What is Blockchain technology? Is Blockchain the future?
What is Blockchain?
A blockchain is a special kind of database. You may also have heard of distributed ledger technology (DLT) - in many cases, both concepts refer to the same thing.
Blockchain is often referred to as a Distributed Ledger Technology (DLT). This is because each computer or 'node' in the network has a copy of the ledger. The data that is stored on a blockchain is distributed across the network of computers that make up the blockchain. This means that no single entity can control or tamper with the data. This makes blockchain a very secure way of storing data.
Data is added, over time, in structures called blocks. Each block is built on top of the previous one and includes a piece of information that links it to the previous one. Looking at the most recent block, we can see that it was created after the previous one. So if we continue down the "chain", we will arrive at our first block - known as the genesis block.
Who is Satoshi Nakamoto?
Satoshi Nakamoto is a pseudonym that was used by the Bitcoin creator in email communications, forum posts, and publications such as the Bitcoin Whitepaper. For all we know, this could have been a male, a female, or a group of persons. The name is clearly of Japanese origin, but since the person was writing in perfect English, many believe that Satoshi comes from an English-speaking country.
The key features of Blockchain
- Decentralization: One of the most important aspects of Blockchain Technology is that it is decentralized. This means that there is no central authority controlling or regulating the network. Instead, it is managed by a network of computers, known as nodes, spread across the globe. This decentralization makes it very resistant to fraud and corruption.
- Transparency: Another key feature of Blockchain Technology is its transparency. All transactions on the network are transparent and viewable by anyone with access to the network. This transparency helps to ensure that all parties involved in a transaction are honest and that there is no room for fraud or corruption.
- Immutability: Another important feature of Blockchain Technology is its immutability. This means that once a transaction is recorded on the network, it cannot be changed or deleted. This ensures that all transactions are final and cannot be tampered with.
- Security: Blockchain Technology is also very secure. All transactions on the network are encrypted and can only be accessed by those with the correct private key. This makes it very difficult for hackers to access or alter any data on the network.
- Efficiency: Blockchain Technology is also much more efficient than traditional financial systems. Transactions are processed almost instantly and there is no need for third-party intermediaries, such as banks, to be involved. This makes transactions much cheaper and faster.
- Scalability: One of the challenges facing Blockchain Technology is its scalability. The network can currently only handle a limited number of transactions per second. However, this is an area that is being actively worked on by developers and it is hoped that the network will be able to scale up in the future to meet the demands of its users.
- Distribution: Blockchain is unique in the sense that it is a distributed database. This means that it is not stored in one central location, but is instead spread across a network of computers. This makes it much more resistant to hacking and data loss.
- Smart contracts: A smart contract is a type of contract that is stored on the blockchain. This type of contract can be used to automate many different types of transactions. For example, a smart contract could be used to automatically send money from one person to another when certain conditions are met.
The Evolution of Blockchain
Blockchain 1.0 - Currency
In simple terms, Blockchain 1.0 refers to the first generation of Blockchain Technology which was created for the sole purpose of powering digital currencies. Bitcoin, the first and most famous cryptocurrency, was built on a Blockchain 1.0 platform.
Blockchain 1.0 platforms are typically quite basic and rudimentary in comparison to newer generations of Blockchain Technology. However, they remain incredibly popular since they are incredibly secure and offer a high degree of immutability.
Blockchain 2.0 - Smart Contracts
The new key concept in the blockchain world is Smart Contracts. To put it simply, a smart contract is like a normal contract, but with one important difference: it is automatically enforced by code. This means that if one party doesn't hold up their end of the bargain, the other party can enforce the contract automatically...
Blockchain 2.0 –Smart contracts could potentially transform many industries and make our lives easier by eliminating the need for third-party intermediaries in a wide variety of transactions. The most prominent project that used smart contracts is the Ethereum blockchain.
Blockchain 3.0 - Decentralized Applications
A Decentralized Application (DApp) is a computer application that runs on a distributed computing platform. A DApp can be coded in any programming language that can communicate with a blockchain. DApps have their backend code running on a decentralized peer-to-peer network. Contrast this with an app where the backend code is running on centralized servers.
The term "DApp" is often used interchangeably with "smart contract". A smart contract is a piece of code that runs on a blockchain and defines certain rules around an agreement or transaction. A DApp is essentially a smart contract with a user interface.
User experience can vary widely for DApps, from simple command-line applications to complex graphical interfaces. The important thing is that the application is decentralized, meaning the backend code is running on a decentralized network rather than centralized servers.
Blockchain 4.0 - Practical Usage
From cryptocurrency to smart contracts, this distributed ledger technology has the potential to change the way we interact with data and conduct transactions. This latest iteration of Blockchain Technology is often referred to as the "fourth industrial revolution" or "Industry 4.0."
It takes the idea of a distributed ledger and builds on it, integrating new technologies like artificial intelligence (AI), the internet of things (IoT), and big data. This allows for more complex applications and higher levels of security. Blockchain Technology 4.0 will be applied in all areas of the digital economy
Advantages & disadvantages
- Open: One of the major advantages of blockchain technology is that it is accessible to all means anyone can become a participant in the contribution to blockchain technology, one does not require any permission from anybody to join the distributed network.
