The creation of blockchain technology grabs the curiosity of many, and soon many more people will understand the technology. In addition, Blockchain Technology is useful for other things like medical records, creating digital documents, and maintaining corporate finances.
What is Blockchain Technology?
Scientifically speaking, a blockchain is a collection of blocks connecting data in a sequence. The block is a collection of data and information collected in a block and hash of the previous block.
When a new block attaches to this chain, they act as connectors forming a blockchain.
In other words, Blockchain is stored in a ledger that records and stores in this record-keeping book (Ledger), which is obtainable to everyone but is unalterable. Thus making it perfectly safe and secure.
Blockchain is attempting to solve the problem of intermediaries, also called third parties; the issue of third parties is that they take a minimum of 3 days to transfer money and charge the fee. Blockchain is trying to do this immediately, and the fee is cheaper than a third party collects.
Imagine a chain of blocks; if you change the details recorded in a particular block, the whole block is not altered. Instead, the details are stored in a new block. So, for example, N changed to P at a specific date and time.
So in simple words, it is a non-destructive way to trace data or hack the data over time.
Albert Einstein once said if you cannot explain it simply, you do not understand it well enough.
The goal of this article is to understand it simply so that everyone understands well enough.
Realtime Examples of Blockchain
Let’s do this homework by understanding the example, which I will explain in a simple way.
Carlo has a conflict over who owns a piece of land that had been in the family for years. How will Blockchain work in this dispute?
Blockchain uses the type of method where an entry is made on every purchasing and selling process. So it shows first, Nick had owned the property in 2015, then sold it to Christian in 2017. Then a new entry is made in the Ledger, and so on — every change of possession is made and put in the Ledger until it was purchased from their father in 2020 by Carlo.
We can see that Carlo is the current owner of the property.
We absorb here how blockchain Tracks and stores the data and how it initiates trust in the data.
Blockchain Technology is such a twist that there are no middlemen in between. So when you discuss a deal with our corporate partners, don’t reveal your financial or career records, DO YOU?
Of course, NO. Instead, we trust third parties like lawyers or banks to eyeshot your records and keep the records private.
In the example of Carlo, Carlo is the rightful owner of this land, but the intermediaries request information about limits and risk, plus they take much of his time and money.
If Carlo’s information was stored in Blockchain, then there’s less waste of time and money.
Is Blockchain private or public?
Till now, you have understood that Blockchain is a technology, not a single network. Some blockchain ultimately gives access to the public, and some are private only to a group of certified users.
We see corporate, companies, banks, and governments using Blockchain technology. There is a fusion of private and public in many places in Blockchain. In some of these categories, people have access to private data where they are approachable to all the data in the Blockchain.
Meanwhile, the public will have only some selections of the Blockchain. Everyone can see all the data in others, but only a few will have the right to change it or add some data. (Blockchain says no one can change the Blockchain once it is entered — but what is the truth? It remains to be seen.)
Here is some insight for the example above: Governments can use Carlo’s data and the fact that he owns the property — while keeping his personal information private — or it could allow the public to see the records and the right to update the property to itself.
This procedure is how Blockchain is beginning to build trust in the data while enabling you to interact with others — without any third parties. It also gives many additional ways to interact with others.
Backwashes of Present Technologies
- More technologies, fewer face-to-face interactions.
- Increase in the problems such as cyber-bullying, online stalking, and crime.
- Human beings have less worth in the workplace as computers replace them for more significant profits in giant companies.
- There is no privacy in this digital world where your bank a/c, social media, and other details can be hacked, including photos and videos.
- There are many intermediaries while transactions are going on, resulting in a work delay.
- Modern societies are very dependent on technologies so much that hospitals, railways, airports, and online trading can be dead to the world by Cyberattack, causing a complete failure.
- Humans will be helpless if it is taken down overnight. Just Imagine no computers, television, etc. Sound’s hilarious or fantastic, you decide.
- Modern technology brings so much waste of time and floods us with irrelevant messages, emails, sales advertising, etc.
Components of Blockchain
1) NODES: There are two types of nodes
- FULL NODE: It maintains the full-length form of the Ledger. It can approve, deny, and certify the transactions.
