The 21st century has seen the most number of technological advancements in the entire history of mankind. With the growing need to modernize our daily lives, people are opening up & have started to embrace new technologies with their arms wide open. Digital technology has made room for everyday lives, all the way from using a remote to controlling humongous machinery simply by giving certain voice commands. Technologies such as Augmented Reality and IoT have gained momentum during the last decade and now, a new addition to the pack is also available. Yes, you guessed it right -Blockchain!
Blockchain was introduced to the general public with its very first application -Bitcoin. Since then, this groundbreaking technology has been magically affecting different industries for the good, Bitcoin, on the other hand, is nothing but a form of online currency that can be used as a trading substitute for fiat money. And the technology behind the success of cryptocurrencies across the globe & it’s ever gaining popularity is called Blockchain.
However, many people, most of them in fact commonly assume that Bitcoin and Blockchain are the same, but this is clearly not the case. Cryptocurrencies are one of Blockchain’s technologies and there are various apps other than Bitcoin which are built on the basis of blockchain.
What Is Blockchain?
The history of any digital asset is made changeless and transparent with the help of a technology known as Distributed Ledger Technology (DLT) aka Blockchain, all thanks to the decentralization and cryptographical hashing it uses.
A Google Doc is a simple analogy that can be used to understand blockchain technology. In Google Docs, it is the original text file which is distributed among people, not the copies of the text document. This provides a shared distribution chain that helps all to view the text concurrently. No one is locked out waiting for changes from another party, while any changes to the document are recorded and made completely transparent in real-time.
Blockchain is, of course, more complex than a Google Doc, but the comparison is fitting as three essential concepts in technology are illustrated:
- The original digital assets are transferred, not the copied versions.
- The digital assets are completely decentralized, which allows full real-time access to the users.
- The transparent ledger system creates a sense of trust and security in the asset.
Now, How Does Blockchain Work?
Any blockchain system is made up of 3 key elements:
Each chain comprises of several blocks, where each and every block is made up of three basic elements:
- First and foremost, block data.
- A 32-bit whole number, known as Nonce. When a block is formed that then produces a block hash header, the nonce is randomly generated.
- The hash is a 256-bit number which is wedded to the nonce. It usually starts which a massive number of zeros, as it has to be extremely small.
The cryptographic hash is created whenever the first block of a chain is formed. Block data are considered to be signed and are always connected to the nonce and hash unless mined.
Through a process known as mining, the miners develop new blocks on the chain.
Each block has its own distinctive nonce and hash in a blockchain. It refers also to the hash of the previous block in the chain. It is not easy to mine a block, particularly in large chains.
Miners use specialized software to solve the unbelievably difficult mathematical problem of finding a nonce generating a hash. As the nonce is only 32 bits and the hash is 256, about four billion possible combinations of nonce-hash are necessary for mining before the correct combinations are found. When it occurs, the “golden nonce” is said to be found and its block is attached to the chain.
Not just the block being changed but all the blocks that come after need to be re-mined, when it comes to changing any block on the chain. That’s why manipulating blockchain technology is incredibly difficult. Think about it as “safety in mathematics” because it takes enormous time and computing power to find golden nonce!
If a block is mined effectively, all nodes or peers on the network first accept the change and then only the miner earns financial rewards.
Decentralization is among the most notable principles of blockchain technology. The chain can not be owned by any single computer or organization. Actually, it’s a distributed ledger through the chain-connected nodes. Nodes can be any computer hardware that holds blockchain copies and the network running.
That node has its own blockchain copy and the network requires certain algorithms to update, trust and validate every newly-mined block for the chain. Every behavior, every action in the ledger can be readily reviewed and deciphered because blockchains are transparent. A unique alphanumeric identification number showing their transactions is given to each participant.
The mixture of public information and a monitor and balance mechanism lets the blockchain preserve credibility and generates user faith. Blockchains should ultimately be acknowledged as the scaleability of trust via the technology!
Why Do We Say, Blockchain is Here To Stay?
There are 5 key reasons which make blockchain a long-term player. They are:
1. Well, we all know this One – Blockchain Is FinTech’s Favourite.
With the open-source and shared blockchain technology, miners can only expand on their existing code with no alteration in their initial chain. And if someone has to tamper it -in that case, he’ll have to re-write the complete history once again, which is kinda impossible – we all know this right.
This is certainly a huge success for financial institutions, who actually value transactions that have no creeping secrets. That is the reason why companies like MasterCard have already announced that their company strategy would include blockchain technology.
2. It Makes Peer-to-Peer Possible
Blockchain technology allows companies to reduce intermediaries considerably. In sectors such as power and energy, peer-level purchasing and selling are made possible.
Through smart contracts, consumers producing solar power can sell the excess. It is also possible to avoid a number of transaction costs simply because money does not have to pass through many institutions. Well, there can be users fees along but way, but in no possible scenario, it will be as high as to how other financial charges are!
3. Biggies Got Its Back
Well, another argument against blockchain is that the investors who once supported its main application – cryptocurrency, are already have started to back out!
There are no regulating parties and no real-world assets to back-up the currencies. But on the contrary, the truth is that these naysayers don’t actually see the clearer picture by separating the technology from its application. Blockchain is a platform that’s much bigger than Bitcoin or any other form of cryptocurrency.
In collaboration with some of the leading banks, Commerzbank, Bank of America, CaixaBank and Erste Group, to name some, IBM is researching all the better applications of Blockchain!
4. It eliminates Verification
How many times did you raise an invoice and waited to have it cleared up? Ponder upon it, how often does your work stop because someone has to authenticate or verify a document?
Well, with blockchain you don’t have to worry about any such unrequired hassle, as everything is seamless and interconnected with it. You will not need physical or human power. The ledger created in the blockchain is so powerful that all the payments and approvals happen there and then, in real-time.
5. Wide Range Of Applications
Blockchain will revolutionize each and every industry possible, all the way from manufacturing to pharmaceuticals. The way the supply chain is operated and how financial transactions are secured is changing, for better with the help of blockchain. It brings peer-to-peer exchanges and replaces centralized systems that are literally centuries old.
In fact, these days some Insurance companies are testing Blockchain’s use in the processing of claims. And hence, we can say that Blockchain has only scratched the surface yet.
Some Famous Blockchain Examples
As we said earlier, Blockchain is something that can be used in any and almost every industry possible. From making payments and transactions safe and secure in the Banking & Financial sector to streamlining the workflow in the supply chain management sector, Blockchain does it all. To your surprise, Blockchain even has the ability to improve the Real Estate sector as well by removing the middlemen, automating the retail transactions and transferring title deeds.
BURSTIQ, FILAMENT, and OPSKINS are some examples of successful blockchain applications. There are numerous other industries that can be transformed by Blockchain Technology. Healthcare, finance, supply chain management are few of the top industries blockchain will transform.
Hence, we can say that blockchain is a piece of technology, which is here to stay!