Blockchain. Cryptocurrencies. Bitcoin. Ethereum. NFTs. These terms have become the base words of the vernacular of digital earth. You can’t go 3 people into your social circle without these words coming up — that’s how ground-breaking digital technology has become. The core concept of it all — Blockchain is the lifeblood of these applications.
Blockchain — Layman’s Terms
In the simplest terms, Blockchain is a chain of blocks that consist of information. It’s a digital, distributed and decentralized database that’s fully open to anyone, and accessible to anyone with a robust internet connection. Unlike a traditional database, Blockchain bundles information in blocks that are chained together, with each block containing a data piece of the previous block. Once data has been recorded inside a blockchain, it becomes near-impossible to change it. The earliest occurrence of the concept goes back to 1991, when researchers wanted to timestamp digital documents to make them difficult to backdate. Modern Blockchain was revolutionized through the cryptocurrency ‘Bitcoin’ by developers under the pseudonym ‘Satoshi Nakamoto’. The first public ledger/database for Bitcoin transactions was made by this group.
How does a Blockchain Network work?
Blockchains work through what’s called DLT (Distributed Ledger Technology). First, let’s zoom in on the blocks — each block contains the below components:
Any tampering of data in Block 2 will cause its hash to change, which in turn will change the previous hash details in Block 3. This block is now rendered invalid since it no longer stores a valid hash of the previous block. Subsequently, the rest of the blocks in the chain after №3 will also have hash changes, and the enitre blockchain is sabotaged.
Transactions & DLT
Whether it’s mining for the steamrolling Bitcoin or verifying the authenticity of property contracts, transactions in the Blockchain bastion have a very specific, secure and smart flow. Let’s take it step-by-step:
This is all possible owing to DLT — Distributed Ledger Technology. Since the blockchain database is managed by multiple participants from different parts of the world, it’s called a distributed ledger. Some of the benefits of having such a technology are:
Proof-of-Work — a.k.a. Transparency & Security
In reality, hashes are not enough to bulletproof blockchains. This is where Proof-of-Work (PoW) comes in. When new blocks need to be introduced into a blockchain, there are umpteen users on the network who compete with each other to take the responsibility of adding that block. Each member is given an equation (mathematical/logical), depending on the type of blockchain, to solve. The first one to solve this, gets to add the block into the chain and is rewarded (eg. Bitcoins!) in turn for this job. This is called ‘Proof-of-Work’.
Now if you get cocky and still want to manipulate the chain by recalculating the hash of a block and all its subsequent blocks, you will have to calculate the PoW of each block, costing you an incredible amount of time and an insane amount of computing power. Beyond this, you’d even have to tamper with the records of other members of the P2P network to take control of the blockchain. See why blockchains are so transparent and secure? In fact, the security is so tight that a recent report revealed only 0.34% of crypto transactions are criminal, compared to 5% in cash transactions in banks.
It’s true that cryptocurrencies have boomed in the past decade, but many Blockchain proponents believe that cryptos have overshadowed its other applications. Here are some areas where you’d be surprised to encounter Blockchain:
Benefits of Blockchain in Business
Blockchain is capable of creating shockwaves in the business world. As a use-case, if two companies are looking to transfer assets, the transactions might be slow, inefficient, expensive and worst of all — susceptible to manipulation. Both parties would have their own ledgers with transaction details that may not reflect exact data, values and proposals. This can lead to disputes, delayed settlements and discord between the transacting parties. But if they were to use Blockchain, all checkboxes would be ticked — saving time, dropping costs, mitigated risks and increased transparency.
The consensus mechanism in Blockchains provides a consistent dataset with minimal errors to companies that use them, while providing the flexibility of any of their employees/associates to act as participants in their Blockchain P2P network.
Immutability of data on the Blockchain can put big smiles on the faces of auditors, regulators and compliance watchdogs, irrespective of which sector the business is in. It doesn’t come as a surprise that throngs of companies are using this technology to upscale their business.
Beyond the Cryptocurrency Hype
Cryptos only became a buzzword in the digital world because they were Blockchain’s first popular application. And let’s be honest here — who wouldn’t like to make some extra dough for spending a few extra hours on the computer and splurge a little extra on electricity bills? But there’s a whole world beyond crypto-trading.
Non-fungible Tokens have surged ahead in the last year or so. They can be regarded as certificates of ownership for virtual or physical assets like art (digital and otherwise), paintings, music, precious gems, collectables, JPEGs, and many more. Stuff like comics, video games and digital art can all be easily meddled with; which is where NFTs are a boon — they ‘tokenize’ the digital asset to the owner/creator so that it can be bought/sold. NFTs can also include smart contracts for the artist in case he/she demands a cut for future sales of the original or copies.
Current trends in Blockchain
Not too sure about those dynamite cryptos, but Blockchains are here to stay. They have an unmatched ability to stay secure and transparent, giving more industries reason to adopt the technology and reap the benefits. It’s true that the computing power and electricity required for keeping up and improving blockchains are tremendous, but with the boom of renewable energy round the corner, we can expect a good upswing in usage of this wondrous digital tech.
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