How Blockchain Technology Move the World Economy
Blockchain: the revolutionary technology that is miraculously impacting different industries was introduced in the markets with its very first modern application Bitcoin. Bitcoin is nothing but a form of digital currency (cryptocurrency) which can be used in the place of fiat money for trading. And the underlying technology behind the success of cryptocurrencies is termed as Blockchain.
Blockchain is a data structure that holds transactional records and while ensuring security, transparency, and data decentralization. It is a chain of files stored in the forms of blocks which are controlled by no single authority. They are compone by millions of algorithms and numbers almost impossible to decode because each block contains information from the above, and this makes it safer.
A blockchain is a distributed ledger, is entirely open to any and everyone on the network, but the information stored on the chain, it is tough to change or alter it. Each transaction on a blockchain is secured with a digital signature. Due to this, the data stored on the blockchain is tamper-proof and cannot be changed.
This is the main character because the blockchain technology became famous and rentable for business.
Blockchain technology allows all the network participants to reach an agreement, commonly known as consensus. All the data stored on a blockchain is recorded digitally and has a shared history which is available for all the network participants. This way, the chances of any fraudulent activity or duplication of transactions is eliminated without the need of a third-party.
How Does a Blockchain Work?
A blockchain contains data or information. Each block of blockchain network stores some information along with the hash of its previous block, as we explained before.
A hash is a unique mathematical code that belongs to a specific block of the chain.
Suppose: data inside the block is modified, this means that the hash of the next block will be changed too, and the next, and so on. Thanks to that, blockchain is secure.
While transactions take place on a blockchain, there are nodes on the network that validate these transactions. In the blockchain, these nodes are called miners, and they use the concept of proof-of-work to process and verify transactions on the network. For a deal to be valid, each block must refer to the hash of its preceding block. The transaction will take place only and only if the hash is correct. If a hacker tries to attack the network and change information of any specific block, the hash attached to the block will also get modified.
If there is a breach, it will be detected immediately as the modified hash will not match with the original one. This ensures that the blockchain is unalterable, and any change which is made will be reflected throughout the entire network.
Here’s how blockchain allows transactions to take place:
- A blockchain network makes use of public and private keys to form a digital signature, ensuring security and consent.
- Once the authentication is ensured through these keys, the need for authorization arises.
- Blockchain allows participants of the network to perform mathematical verification and reach a consensus to agree on any particular value.
- While making a transfer, the sender uses their private key and announces the transaction information over the network. A block is created containing information such as digital signature, timestamp, and the receiver’s public key.
- This block of information is broadcasted through the network, and the validation process starts.
- Miners all over the network start solving the mathematical puzzle related to the transaction to process it.
- Upon solving the puzzle first, the miner receives rewards in the form of bitcoins.
- Once the majority of nodes in the network come to a consensus and agree to a standard solution, the block is time-stamped and added to the existing blockchain. This block can contain anything from money to data to messages.
- After the new block is added to the chain, the existing copies of the blockchain are updated for all the nodes on the network.
Types of Blockchain used
As the name suggests, a public blockchain is a permissionless ledger and can be accessed by any and everyone. Anyone with access to the internet is eligible to download and access it. Moreover, one can also check the overall history of the blockchain along with making any transactions through it. Public blockchains usually reward their network participants for performing the mining process and maintaining the immutability of the ledger.
Public blockchains allow communities worldwide to exchange information openly and securely. However, a distinct disadvantage of this type of blockchain is that it can be compromised if the rules around it are not executed strictly. Moreover, the rules decided and applied initially have a minimal scope of modification in the later stages.
Contrary to the public blockchain, private blockchains are the ones which are shared only among the trusted participants. The overall control of the network is in the hands of the owners. Moreover, the rules of a private blockchain can be changed according to different levels of permissions, exposure, number of members, authorization, etc.
Private blockchains can run independently or can be integrated with other blockchains too. Enterprises and organizations usually use these. Therefore, the level of trust required amongst the participants is higher in private blockchains.
Also called consortium blockchains, are considered to be semi-decentralized and employ characteristics of both public and private blockchains. Hybrid blockchains contain sets of permissions, similar to private blockchains; however, instead of a single organization controlling it, a group of agreed-upon organizations controls it. Administrators of each organization can restrict users’ reading rights as they desire and only allow a limited set of trusted nodes to execute a consensus protocol.
Now, which applications can you develop using blockchain technology?
Cryptocurrencies were the first signals of the enormous potential of blockchain technology. Actually, they made it famous, but this is not the only way of using and taking advantage of it.
Blockchain technology has led businesses, industries, and entrepreneurs from all around the world to explore the technology’s potential, make revolutionary changes, and earn money being safe.
So, let’s find out how Blockchain can be useful in practical implementation for you.
1. Smart contracts
A contract is a document where reposes a transaction between two people, companies, and so on.
Different businesses deal with each other to exchange services or products using it, but paper-based contracts are prone to errors and frauds.
Blockchain, by itself, brings forward a fantastic solution to this problem for the high level of security it has.
In that way, smart contracts perform similar functions as paper-based agreements, but they are digital as well as self-executable in nature.
Self-executable means that when certain conditions in the code of these are met, they are automatically deployed.
Ethereum (which is a blockchain network) has fantastic options to develop smart contracts. There is no area where this kind of document can not be useful.
2. Government Elections
This is a public business, but you perfectly can develop a software to ensure the authencity and the correct transaction of votes for any government voting process or tender.
The current voting system relies on manual processing and trust, and you can change this.
Blockchain smart contracts provide a modern system through which these common issues can be easily eliminated, so smart contracts will allow transparency and security while maintaining the privacy of the voters.
3. Identity management
Everything is on the internet. And financial transactions are part of this. Blockchain each time represents excellent options to protect sensitive information like financial transactions, invoices, and even accessing credentials.
This technology offers you advanced methods of public-private encryption using which you can prove your identity and digitize your documents, money, and whatever you need keeping in safe.
This is enough reason to consider providing software for this necessity. It can make you a millionaire if you follow the right steps.
Blockchain is friendly technology. If you are interested, keep reading and investigating what you do need to develop a software project using it. More areas of applications are being discovered and tested with each passing day, and you can find the next. Why not?