Blockchains are timestamped, immutable records of data that are distributed and managed by a cluster of computers. This is the term used to describe a specific database system. Blockchain transactions are recorded by a distributed ledger. A distributed ledger is a set of databases that are replicated and synchronized between several locations. Therefore, storing your data here is safer than on a centralized database server. Blockchain technology is largely used to keep track of cryptocurrency transactions and verify ownership of digital currencies like Bitcoin. The technology can be applied to anything that needs to be secure, such as healthcare records, documents, and contracts. As a result of its security and efficiency, blockchain has been adopted by businesses across industries, according to Deloitte.
Blockchain technology allows you to control your digital currency without having to rely on a central administrator. Several industries have embraced blockchain technology, including BFSI, healthcare, education, real estate, supply chain & logistics, and IoT. As a peer-to-peer technology, no one controls it. Therefore, the data stored in it cannot be controlled by a central source. The data stored in this way differs from data in traditional databases. Already, blockchain has revolutionized the way businesses operate, money is sent, and relationships are formed. It was designed to solve the double-spending problem without relying on a central authority to verify transactions between individuals and organizations.
The technology works through digital, encrypted ‘blocks’ or pages of data linked to each other and secured by cryptography (a method for storing information). When new data is entered, it is added to the existing block, which makes the data in chronological sequence. When you log into Dropbox, your database is typically stored in a central location, such as your laptop. However, a distributed database is stored on multiple devices across the globe – like when you log into Google Docs.
Having a database requires that we treat all of the information as structured data. The blockchain, however, can store various types of data in an unstructured manner, including images, videos, and documents. Although this might seem like a disadvantage considering the fact that structured data is easier to work with, it also allows us to store more relevant data. Businesses can learn a lot about blockchain technology and develop a store of trust with their customers.
Brief History Of Blockchain
Technology like blockchain allows digital data to be recorded and distributed, but not edited. Blockchain technology was first outlined in 1991 by Stuart Haber and W. Scott Stornetta. The researchers wanted to implement a system where document timestamps could not be modified. However, it wasn’t until Bitcoin became a household name in January 2009 that blockchain technology caught the attention of the general public.
Uses Of Blockchain Technology
Blockchain technology can be used for the following purposes:
- Building complex algorithms and structures to share data securely.
- Conducting transactions or agreements without the need of a third party.
- Protecting physical goods from theft with the use of smart contracts.
- Addressing and disrupting many industries that rely on intermediary verification systems such as banking, real estate, insurance, healthcare, and government.
- Providing transparency for supply chains in manufacturing by tracking ownership history.
Some blockchain platforms allow for tokens to be created which can represent value such as currency or other types of assets like gold coins, houses or stocks in a company. These tokens can be sent peer-to-peer between users without any involvement from traditional financial institutions that control fiat money flow today.
Pros Of Blockchain Technology
Blockchain technology can be used in many different industries, and it is currently gaining popularity in the tech sector. A few benefits of Blockchain technology include:
- It is a distributed ledger technology that uses cryptography to ensure secure information exchange between nodes. It is great that the decentralized digital ledger can be used to track everything from digital currencies to the exchange of stocks and real estate, to voting systems and more.
- Blockchain technology’s potential for widespread implementation and use is an important factor that makes it exciting. From healthcare to voting systems, it can be used to increase privacy and security as well as to make vital information freely available to everyone who needs it.
- A blockchain is a decentralized method of verifying transactions, establishing agreements, and storing data in a less vulnerable manner than other methods. The blockchain will have a game-changing effect on sectors such as retail, government, and healthcare because of its transparent technology.
- It can be used to reduce costs, make payments and transfers more reliable and fast in the financial sector. Blockchain technology can be used to process payments more securely. Without involving an intermediary, the technology increases data security and reduces transaction costs.
- Due to its decentralization, it is more difficult to tamper with, it is more private and secure, and transactions are more efficient.
- A major advantage of blockchain technology is greater accuracy because it eliminates human error.
- Having no access control and open, permissionless chains makes blockchain networks less susceptible to bad actors. In essence, this lets applications be added to the blockchain without requiring the approval or trust of other parties.
- As a peer-to-peer system, blockchain networks have no single point of failure or vulnerability that hackers can exploit; the system is also not centralized.
Cons Of Blockchain technology
Some believe that blockchain’s disadvantages are just an attempt to downplay its advantages. When used correctly, technology is even more useful. Nevertheless, every benefit has a downside. Blockchain has the following downsides:
- If the blockchain is not scalable, low transaction rates become an issue.
- The blockchain network offers users a level of confidentiality that protects them from hackers and preserves their privacy, but it also provides the possibility of illegal trading and activity. The history of use in illicit activities is due to the fact that cryptocurrencies are built on a secure foundation of blockchain technology. Additionally, the same can be said about fiat currency, which is still widely used today.
- Many in the crypto space are concerned about government regulation of cryptocurrencies. Since it is virtually impossible to end a decentralized network like Bitcoin, governments can theoretically prohibit ownership of cryptocurrencies or participation in their networks.
- Even though blockchain can save users money on transaction fees, it is not free. Bitcoins are obtained at a significant technology cost. Mining Bitcoin and other cryptocurrencies are costly. After a meteoric rise, bitcoin is now being valued flat to down. People who mine Bitcoin invest a lot of money into the process, but they make little money out of it.
Blockchain has multiple uses outside of cryptocurrencies, including supply chain management and payment systems. Bitcoin is the most popular use case, but it is not the only one. Compared to current databases, this technology represents a significant improvement. Essentially, blockchain is a way to make data transparent and may come into use in the future for things like identity management.
Is blockchain technology something you’re interested in? Would you like to add any additional suggestions? Do you currently use blockchain technology in your company or daily life? Let us know your experiences and knowledge. We have an article on cryptocurrency that you can read.