What Is A Blockchain? How Is This Technology Revolutionizing The Marketplace?
Blockchain is a continually updated transaction record spread over a vast computer network. Blockchain technology was initially invented in 1991 by Stuart Haber and W. Scott Stornetta, but the original implementation of this technology started in 1992 by Satoshi Nakamoto. As a result of his efforts, a cryptocurrency was launched by the name of Bitcoin, which was the very first application of Blockchain technology.
Over time, Blockchain has made much progress and holds the future for many marketplaces. Unlike the traditional marketplace, the Blockchain can provide total anonymity and transparency, which establishes trust between both the seller and the buyer.
Many people don’t have any idea how exactly this technology works and how is it changing the market trends.
Well, you are in the right place to get all the necessary answers.
What this article is about:
- Basics upon which Blockchain works
- What makes Blockchain secure?
- Opportunities in Blockchain for the younger generation
- Cheat Sheet and Key Takeaways
Basics upon which Blockchain works
Before getting to the applications and importance of Blockchain, you need to know how this technology works.
What is a Blockchain, and how are these blocks linked to each other?
Each block in Blockchain contains an encrypted hash of the current block, a hash of the previous block and timestamp. The hash acts as a fingerprint because each hash is different from each other in the same manner as fingerprints would be. Hash represents the code wording of the information contained inside the block. The timestamp is the time (in seconds referring to the exact moment when the block was created), which provides the exact time and amount of transactions.
Every new block contains those three components, and whenever a new block is created, it includes the hash of the previous block which ensures all the information is linked through a chain of blocks inside what is called a Blockchain.
Nodes are devices like computers, laptops or mobile devices that act as servers. Nodes have the responsibility to accept new blocks and also to preserve the data which has been spread all across the Blockchain . These nodes are often managed by human beings known as miners.
Before a new block is added to the chain, all of its information gets shared with all the nodes to confirm the validity of it. Also, whenever someone performs a transaction, the data passes through all nodes, synchronizing the data with all nodes to keep all the information up to date.
Proof of Work in Blockchain
A new block never gets validated quickly. All the responsibility of building a new block in Blockchain relies on miners. In simple words, the production of a unique hash for the new block is done by miners by solving a complex mathematical problem. In the Blockchain network, a new block forms in every 10 minutes.
So basically, it depends on how soon the miners create a new block and in turn, they get a reward that can take the form of some cryptocurrency. The transaction which a person does via Blockchain gets transferred into the new block, and the chain of information goes on .
What makes Blockchain secure?
Many companies rely on Blockchains because it has been a game-changer and could give total anonymity to any personal information and history of transactions. We have gone through the basics of how it works, but to fully understand the principles of the Blockchain technology, we need to dive in a little more.
2.1 Decentralization is the essence of Blockchain
Decentralization in Blockchain means that the data isn’t controlled by any sole or central authority; instead, the control of the network is distributed along all the nodes of the network. In this way, you get the solution to two predominant problems because:
- The middle man gets removed
- There is no charge paid to the middle man for validating a transaction
Again, the miners (and more precisely their nodes) are the real workers here. They handle all the block validations and keep all the information distributed to all the other miners in the blockchain network. This process is followed to keep the data secure. In fact, the greater the number of nodes participating in the handling of information or transaction, the more reliable and safer the whole blockchain network gets. This distributed network is just one of the three pillars on which Blockchain technology stands.
2.2 How transparent is the Blockchain?
Miners confirm every transaction before they get recorded in the Blockchain, however, the identity of a person operating on the blockchain doesn’t remain entirely anonymous during the transaction process. It could, therefore, leave a small doubt in the minds of readers as to how Blockchain technology claims to be transparent then.
Blockchain is more like a ledger network, and all the information about a specific transaction gets stored in a ledger manner . Whenever a block is adding to this ledger, it occupies the top space and keeps linking all the previous information or history with it.
Now, as for transparency concerns, a person who joins the Blockchain network will always be allotted with an id number instead of a name. No one can know the real identity of the person, and the miners will also be dealing with that id number instead of the name of the person operating on the blockchain. In this way, no actions of that person should trace back to an identity. Blockchain technology holds the future for many marketplaces and builds trust between customers and companies.
