Blockchain technology is bringing about a paradigm shift in the world today. You may wonder why. The key reason is that it is a decentralized data storage platform where no single authority controls the information. Instead, the data is shared across the network.
Thus, it allows multiple parties to record transactions in a secure, transparent, and immutable manner making Blockchain pave its way to countless applications such as financial transactions, supply chain management, voting systems, identity verification, and more.
Dive into how and why Blockchain will sweep into our lives in the years to come.
Blockchain Technology In 2023
Blockchain is a decentralized and distributed digital ledger that records transactions across a network of computers. Blockchain technology has a wide range of applications, including
- financial transactions,
- supply chain management,
- voting systems, and identity verification.
Some crucial benefits of Blockchain include increased security, reduced costs, and increased efficiency.
The concept of a distributed ledger promotes increased security, efficiency, and cost reduction, resolving some of the top concerns in the digital world.
It seems like this technology is raising the bar of technology today. Through this article, we will try to decode the science of Blockchain technology—its functions, applications, challenges, and future insights.
How Does Blockchain Work?
This brings us to the question of how a decentralized database functions. How does the blockchain ensure the data is secured throughout the network? How does everyone in the network access the information? What if there is a change in the data stream of the blockchain? How is that secured at all?
Questions may be countless. Comprehending the blockchain’s function will resolve it in a single go. Dive right into the functioning of the blockchain.
The basis of blockchain technology is the decentralization of information (the data is shared across a network and is not under the helm of a single supremacy).
The technology works on a ledger-based model:
- Blockchain is like a decentralized ledger.
- Each record of this ledger is called a block.
- The first block is called the genesis block.
- The block comprises three elements: the relevant information, the hash (a unique code), and the hash of the previous block.
- Thus, a series of multiple blocks make a chain of blocks interconnected with each other through hash codes.
The information is accessible throughout this network. Now you may wonder, “How is the data secured at all?” The information can still be changed for a block. But it will take years to do so.
Example. For every information block, there is a unique code called a hash. So if anyone attempts to change the data, they would have to change the hash, which is next to impossible. Why?
For specific information, there is a unique hash code. So, if someone attempts to change that, it won’t be possible with the existing hash code making it invalid.
If there is a mutual need to change (or a change request), it happens through a peer-to-peer voting system where everyone has to agree on a decision.
One may still wonder: what if someone attempts to change the hash of every block? As easy as it is to think, it is equally impossible to do. Here is how. For instance, changing the hash of one block in a bitcoin takes approximately 10 minutes. Now, for 10 million blocks, it will take around 200 years!
Top 5 Applications of Blockchain
We have learned about the nitty gritty of the blockchain. Now let’s dive into the applications of blockchain.
1. Role of Blockchain in Asset Management
The process of asset management involves:
- Monetary Transactions
- Real Estate
- Investment, etc.
With the blockchain, the need for intermediaries like brokers and managers is eliminated. Thus, it smooths the process and reduces the chance of mismanagement.
2. Role of Blockchain in Healthcare
Blockchain is advancing the healthcare industry today. With the online proliferation of electronic healthcare systems, information is stored digitally. For instance, for drug authentication, patients’ records and the prescription directory are usually saved online these days. Thus, a blockchain network can easily promote efficient access to this information with the advantage of mutual data sharing and security.
3. Role of Blockchain in the Internet of Things
IoT enables the blending of the internet with various physical devices like embedded sensors, software, etc. The internet is connected to the devices which help to extract the data that enables a seamless interaction amongst humans, the internet, and things.
Blockchain technology provides a securer network and efficient data sharing.
4. Role of Blockchain in Virtual Currency
One of the first and most renowned uses of blockchain was bitcoin. It gained so much popularity that blockchain and bitcoin were used synonymously.
Nonetheless, bitcoin is an application of blockchain technology. It works on the peer-to-peer network model, wherein the transactions are recorded in each block. This technology will be widely used in the financial domain because it offers:
Over the years, blockchain has grown from bitcoin to Ethereum and thousands of other digital currencies.
5. Role of Blockchain in Smart Contracts
Smart contracts employ blockchain technology to ensure information security and efficiency across the network. This is an advantage in the real estate industry. Since it promotes efficient data management, Smart Contracts provide a digital interface between buyers and sellers. Thus, it eases the process of user verification and background check.
These contracts based on blockchain contribute to a transparent ecosystem for transactions.
Based on a recent report by Gartner, “When an organization adopts blockchain smart contracts — whether externally imposed or voluntarily adopted — they benefit from the associated increase in data quality, which will increase by 50% by 2023,” said Lydia Clougherty Jones, senior research director at Gartner.
Like every technology, blockchain too has its limitations. These include regulatory issues, scalability, and the need for strong cybersecurity measures, as explained below:
There are three key factors that limit the scalability of blockchain: Networking, Capacity, and Throughput.
When we say capacity, it implies the storage limit. Now, in a blockchain, if we happen to introduce more data, that implies more blocks. Since each block is shared, it means starting from the genesis block (the first block) to the whole chain. Not each node (block of the chain) has the storage capacity to handle the new introductions. Thus, scaling becomes a challenge.
2. Lack of Standardization
This is yet another concern while establishing blockchain. There is no common standard in terms of cost, mechanism, etc. Thus, widely accepted adoption becomes next to impossible.
3. Lack of Resource
Blockchain is a new technology as of now. Therefore, when it comes to the experts in this domain, there are still few. In the future, the dynamics may change, but it is yet at a fundamental stage like any other technology.
Like any other technology, blockchain has its limitations. However, no shortcoming stands tall in front of the utility offered by the technology.
Blockchain Trends | Future Insights
Looking to the future, it is likely that blockchain technology will continue to evolve and be adopted by a broad range of industries. It has the potential to revolutionize many aspects of business and society and is being adopted in various ways. Some experts predict that blockchain will eventually become a fundamental part of the global financial system and the Internet of Things (IoT) and will play a significant role in shaping the future of technology.
Stay tuned to https://www.rapidinnovation.io/ for more technical dives.
Written by Ritu