all, blockchain operation consists of all transactions stored in a secure, transparent and immutable record that is managed by a network of distributed nodes. This guarantees that all parties involved in a transaction have access to the correct information, and that the records of transactions cannot be tampered with.