2.3 Blockchain Immutability
People need your computers, laptops, accounts, cell phones, and personal information to be protected. Hacks are becoming more and more common, and we do need a system that is unbreakable, incorruptible, and durable.
In Blockchains, we have blocks, and each block contains its own specific hash and the hash of the previous block. These blocks of information are linked with one another thanks to the help of hashes.
Hashes are strings of characters that are uniquely generated by an algorithm using cryptography based on data inputted in the computing machine. Therefore one piece of data will always result in the same hash generated by a specific algorithm. This means that if someone is to tamper with any data contained in a block, then the hash of the block will not be the same. It will result in the miners not validating the block because they will know it has been tampered with.
All in all, if someone wants to alter a block in a blockchain, there will be a need to tamper not only with the hash of that specific block but also with the hash of the block before. Besides, it doesn’t just stop here, every 10 minutes a new block adds to the network, so the hacking of the entire chain of blocks has to happen within 10 minutes which is meant to be impossible.
Furthermore, this system is decentralized, and if anyone is to tamper with any block, all the other nodes get an alert: data tampering then gets prevented.
Opportunities in Blockchain technology for the younger generation
Applications of Blockchain in different sectors are numerous. It can help regular people stick to the market and also the younger generation to decide what their future holds if they get acquainted with this technology soon enough.
3.1 Smart Contracts and Blockchain
Many of us are tired of dealing with intermediaries while exchanging money, shares, or properties. Conflicts might arise around a transaction, that’s why a middleman needs to be offered money to check if both parties meet the requirements (enough money in the bank, official property deed available, and so on) before a transaction is even made.
Smart contracts are the ultimate alternative to all the traditional contracts because there is no more third party involved: it saves time and prevents conflicts. More importantly, it is cheap, secure, and credible.
Since Blockchains work on ledger networks, all the nodes carry the contract details. Unlike a traditional contract, smart contracts automatically apply the rules and penalties of the transaction agreement. It means that if required conditions to perform the transaction are not met, then penalties are applied in an automatic way .
And, the best part is… It is only a small example of what smart contracts can allow the marketplace to do!
3.2 Significance of Blockchain in the Internet of Things (IoT)
In simpler terms, the Internet of Things is the connectivity of devices in order to collect and exchange the required data. For example, smart TVs and smart cars use sensors or software to transfer data.
How will Blockchain emerge as the new face of this technology?
Let’s take another example. A car company needs to know the relation between different car parts, their ratios, wearing ability and efficiency, etc. All of this gets done due to the use of the Internet of things. Now if we link Blockchain to IoT, let’s say information about the relation between air resistance and fuel consumption is sent to the market in real-time (thanks to IoT technology).
What’s more is that a Blockchain combined with IoT, allows data to be securely and directly sold (thanks to the Blockchain technology) to car parts producers, who will then use these metrics to enhance the general structure layout of their cars in order, for instance, to decrease their cars’ fuel consumption.
3.3 Blockchain and Digital Identity
Blockchain can jump in to protect the digital identities of any individual that uses the technology. The Blockchain provides users with a secure digital identity that they have control over. This digital avatar securely stored in the blockchain could keep all the records of a person, such as birth certificates, social security numbers, credit card information, and all the other sensitive information. People could then only release pieces of their digitally stored identity after they approve a request made to them by a company or an individual.
Many companies have started working on Digital identities, such as include Microsoft ®, Civic ®, Evernym ®, and Ocular ®.
3.4 Blockchain applied to the Supply Chain
The supply chain is the whole process involved in a product being delivered from a supplier to the end-user.
Blockchain helps in keeping a record of all the products and their quantities: as products move throughout the supply chain, nodes keep track of the stock, purchases, and shipments . All the other required information such as, but not limited to, manufacturing processes, assembling of the product and product maintenance gets shared with the suppliers.
Cheat Sheet and Key Takeaways
- The Blockchain came out to be the most secure technology ever.
- The Blockchain provides anonymity, transparency, and immutability.
- Businesses are becoming more organized and trustworthy when they use the Blockchain.
- When the blockchain is made use of, no third party gets involved, and thus, no additional fee gets charged for business transactions.
- The Blockchain technology, thanks to its distributed and decentralized network, is meant to be impossible to tamper with.