Key Things You Need To Know About Blockchain Technology

Posted by Seema Dobriyal on May 23rd, 2019

Currently, Blockchain is one of the most trending buzzwords in the field of technology. But what really is it? And why are the people around the world talking about it?

Let’s start from the beginning. Bitcoin is a cryptocurrency that was the first major application of blockchain, which was released in 2009. A cryptocurrency is a digital coin which runs and being managed on blockchain technology.

Understanding how the bitcoin works with blockchain will enable us to see how this revolutionary technology can be utilized in many other real-world scenarios.

The Bitcoin Blockchain Technology

Bitcoin was developed by a mysterious individual or group of individuals known as ‘Satoshi Nakamoto.’ Their vision was first laid out in a whitepaper called “Bitcoin: A Peer-to-Peer Electronic Cash System,” in 2009.

Bitcoin is a public ledger of all the transactions, based on blockchain technology. It can’t be tampered by anyone except for the person who holds it, which makes bitcoin transactions more secure and safer than the current systems.

How Does Bitcoin Blockchain Technology Work?

While the traditional currencies are issued by banks, Bitcoin has no central authority. The bitcoin blockchain works on a decentralized system. Instead, it is maintained by a network of people called “miners”. This network of people runs purpose-built computers which are competing in order to make the transactions go through.

For instance, a number of people are making bitcoin transactions. Each and every transaction originates from a wallet having a “private key,” which is a digital signature and gives proof to the bitcoin blockchain that the transaction has come from the valid owner of the wallet.

These transactions are then grouped together into a block, managed by strict cryptographic rules. Then the block is sent out to the bitcoin network, made up of a network of people running high-powered systems. These systems then compete to validate the transactions, the winner receives the bitcoin, and the validated block is added to previous blocks making a chain of blocks known as the blockchain.

What Makes Blockchain Technology Tamperproof?

Each block that is added to the blockchain carries a cryptographic reference to the previous block. A random number called “nonce” is worked out and combined with other data like the transaction size, creating a digital encrypted fingerprint known as “hash,” making it secure.

The digital encrypted fingerprint makes each and every hash is unique, in turn making each block unique, connected to the previous block. In order to temper with a block, the previous block also needs to be tempered, and there are over a half million connected blocks. The whole cryptographic puzzle is needed to be re-mined for it, making it almost impossible.  

Pros Of Blockchain Technology

With the traditional payment methods, each and every digital transaction is registered on privately-held central databases, which are owned by state entities or corporations, and not accessible to the public. Because of this, they could be open to fraud and hit by an attack that could cripple the entire network.

On the other hand, the blockchain is a beefed-up database. It records all the digital transactions in bitcoin, not allowing any repeat payment, and requires different parties to authenticate the transaction. Also, as the blockchain is not centralized, if one part of blockchain goes down, it won’t collapse the whole network.

Cons Of Blockchain Technology

Though blockchain was designed as a decentralized network, it comes with some problems as well. One major issue is the transaction costs and times, which have escalated as the bitcoin network has become more congested. This issue has also led to disagreements among different blockchain companies upholding the network, on how they should develop the technology to address these issues.

For example, a group of blockchain development companies in disagreement about the bitcoin’s future, broke off and divided the underlying blockchain, last year. This led to the creation of different bitcoin versions, known as “Bitcoin Cash,” and “Bitcoin Gold.”

Another weakness of blockchain technology can be the thing which makes it attractive, that is “rewards.” The people who maintain the blockchain, known as “miners,” are rewarded in bitcoin. But the mining process costs lots of money in the form of power consumption to run specialist hardware and purpose-built computers.

What Other Blockchains Are There?

The bitcoin’s blockchain is not much suitable for other blockchain companies to build applications. But some blockchain development companies have created different platforms on blockchain, helping other firms interested in the technology, to build processes on the blockchain.

For instance, Ethereum, a blockchain platform that specializes in smart contracts, and a digital coin, called “ether,” linked to it. Smart contracts are automatically executable contracts when a certain number of conditions are met from all the interested parties. Ethereum is also being considered as the future of blockchain.

Just like Google and Apple release software development kit allowing people to build applications on their platforms. Similarly, Ethereum allows people to build “decentralized applications” on its platform, taking advantage of its blockchain and their digital coin ether to power their product.

Meanwhile, another blockchain, Ripple, is specifically developed for cross-border currency transactions. Ripple’s blockchain, known as xCurrent, helps large businesses to cut down cost, time, and some of the intermediaries, in cross-currency transactions.

Who Else Is Trialing To Leverage Blockchain Technology?

Any entity or business hoping to make their processes faster, cheaper, and more traceable, can leverage this technology. Blockchain Technology has already revolutionized the finance and banking sector. So let’s have a look at a handful of other industries.

Blockchain technology in the healthcare sector can tackle some of the biggest challenges, allowing the doctors and other healthcare providers to easily and securely access your health records. Additionally, your lifesaving info can be accessed immediately by the doctors, at the time of an emergency.

In the Real Estate sector, blockchain technology can simplify the whole process and eliminate the need for escrows altogether. Smart contracts, designed by blockchain companies can be utilized here, which are executed when certain conditions of the contract are met, including funding, preventing the frauds in the real estate sector.

Supply chain management is another industry that is on the way to leverage the blockchain technology. The transfer of products requires a lot of intermediaries, consequently increasing costs, and the need for more resources, on both a timely and monetary basis. Hence, it is crucial to find alternatives that can speed up the transportation process without compromising the quality of delivery.

What’s In The Future For Blockchain Technology?

Currently, the financial institutes and banks are experimenting with this technology, using it for some mere processes such as loans, etc., but not adopting it on a wide scale. However, there are multiple other use cases in different industries that blockchain technology can touch. Insurance, health care, legal/government agencies, voting, and education just to name a few.

zqaThough blockchain is an emerging and trending technology, there are still a number of stumbling blocks that the blockchain technology is required to overcome to become viable across major industries and organizations at large. Currently, blockchain can be compared to the early times of mobile operating systems, including BlackBerryOS, iOS, Android and Symbian, and how they have evolved over time.

Another big factor in question regarding the blockchain’s future is whether systems based on blockchain would be able to scale up and handle the large transaction processes required across various industries.