The whole world was thrown into a frenzy as Bitcoin soar in value with centralized institutions jostling to get a bite of the cookie while centralized governments frantically look for ways to either leverage on the situation for tax windfalls or ban the cryptocurrency outrightly.
So blockchain. The magic behind the ever-rising bitcoin. It seems like a pretty complicated concept but when we get down to it blockchain is a special kind of database. A blockchain is special because of its decentralized nature and structure (data). It is that simple. To be specific, blockchain is a method of storing information such that it becomes very hard or outrightly impossible to alter, hack into or cheat the system.
What makes up a blockchain?
It is made up of a digital ledger of recorded transactions which is duplicated and can be freely accessed by every computer on the Blockchain. The data recorded is stored in blocks. Each block contains a cryptographic hash (All transactions must be recorded with this immutable cryptographic signature.) of the previous block in the chain, a timestamp, and a record of transactions. To keep all copies of the ledger identical, every time a new transaction has been processed a record of it is added to each participant's ledger.
Because every single computer is aware of transactions the system is known as a decentralized one. Decentralization ensures that the system remains fully transparent.
Requirements of a Blockchain
To be recognized as a true blockchain network, a blockchain must have the following features:
- It should be programmable: A blockchain should be able to undergo programming.
- It should be distributed: Every participant(node) on the network had access to the ledger.
- Security: Each recorded transaction is encrypted.
- Immutability: This means that any transactions which have been verified cannot be reversed or altered in any way or form.
- Participants are anonymous: Everyone with one activity or the other on the Blockchain should not be known. Instead, they should be anonymous or pseudonymous.
- It should be unanimous: All parties should be in agreement on the validity of every record.
- It should be time-stamped: All timestamped transactions should be recorded on blocks.
With these features, it is evident that alteration of just one block would be detected swiftly and easily. The only way to successfully corrupt a blockchain is to change every single block in the system. As you can imagine that is practically impossible for a bunch of hackers.
Applications of Blockchain
Over the years, blockchain has been applied in a variety of ways to build more transparent and secure systems. Here are a couple of interesting examples:
With Cryptocurrency in the lead, blockchain has sent a tremor of change through the world of finance. It has led to a lot of positive changes. Let's start with the famous crypto.
Cryptocurrency: Cryptocurrency is one of the most advanced applications of blockchain. Now, why is it special? Well, let's use an analogy. You have the money which you would like to save. To do that you would probably have to go to the bank. Once you deposit the money the transaction is recorded and you can be on your way.
Now imagine that there was no bank and instead there's a system that records all transactions. You join the network as a participant and store your money in a wallet.
Everyone on the network gets a notification of this transaction and it is recorded. That way altering a record is not possible and there is no need for any constituted authority like a bank.
There are many available Cryptocurrency options. The largest and most popular are bitcoin, ethereum, litecoin, etc. One bitcoin is currently worth about USD 58,771.
Money transfer: With new currency comes a new way to transfer money. The use of Cryptocurrency(especially bitcoin) for transfers has led to a faster and more effective system. The best it has done is to save about a whopping amount of at least 8 million dollars yearly. This is because it gets rid of:
- The bureaucratic red tape
- A large percentage of third party fees
- Time delays
Other sectors apart from fintech also benefit from the advantages of blockchain. One popularly applied concept is known as a smart contract. They are like conventional contracts but in this case terms of the contract are enforced in real-time on blockchain. This way there is no need for an intermediary between parties involved in the contract. It improves:
- Contract compliance
It is used in many sectors including three very important ones which are as follows:
Blockchain also plays a role in the world of medicine. Companies like USA-based BUSTIQ use big data blockchain contracts for the secure transfer of confidential medical records. The smart contracts used to determine parameters of shared data.
**Real estate **
Real estate is not left out either. Online marketplaces make use of blockchain. An example is a global one known as property which has a decentralized title registry system.
Blockchain is specifically used in making the process of issuing titles immediately.
The music industry is about the glitz and glam but when it comes to making money they take that seriously too. In music, blockchain is used in ensuring that musicians are paid fairly.
An example of this type of system is the media chain which makes use of smart contracts. Musicians can enter a decentralized and completely transparent contract with which they can agree to higher values for royalties. Mediachain is currently owned by Spotify.
Blockchain is already powering a lot of amazing technology but it is predicted to do so much more in the coming years. Here's a shortlist of where blockchain might be heading to:
- Seamless combination with adjacent technologies.
- Central banks where it would be used to power digital currencies
- The stock exchange market
Blockchain has brought about a new and more effective way to get things done. It is moving rapidly and breaking borders in many fields. It has brought transparency like never before. If you ask me all this is just the tip of the iceberg. Blockchain has proven that it has the potential to move beyond our imaginations and it would probably take great leaps in the coming years. May it leaps be in your favour as the world embraces what is to come.