Blockchain is one of the technological advances which would have multiple implications in the future. Many countries have already started deploying this innovative peer to peer technology for transforming the various sectors. In this guide to Blockchain technology, I will help you in understanding blockchain technology from scratch.
What Is Blockchain Technology?
You might have come across the word “Blockchain technology” from your crypto enthusiast friend. Blockchain for dummies can be explained as a simple way of transferring the information from A to B in an automated, secured and transparent manner.
Suppose A initiates the transaction, then simultaneously the process of validating and updating the transaction will start in the network (digital)by the participants (nodes) involved in solving the complex mathematical algorithm associated with it. Thousands or millions of distributed computers involve themselves together to verify (solving algorithm)the transaction. After the transaction got verified, it gets the validation and the information related to it will be added to the block of a network. After several different verifications, when the storage space of a Block got filled, it will be added to the chain and the fresh block started filling. Thus, the distributed ledger of transactions is known as Blockchain and the technology involved is called Blockchain technology.
Three Pillars of Blockchain Technology
Blockchain permits anyone to send value anywhere in the world (digitally) where the distributed ledger of Blockchain is accessible. Blockchain technology is the smart amalgamation of three leading technologies: cryptography, peer-to-peer network of distributed ledger and computation for storing the record of transactions on a network.
Cryptography keys (meant for maintaining the secured network) consist of private and public keys which allow the completion of transactions between the parties. Individual transaction on Blockchain needs both these keys to produce a secured digital identity reference or digital signature (used for authorizing and controlling transactions). A large number of people which are meant to approve the transactions, use their digital signatures on peer to peer networks. When the transaction gets authorized by consensus mechanism among the participants and certified by mathematical verification, the secured transaction takes place among the parties. Thus, Blockchain users utilize the cryptographic keys to complete different types of digital interactions on peer-to-peer networks.
Benefits Associated With Blockchain Technology
Blockchain is the buzzword amongst the industrialists, startup founders and also amongst the various authorities of the government, so we must explore the associated benefits in this guide to blockchain technology.
Decentralization: A single entity does not store information, but everyone in the network owns the information (cannot edit until you have private keys!). No involvement of the middleman or central entity as the transaction gets recorded on the chain itself, hence a democratized system.
Transparency: In terms of the transactional history, the network (not in terms of the identity of the person which is defined by wallet address) is transparent. Everybody can access the data on an openly distributed ledger of the verified transactions.
Non Immutability: You can access the data on the open ledger but cannot tamper it unless you have the private keys to edit it. For changing the information, either you have to inform all the nodes connected to a network or have to remove the complete Block before adding the new one.
Security: Cryptography techniques are used to secure digital codes associated with the transaction as it adds the extra layer of security with the help of unique private keys to each user.
Applications of Blockchain Technology
Let us move into the real world after the theoretical discussion of Blockchain, where this technology is helping the industries or have the potential to revive the system deployed by various institutions.
- Smart Contracts: Blockchain technology enables the coding of contracts digitally that will be executed after the mentioned conditions get fulfilled. For instance, in case of a warranty claim, payment of derivative in financial markets, insurance renewal and many more, once the claim has been verified, the transaction gets completed.
- Identity verification: Online verification of identity can take place in a hassle-free manner via Blockchain. It would also reduce the chances of cyberattacks associated with central authorities, and helps in database management. For instance, Decentralized App based on Blockchain is utilized in Zug city of Switzerland to verify the electronic identity of citizens.
- Internet Of Things (IoT): The evolving technology of IoT, which facilitates the interaction in the network of interconnected physical devices with software and sensors along with internet connectivity. The distributed ledger technology can revamp the technology of IoT by combat hacking, providing data immunity against tampering and also the decentralization of control.
- Cloud Storages: Decentralized cloud storage like Storj, Sia, Ethereum Swarm etc. can enable the archiving and storage of the files confidentially. Blockchain technology-based cloud storage spaces are also less prone to cyberattacks.
- Governance of Financial Institutions: central authorities currently follow a labour-intensive multi-step process for every new customer. Also, one or other day, institutions suffer from money laundering, fake accounts, gambling etc. Blockchain technology has the potential to revive the process of Know Your Customer (KYC) and Anti Money Laundering Regulations (AML). Startups like Polycoin, Tradle are working for AML/KYC solutions.
Thus, more you wish to dig, more you can find the applications of Blockchain technology in the various sectors of industry from health to education, governance to banking, every system can be revived by deploying the Blockchain in the system.
This Guide to Blockchain hopefully helped you to understand about one of the latest technologies and its utility in real life.