Currently, cryptocurrency is the widely-used application of blockchain technology.
How blockchain works
Blockchain makes a record of each transaction. Each transaction is secured by a digital signature. Every time when a transaction is completed, it generates a hash. Basically, a hash is a string of numbers and letters. Hash of the previous transaction is used for generating the hash for a newer transaction. Even a small change in transaction can result in creating a completely new hash. Each transaction is registered in order in which they occur. In blockchain, the order of the transaction is very important. The nodes check the hash to ensure that the transaction has not been changed. If the majority of the nodes approves the transaction, then it is written into a block. A blockchain updates itself every 10 minutes.
Nodes
Each computer connected to the blockchain network is called a node. Nodes are connected with the blockchain network through the client. When node gets connected with the blockchain, a copy of the blockchain data gets downloaded into the system. Then the node comes in sync with the data of the latest blocks on blockchain.
Applications of blockchain
The below applications are the widely-used application of blockchain:
Sharing of medical data securely Cryptocurrency Cross-border payments Security of personal identity Tracking system for anti-money laundering Keeping records of property Smart contracts For voting
Disadvantages of the current monetary system
Due to the below disadvantages of the current monetary system, blockchain is being considered for digital transactions.
Cash can only be used in low amount transactions Hoarding cash leads to shortage of currency from the market Much waiting time during the transaction process Third-party verification and execution of transactions makes it more complex High charges for transactions, which makes the process expensive Cross-border payments are too time-consuming and charge the users heavily
Advantages of blockchain
Blockchain allows transactions to get verified without depending on third parties The data of each block in the blockchain are appended only to type, so they cannot be altered or deleted Data ledgers are protected using cryptography No transaction cost makes processing less expensive
Disadvantages of blockchain
Blockchain is appending type only, so it is difficult to modify the data once it gets entered User gets a private key to operate. If they lose it, access to data in the block is lost and there is nothing they can do about this Scalability issues Complexity in design and maintenance
Types of blockchain
Public: This type of blockchain is also called permissionless blockchain. Everyone can be a part of this blockchain. Each can be run as a node by mining blocks or by making transactions in the blockchain. For example: bitcoin mining. Private: This type of blockchain is also called permissioned blockchain. There are restrictions in this blockchain. One or more than one organization can run this. Only specific members of the organization can be part of this. Examples: Ripple, Hyperledger. Consortium: This type of blockchain is also called semi-decentralized blockchain. It is controlled by many organizations. The members of the organization have rights to participate in this by running it as a full node or by mining. Examples: R3, EWF.
Why blockchain is important
Security: The first concern for all kinds of online transactions is security. A very high level of security is provided by the blockchain, which makes it impossible to rupture for anyone because of the decentralized nature of blockchain. Transparency: The blockchain technology is very transparent, as all the transactions are visible to all the members from the beginning. It reduces the chances for any of the variations in the system. No intermediary party involvement: In this technology, there are no chances of mediators or brokers in any of the transactions. Inexpensive: Blockchain technology is the most feasible commercial model available now in the world.
There are much more important features offered by blockchain technology. For example: the time of transaction is shorter; increased efficiency in finance; fraud protection for business; scope of innovation; numerous applications; smart contracts; high flexibility of usage; prevention of data leaks and hacking.
Future and scope
Blockchain technology has a bright future in other sectors, aside from the financial sectors. These possible future pairings include:
Blockchain in digital advertising Blockchain in cybersecurity Blockchain will remove the requirement of third parties Digital currencies will be provided by the governments Blockchain in forecasting Blockchain in cloud storage Managing global trade with blockchain technology
A word on Bitcoin
Bitcoin is a cryptocurrency making use of blockchain technology. It was invented in 2008 by Satoshi Nakamoto and its implementation started way back in 2009. Bitcoin is a public-type blockchain. It can be issued in any fractional unit and has a decentralized distribution system. There is no need for a third party or middleman Bitcoin transactions.
Sources
Introduction to Blockchain technology | Set 1, GeeksforGeeks The Future Scope of Blockchain Technology, Zarantech Features of Blockchain, GeeksforGeeks Why Blockchain is Important? 21 Reasons That Shows How Blockchain Transforms the World, upGrad Five Reasons Why Blockchain Is Key For The Future Of Technology, Inc42
