Maybe you’ve read about blockchain and don’t understand what all the hype is about. Maybe you’ve never heard of it. This blog hopes to provide a good summary of what you need to know about about the blockchain.
Blockchain is a continuously growing list of ordered records, called “blocks.” A quick explanation on blockchain by Chew Qui Joon, Consortium 21’s IT Project Manager: “For blockchain, you require validators — people you need to decide what kind of data contributes to the chain. Once a transaction comes in, there is data that comes in and links blocks together. So imagine these validators are spread out throughout the entire world. And if it’s more than a certain percentage— that says that this block is invalid, then it will be invalid. Then it will be linked and stored to all the people who have access to the system. So these validators will store this data for after they validate it, that will be spread out throughout the entire world. So this technology prevents people from forging the data.”
There are four key concepts behind blockchain are:
- Shared ledger. An "append-only" distributed system of record that is shared across a business network is known as a shared ledger. "Transactions are recorded just once via a shared ledger, reducing the repetition of effort that is typical of traditional commercial networks,"
- Permissions. Transactions are secure, authenticated, and verifiable thanks to permissions. With the flexibility to limit network membership, enterprises can more easily adhere to data protection laws like those outlined in the EU General Data Protection Regulation and the Health Insurance Portability and Accountability Act (HIPAA) (GDPR).
- Smart contracts. An agreement or set of rules that regulate a business transaction is referred to as a smart contract. A smart contract is kept on the blockchain and executed automatically as part of a transaction.
- Consensus. All parties consent to the network-verified transaction through consensus. Blockchains have a variety of consensus processes, including multisignature, PBFT, and proof of stake (practical Byzantine fault tolerance).
Each blockchain network contains a variety of users who, among other things, fill the following roles:
- Blockchain users. With permission to join the blockchain network, users (usually corporate users) can transact with other network users.
- Regulators. Users of the blockchain with appropriate access rights can monitor the network's transactions.
- Operators of blockchain networks. People with specific access rights and power to define, build, operate, and maintain the blockchain network.
- Certificate authorities. People in charge of creating and maintaining the various kinds of certificates needed to operate a permissioned blockchain.
Blockchain's most common use cases and applications
Blockchain advocates are developing and testing additional uses for the technology, such as the following, even though it is still primarily used for recording and storing transactions for cryptocurrencies like Bitcoin:
Blockchain for supply chain monitoring.
Businesses may use blockchain to swiftly identify bottlenecks in their supply chains, locate things in real time, and monitor the quality of their products as they move from manufacturers to retailers.
Blockchain for money transfers and payment processing.
Banking transfer fees may be reduced (or eliminated) and transactions performed through a blockchain may be finalised in a couple of seconds.
Blockchain for managing the network of the Internet of Things.
In order to "identify devices connected to a wireless network, monitor those devices' activity, and determine how trustworthy those devices are," as well as to "automatically assess the trustworthiness of new devices being added to the network, such as cars and smartphones," blockchain may become a regulator of IoT networks.
Blockchain for electronic IDs.
Microsoft is experimenting with blockchain technology in order to provide users control over who may access their data and to assist them in managing their digital identities.
Blockchain in the medical field.
Healthcare payers and providers are utilising blockchain to manage clinical trial data and electronic medical records while preserving regulatory compliance, suggesting that blockchain might play a significant role in the industry.
Blockchain for sharing info.
Blockchain might serve as a middleman to transfer and store business data securely between sectors.
History of blockchain
E-commerce did not exist until the late 1990s, making it impossible to process a credit card securely online. How quickly might blockchain create another dramatic change?
Here is a detailed timeline by ICAEU, the Institute of Chartered Accountants in England and Wales:
A cryptographically secured chain of blocks is described for the first time by Stuart Haber and W Scott Stornetta
Computer scientist Nick Szabo works on ‘bit gold’, a decentralised digital currency.
Stefan Konst publishes his theory of cryptographic secured chains, plus ideas for implementation.
Developer(s) working under the pseudonym Satoshi Nakamoto release a white paper establishing the model for a blockchain.
Nakamoto implements the first blockchain as the public ledger for transactions made using bitcoin.
Blockchain technology is separated from the currency and its potential for other financial, inter-organizational transactions is explored. Blockchain 2.0 is born, referring to applications beyond currency.
The Ethereum blockchain system introduces computer programs into the blocks, representing financial instruments such as bonds. These become known as smart contracts.
Downsides and benefits of blockchain
The only downside of blockchain, according to Chew, is that “it’s too pricey.” Like the time of internet web 2.0 during the 90s, blockchain is currently expensive for cost adoption, storage and training and so on. Despite its cost, blockchain offers many advantages over conventional databases. Most importantly, it eliminates the potential for tampering by a bad party and offers the following business advantages: Time reduction.
Transaction times on blockchain are reduced from days to minutes. Because central authority verification is not necessary, transaction settlement is quicker; Cost reductions. Transactions require less supervision. Direct exchange of valuables is allowed between participants. Blockchain prevents effort duplication since users have access to a common ledger. Increased security. The security characteristics of blockchain guard against fraud, manipulation, and cybercrime.
- Synopsys. "What Is Blockchain and How Does It Work, https://www.synopsys.com/glossary/what-is-blockchain.html."
- ICAEW (The Institute of Chartered Accountants in England and Wales). "History of Blockchain, https://www.icaew.com/technical/technology/blockchain-and-cryptoassets/blockchain-articles/what-is-blockchain/history."
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