What is blockchain technology? How it works? What is Bitcon? What is Etherium? These are all the questions that I’m going to answer in this explainer.
So, if you want to learn more about’em then read-on as everything is explained in plain, simple terms.
What is Blockchain Technology?
The record-keeping technology enables its users to make instant transactions on a network without any third party such as banks.
All the transactions are completely secure, and a copy of each transaction is kept by the blockchain technology. Now, it functions somewhat similar to a bank as it also keeps a record of transactions, but what makes it different is that no record of a transaction on blockchain can be changed after the fact.
One thing of importance that needs to be mentioned here is that this technology is emerging, which means it’s still in the evolving phase and is being tested. With the top forty or so companies trying it out, the blockchain technology has been particularly embraced by the financial services industry and many more various industries stand to benefit from it.
The point I’m trying to make here, is that people are still figuring out how exactly they can use this technology to their benefit by cutting costs and keeping quality products and services around.
Here’s a closer look at how the blockchain technology functions.
How the Blockchain Technology Works?
As its name suggests, this technology is literally just a chain of blocks, with each block representing data, strung together with other blocks in a specific order. 4 things must occur first in order for a new block to be added to the chain:
- A transaction must occur. Let’s take the example of an Amazon purchase, after a long search you finally make a purchase.
- That transaction must be verified. Once the purchase is made, now your transaction must be verified with other public records of information. It is done by someone who supervises the screening of new data entries. With blockchain, this job is performed by a network of computers, consisting hundred & thousands of computers spread across the world. Coming back to the Amazon purchase example, once you make a purchase, the network of computers rushes to check that your transaction happened in the way you said it did. That is, they confirm the details of the purchase, including the dollar amount, transaction’s time, and participants.
3.That transaction must be stored in a block. A go ahead is only given once the verification is done and it comes positive. The transaction’s amount along with the digital signatures of both participants are all stored in a block, where it’ll likely join others like it.
- A hash must be given to the block. Hash (a unique, identifying code) must be given to the block, once all of its transactions have been verified. The block is also given the hash of the latest block added to the blockchain. The block can be added to the blockchain once it is hashed.
The new block becomes public once it’s added to the blockchain, available for everyone to view. If you check out the blockchain of any cryptocurrency, you’ll find that you have access to a whole lot of information such as when, where, and by who the block was added along with the transaction data.
How is Blockchain Technology related Bitcoin?
The main aim of blockchain technology is to enable the recording and distribution of digital data, but not editing. The idea of it was outlined in 1991 by 2 researchers who wanted to build a system where document timestamps could not be altered.
The technology saw its first real-world application in the shape of Bitcoin in Jan ‘09. In a research paper introducing the first virtual currency, Satoshi Nakamoto (Bitcoin’s pseudonymous creator) referred to it as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”
As mentioned above it was the first virtual currency, all digital currencies created since then are called altcoins. Ethereum, Litecoin, Peercoin, Feathercoin, and hundreds of other coins are all altcoins because they are not Bitcoin.
A look at Ethereum!
The blockchain technology is also used to build applications with functions beyond just supporting a cryptocurrency. Such applications are often referred to as Crypto 2.0 or even Bitcoin 2.0.
Launched in July ‘15, Ethereum is the most well-established, open-ended distributed computing platform and operating system that enables SmartContracts and ĐApps to be built and published without any downtime, control or interference from a third party. Along with being a platform, it’s also a programming language running on a blockchain; helping developers to build and run distributed applications.
Well, in Ethereum’s own words:
“Ethereum is a global, open-source platform for decentralized applications. On Ethereum, you can write code that controls digital value, runs exactly as programmed, and is accessible anywhere in the world.”
Ethereum has a diverse range of potential applications which run on its currency vehicle, Ether. Used for moving around on the Ethereum platform, Ether is sought by developers looking to develop and run applications inside Ethereum.
Ether has two main purposes:
- It is traded like other cryptocurrencies
- And is used inside Ethereum as a vehicle to run applications and even to monetize work.
What’s Next for Blockchain Technology?
Blockchain has come a long way since 1991, over the course of decades it saw its fair share of public scrutiny, with everyone around the globe speculating about its capabilities and future.
Now going into its thirties, the blockchain’s technology many practical applications have already been implemented and explored, thus bringing it the recognition that it deserves. At the moment, it’s on the tongue of every investor, as the technology stands to make government and business operations more efficient, accurate, and secure.
I’m sure that either you or someone you know owns cryptocurrencies. Their popularity increases with each passing day, and the focus is now turning toward the underlying distributed ledger technology (DLT) that powers these digital currencies.