- Verifiable: Blockchain technology is used to store information in a decentralized manner so everyone can verify the correctness of the information by using zero-knowledge proof through which one party proves the correctness of data to another party without revealing anything about the data.
- Permanent: Records or information which is stored using blockchain technology are permanent means one needs not worry about losing the data because duplicate copies are stored at each local node as it is a decentralized network that has many trustworthy nodes.
- Free from Censorship: Blockchain technology is considered free from censorship as it does not have control of any single party rather it has the concept of trustworthy nodes for validation and consensus protocols that approve transactions by using smart contracts.
- Tighter Security: Blockchain uses hashing techniques to store each transaction on a block that is connected so it has tighter security. It uses SHA 256 hashing technique for storing transactions.
- Immutability: Data cannot be tampered with in blockchain technology due to its decentralized structure so any change will be reflected in all the nodes one cannot do fraud here, hence it can be claimed that transactions are tamper-proof.
- Transparency: It makes histories of transactions transparent everywhere all the nodes in the network have a copy of the transaction in the network. If any changes occur in the transaction it is visible to the other nodes.
- Efficiency: Blockchain removes any third-party intervention between transactions and removes the mistake making the system efficient and faster. Settlement is made easier and smooth.
- Cost Reduction: As blockchain needs no third man it reduces the cost for the businesses and gives trust to the other partner.
- Immaturity: Blockchain is only a couple-year-old technology so people do not have much confidence in it, they are not ready to invest in it yet several applications of blockchain are doing great in different industries but still it needs to win the confidence of even more people to be recognized for its complete utilization.
- Energy Consuming: For verifying any transaction a lot of energy is used so it becomes a problem according to the survey it is considered that 0.3 percent of the world’s electricity had been used by 2018 in the verification of transactions done using blockchain technology.
However, this is only the weakness of the POW consensus mechanism. It has been improved with the new POS consensus.
- Time-Consuming: To add the next block in the chain miners need to compute nonce values many times so this is a time-consuming process and needs to be sped up to be used for industrial purposes.
This is also the weakness of POW and it has also been improved with POS. Now its speed can reach more than 10k TPS.
- Legal Formalities: In some countries, the use of blockchain technology applications is banned like cryptocurrency due to some environmental issues they are not promoting to use of blockchain technology in the commercial sector.
- Storage: Blockchain databases are stored on all the nodes of the network creates an issue with the storage, increasing the number of transactions will require more storage.
- Regulations: Blockchain faces challenges with some financial institutions. Other aspects of technology will be required to adopt blockchain in a wider aspect.
Use cases of blockchain technology
Banks and payment systems
This was one of the first uses of blockchain.
The most obvious example is Bitcoin. Currently, one of the functions of Bitcoin is to be used to transfer money, or to shop in e-commerce. People can access and transfer BTC to each other anywhere in the world and with relatively fast speeds and low costs.
The fact that everything is stored transparently on the blockchain will help users not need to print statements to prove the transfer. You can easily check where the cash flow is going proactively.
DeFi is Decentralized Finance in which institutions, markets, or financial instruments are managed and decentralized.
In simpler words, DeFi leverages the power of Blockchain to be decentralized and transparent to create an open financial platform, which anyone can access and use anywhere, anytime. which is not governed by individuals or organizations with centralized power.
We know that transactions in the blockchain are recorded securely and transparently.
Based on this feature, one can track the process of creating a product, transporting it, and distributing it to the end user. Thanks to that, users can trace back the history of the product's formation and transportation.
A non-fungible token (NFT) is a cryptographic token on a blockchain that represents a unique asset. This can be a fully digital asset or a tokenized version of a real-world asset. Since NFTs are not interchangeable, they can act as proof of identity and ownership in the digital realm.
With sites like Facebook and Google constantly getting into scandals about leaking users' data, a more decentralized storage solution is required. And that's why projects in this area were born.
Some charities have problems with efficiency & transparency when transferring aid (money or belongings) to those who need it. Blockchain allows donations to be tracked to make sure they go to the right people.
What blockchain means for enterprises
Bitcoin uses a blockchain, but the blockchain is not Bitcoin. The value of blockchain goes far beyond the initial implementation used by cryptocurrencies.
Blockchain is not just a technology, but a fundamentally new way to think about data that will create a new iteration of the internet. It is as fundamental to data as the internet backbone is to information transmission.
As you start thinking about your future application architectures, keep the blockchain in mind. Blockchain will be as important to the next generation of internet applications as the public cloud, microservice architectures, and DevOps is to the current generation. Make sure you consider the influence of blockchain in all of your application architecture plans for current and future applications.
Is Blockchain the future?
The technology is designed for security, and its decentralized nature makes it difficult for hackers to target.
Blockchain is a decentralized database that securely stores information. This means that there is no central authority to control or manage the data - instead, the data is spread over a network of computers, known as "nodes". Because each node has a copy of the entire database, this makes it virtually impossible to hack or tamper with.
For example, in the financial sector, blockchain can be used to create a secure and transparent way of processing transactions. This not only reduces the chances of fraud or corruption but can also speed up transaction times and make them more efficient.
Blockchain has the potential to revolutionize several industries – making it one to be mass adoption.