- PARTIAL NODE: It maintains the polished form of the Ledger. These nodes have low storage value and keep only the value transactions.
2) LEDGER: A ledger is a collection of data that reflects the results of all the transactions. It shows the state of the Ledger of a particular time and date, when and where the transactions are evolved.
3) WALLET: This is one of the essential components of Blockchain; it’s a digital wallet that is used to store your cryptocurrencies. It is a great size (small), and you don’t need to convert it into different currencies.
Wallet is an acceptable currency around the globe. And these wallets make sure the transactions are easy to use and don’t have blockades like third parties.
4) CONSENSUS NETWORK: Blockchain is a decentralized system. It provides many advantages to one of the challenges: maintaining consistency and verification of the data based on the decision made by a majority of the participants. When the end-user joins the Blockchain, they need to agree to the present state and agreements of the Blockchain.
Functioning of Blockchain
Many companies are now stabilizing Blockchain systems to be safe in this changing time phase. Still, many industries find it hard to understand how the blog about Blockchain works. Many want to implement it but are still confused about whether Blockchain is profitable.
Blockchain sure has its different way of decentralization. That’s why in this article, we will cover how Blockchain works. So grab a coffee and read this before you Contemplate How Blockchain Works?
Before jumping into the course, let’s start with some basics. So far, you know Blockchain uses a ledger system where no one can change or delete the data. In addition, Blockchain uses a Peer-to-Peer network which makes Blockchain a decentralized system. First, let’s understand the concept of “key.” The keys offer security to the system where a user establishes key pairs known as public keys or private keys.
The keys provide you with a unique authentication where others are not approachable.
Under any circumstances, you have to store the private key in a private key just like you store your bank password. But what happens if your password is stolen? It can be misused — so make sure you keep it confidential and secure.
On the upper hand, the other end users will find you on the public key.
For example, Your Facebook account is the public key, and its password is like a private key.
Procedure of Blockchain
A transaction will be initiated through a node aligning with its private key. Essentially a private key will develop a digital signature that will be unique in its way and its untraceable. If anyone tries to change the signature, it will automatically change, and no one can trace it; therefore, it will be rejected.
Henceforth the transaction will be transmitted to the nodes to verify. If the transaction is valid, it gets placed into the Ledger, and also it generates a unique ID to secure it from further modification.
When a new block is introduced in the system, it will be linked to the previous block. So the process continues, and just like that chain of blocks is formed, the name itself says it: BlockChain.
Dynamic Approach of Blockchain in Different Sectors
Blockchain can work in various sectors like
- Supply chain management
- Cloud storage
Is Blockchain the resolution of data breaches in the health care industry? The health care industry is one of the most benefitted sectors from Blockchain because pharma company loses approximately $200T to fraud drugs each year.
HIPPA reported at least one data breach every day in 2018. The main objective of Blockchain in the health industry is to enroll patients — without filing the form and to remove third-party services of payment.
Cyber magazine stated that” global cyber-security spending predicted to exceed $1 Trillion from 2017-2021″. Blockchain has a different rail towards cyber security, which is not friendly to hackers. This reduces the burden of data breaches and provides strong encoding. It also helps with data ownership and may even rule out the need for passwords which is easy to castrate.
This must be fascinating by how this Blockchain works in the banking sector. Let’s assume you have to send $1000 to a friend through a regular bank. The bank charges you a fee for transferring the money, so indirectly, you will be sending $1000< the bank fee to your friend.
If they live abroad, the bank may charge you more because of the hidden fees. In addition, the process is tedious — hence understanding the transaction status is a bit complex.
On the other hand, Blockchain changes the traditional banking system by using peer-to-peer money transactions. Since there are no commercial banks in between, transferring money to your friend is easier, and you don’t have to pay the banks.
The Ledger records all transactions, and additionally, you feel freer in the exchange without all the banking interference.
For example, if you decide to trade on the cryptocurrency platform, Coinbase. You can transfer and receive money on tablets, PC’s or mobiles. Any intermediaries do not bind you. You’ll see the use of Blockchain is more helpful and saves you time and money as well.
SCM is a procedure where raw materials. These have been converted into finishing product till it reaches their customers. This method involves sourcing, planning, production, inventory, warehousing, fulfillment, transportation, and delivery.