It’s known as Blockchain, and to be honest; it’s not that hard to understand this technology. To put it simply, the tech exists as a decentralized database filled with entries that must be confirmed by peer-to-peer networks and encrypted.
If the above paragraph were not helpful for you, well, then another way to understand this technology would be to think of it as a strongly encrypted and verified shared Google Document, in which each record in the sheet depends on a logical relationship to all its predecessors, and is agreed upon by every participant in the network.
A notable revolution in the systems of record, the potential use cases of this technology are much more than just serving as the fuel behind digital currencies, a reason why it’s described as the ‘magic beans’ by several of the brightest minds of industries. Below, I’ve outlined some of its emerging applications across various industry verticals.
Supply Chain Management
Have you ever thought about how you get your cereal in the morning? It is the result of the impeccable supply chain systems that are implemented across the place you are staying in. If the supply chain stops working properly for some reason, then you get delayed products or no products at all. Supply chains have other issues, too, but one of the biggest issues for companies and consumers like you is to get rid of counterfeit goods that can get into the supply chain by fraud elements in the market.
So, what’s the solution then? Yes, you guessed it right — Blockchain. Blockchain’s immutable ledger makes it well suited for real-time tracking of goods as they move and change hands throughout the supply chain. Not only does it allows companies to monitor the fraud elements in the supply chain, but it also allows them to find out about the inefficiencies that are part of the supply chain. This means that the supply chain can be improved by monitoring it through Blockchain.
Digital identity (in case you have no idea what it is, well, it’s an online record of information about individuals and organizations) is a great thing; it solved a lot of our problems, especially it rid us of the need to carry documents all the time to do even the smallest of tasks. But since centralized entities are becoming increasingly susceptible to identity thefts and data breaches, it has created some issues. Once we provide consent to use our data to the service providers, from there on, the ownership of that data is concentrated in their hands. We would all love a system that helps us get identified most securely.
The answer is a blockchain-based digital identity system. Proponents of blockchain tech for identity management claim that people would only need to provide the bare minimum (date of birth, for example) to prove their identities with enough information on the blockchain. Creating a global identity is way far away from now, but the work has already started in the right direction.
Voting systems have always been scrutinized (sometimes for transparency while sometimes for the speed at which voting occurs) worldwide. It is common for people to stand in line for hours before they get their chance to cast their vote at the polling booth. Some endure it while others don’t; this lowers the overall voter turnout.
Voting is one activity that must have the option of being carried over the internet. However, online voting has been resisted by many due to concerns such as security and fraud. Blockchain has the ability to eliminate all these concerns as it will present a clear record of the votes that have been cast. The hackers would be no match to blockchain technology, as its tamper-proof feature makes it difficult to hack a blockchain-enabled voting system. With blockchain, the voting process will become more easily accessible, resulting in a significant rise in voter turnout.
As mentioned above, the supply chain can be improved by monitoring it through blockchain. Which will help solve one of the most painful points of healthcare, counterfeit or fake medicines. As a consumer, you will get access to medicines that are authentic in nature, while the companies will also benefit from this as it will save them millions of dollars.
Moreover, if you look around yourself, you’ll find that almost everyone has some sort of specialized connected medical device; they are becoming more common with each passing day and are being increasingly linked to a person’s health record. A major issue currently being faced by connected medical devices is the siloing of the data they generate; blockchain could be the link that bridges those silos. Devices will store the data generated on a healthcare blockchain and append it to personal medical records. So, all your health data will be in one place.
Blockchain technology has the potential to decentralize the energy market, which is controlled by large corporations. It allows for real-time coordination of electricity demand and supply data to improve energy efficiency on the demand-side. Blockchain solutions can also monitor and control energy performance in real-time accurately, ultimately increasing efficiency on the supply side. In effect, Blockchain provides electricity distribution companies with ways to efficiently track the usage and generation of energy and identify network anomalies, improving response time in case of a blackout or a failure.
The average homeowner sells their home every 5 to 7 years, and the average person will move nearly twelve times during their lifetime. Real estate is not in perfect shape; the amount of paperwork that goes in while buying or selling a property would give many headaches. If one wants to make a purchase, one will have to go through long documentation, verification, and ownership transfer. There are also chances of getting fraud. The fraud generally happens from sellers who sell their property to more than one party at the same time.
Blockchain could certainly help with all these issues of the real estate market. It would expedite home sales by quickly verifying finances, reducing fraud thanks to encryption, and offering transparency throughout the entire selling and purchasing process.
Today, the question is not “if” legacy companies will catch on to this cutting edge technology instead it’s a question of “when.”