Blockchain in SCM can help track every business process and activity. This will improve traceability factors and better relationships with customers by providing the product details — thus increasing the fairness of the product.
Blockchain in the transportation and logistics industries is enhancing efficiency and end-user experience. In addition, it helps solve problems related to damaged goods where they can be traced using the LOT system.
Due to its security features, Blockchain money transfers are at low risk — and false data can be quickly identified and tracked. Every action is traceable by this technology which helps to reduce the frauds and thefts in this industry.
Insurance: The estimated growth of the insurance industry if it uses Blockchain is predicted to be $64 million to $1.39 billion. The costly EMI and frauds are taking a toll in this industry as in all others.
Blockchain in this industry reduces KYC costs peer-to-peer insurance models, simplifies the policy-making process, better security, and provides reasonable insurance policies.
AIG is one of the insurance companies which is using Blockchain.
Blockchain has disrupted the entire industry of real estate by making it easy to use without intermediaries; one primary concern is related to the transaction and listings and connecting it with buyers and sellers.
It lowers the problems regarding investing in real estate, where people have access to trading apps to buy and sell the trades as they fit in.
Cloud storage: Gmail, google drive are examples of cloud storage. It allows the storage of data in digital format. Blockchain in cloud storage helps to break the data into small blocks. Many small articles take part in cloud storage by providing space to store their data.
History of Blockchain – Once in a Blue Moon
Blockchain is one of the biggest depth-bomb of this 21st century, occurring a significant effect on various industries which is unknown to many. Therefore, it is essential for Blockchain aspirants to know about the history and how it has evolved worldwide.
Who came up with the idea of Blockchain?
- Stuart Haber and W. Scott Stornetta contemplated the Idea of Blockchain in 1991. The initial start was on the secured chain of the blocks where there is no chance of tampering with documents and which is highly safe. Both scientists developed a system through Cryptography.
- In 1992, Merkle trees counted more features where several documents could be stored in a single block. However, in the year 2004, a computer scientist, Hal Finney. He introduced Proof-of-work. This was a paradigm shift where you are the owner of the trusted server transactions and spend less on transactions fees.
- On the other hand, in 2008, Blockchain started to gain importance, and the credit went to the person called Satoshi Nakamoto. He is the Mastermind of the Peer-to-peer cash system. He refitted the model of the Merkel tree. And cast the white paper explaining how well Blockchain will be if decentralized and inaccessible.
- Until now, Blockchain is so assuring and reliable that many industries need this type of technology where the data is secured and private.
- For example, Spotify uses blockchain technology to connect artists with agreements and tunes. So the use of this technology in music looks more transparent. And also records ownership which will solve the issues in the industry.
Different Types of Blockchain
This guide spotlights each type of Blockchain and helps you to grasp the need for Blockchain technology types.
1) Public Blockchain
It is a domain where anyone can participate and join this network; it is open for everyone to view and immutable. Therefore, it is highly safe where transactions are unknown but are transparent.
2) Private Blockchain
Single industries manage private Blockchain and only have authority over the network: faster output, power-efficient, and privacy. The data is simplified but not open to everyone to see.
3) Federated Blockchain
It has both the features of public and private Blockchain, where some data is private, and some are open to the public to view. Federated Blockchain has more sufficiency than public Blockchain and Fits well in Government sectors. It is a high-speed network.
4) Hybrid Blockchain
It has elastic control over which data is public and private. Only certain factors are kept private. It is a highly regulative and scalable system. Also, it offers privacy when you are still connected to a public network. The network is adaptable where rules can be changed according to the company’s benefits.
Why Blockchain is Being Dubbed as “The Future of Data Centers.”
Blockchain development is a comparatively new method that appears to offer the potential to develop secure, verifiable transaction-based applications from both public and private sources.
Although it’s the potential to develop a decentralized system where you can robotize various data center functions, several industries are implementing this technology. For example, the value of its core strengths has already begun to embrace financial organizations.
Blockchain has proved its worth in various industries. The government and Banks are adopting this incredible technology for their own benefit — I think they will add in their minor cushioning charges — but at least you will see it on the Blockchain.
Image Credit: Provided by the Author; Thank you
Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.