June 18, 2022
Read-Time: 5 min
Category: Blockchain technology
Over the last few years, you've probably seen a lot of topics on the internet, such as blockchain and cryptocurrency trends. These two terms, as we know them, are believed to revolutionize information technology and banks.
As blockchain grows and becomes easier to use, it's up to you to learn this evolving technology to prepare for the future. If you are new to blockchain, this is the right platform to get a solid foundation.
In this blog, you learn how to answer the question, “what is blockchain technology?” Why is there so much hype around blockchain technology? , How do Blockchain work? , The future of blockchain technology, Applications of Blockchain, Pros and Cons of Blockchain.
What is blockchain technology?
Blockchain is a distributed, unchangeable ledger that is used to record transactions and monitor assets within a network of enterprises. It's a method of storing data that prevents it from being altered, hacked, or manipulated.
Blockchain technology is a network of peer-to-peer nodes that maintains public transactional information, also known as blocks, in various databases, also known as the "chain." A 'digital ledger' is a common term for this type of storage.
For all, you’ve probably heard about Bitcoin, Ethereum, and other cryptocurrencies lately, many financial experts say it’s the technology behind crypto you should really be paying attention to.
Why is there so much hype around blockchain technology?
Blockchain is very overrated and I think it's a solution to look for problems in some cases.
There are exceptions to this When it comes to cryptocurrencies, it was great to have an almost viable system for solving the problem of double payments, spending money anonymously, and sending money to people over the internet.
The problem with double payments is how to prevent two people from using the same cash to make a transaction at the same time. Traditionally, banks have used a centralized database to allow customers to use their cards in two different locations at the same time. Each time you use your credit card, the transaction is recorded in a central database and the funds are withdrawn on a transaction-by-transaction basis.
A "distributed" system like the blockchain does not have a single source of truth. There is no single database that contains the answer to who owns what money. Instead, there are multiple copies around the world. Such distributed systems usually suffer from the problem of double payments. If you have copies of your database in India and the UK and you want to make transactions at exactly the same time in both locations, you will spend the same money twice.
How does Blockchain work?
In recent years, you may have noticed many businesses around the world integrating Blockchain technology. But how exactly does Blockchain technology work? Is this a significant change or a simple addition? The advancements of Blockchain are still young and have the potential to be revolutionary in the future; so, let’s begin demystifying this technology.
Blockchain is a combination of three leading technologies:
A peer-to-peer network containing a shared ledger
A means of computing, to store the transactions and records of the network
Cryptography keys consist of two keys – A private key and a Public key. These keys help in performing successful transactions between two parties. Each individual has these two keys, which they use to produce a secure digital identity reference. This secured identity is the most important aspect of Blockchain technology. In the world of cryptocurrency, this identity is referred to as a ‘digital signature’ and is used for authorizing and controlling transactions.
The digital signature is merged with the peer-to-peer network; a large number of individuals who act as authorities use the digital signature in order to reach a consensus on transactions, among other issues. When they authorize a deal, it is certified by a mathematical verification, which results in a successful secured transaction between the two network-connected parties. So to sum it up, Blockchain users employ cryptography keys to perform different types of digital interactions over the peer-to-peer network.
The future of blockchain technology
As of 2022, the market capitalization of the world's cryptocurrencies reached a record high of $ 3 trillion. Cryptocurrencies such as Bitcoin and Ethereum utilize blockchain technology. The adoption of blockchain and the technologies and products it supports will continue to have a dramatic impact on business operations.
But blockchain technology is more than a system for securely transferring cryptocurrencies. Outside of finance, it can be used in applications such as healthcare, insurance, voting, welfare, gambling, and artist licensing. The global economy is preparing for a blockchain revolution, as technology is already affecting the economy and society at many levels. If the "revolution" sounds dramatic, consider that eight of the world's top 10 companies are developing a variety of products that incorporate blockchain.
1. Financial Sector Would Lead in Blockchain Application
Banking and the financial industry do not need to radically overhaul existing processes to implement blockchain technology. Financial institutions easily embrace the use of blockchain in traditional bank finance. According to a recent study, distributed ledger technology, along with blockchain, will help financial services companies reduce their costs by $ 15 billion to $ 20 billion annually by 2022. In addition, Gartner predicted that the banking industry would use blockchain to unlock more than $ 1 billion in business value by 2022. Therefore, blockchain can easily be described as the future of the banking and financial industry with its extraordinary outlook.
2. Demand for Blockchain Expertise Continues to Escalate
As the world recognizes the potential of blockchain technology, companies need professionals with the right blockchain skills and knowledge. However, the popularity of blockchain as a technology has not affected the supply of blockchain talent. The online freelance platform Upwork recently reported a surge in demand for people with blockchain expertise. It is difficult to find many blockchain engineers because this technique is relatively new and little known.
3. New Governance Models
The outlook for blockchain is growing rapidly, and new governance models are commonplace. So how do these new governance models work? You can see a governance model that enables a large and diverse consortium to increase the efficiency of decision-making, payment, and approval systems. There is no doubt that the new governance model will be the future of blockchain technology by ensuring the standardization of information from a variety of sources.
In addition, the new governance model will help us collect new and more resilient datasets. Nearly 68% of CIOs and CTOs recognize the need for a scalable governance model to support interactions between multiple blockchain networks.
4. Better Integration of Smart Contracts and Law
Blockchain technology ensures future possibilities with the capabilities of smart contracts. The basic idea of smart contracts is to automatically perform certain tasks when certain conditions are met. However, we can see the future where other conditions of smart contracts may also be subject to automatic regulation.
One of the most prominent examples of future blockchain applications in legal applications is the insurer AIG's blockchain pilot project for creating complex insurance policies. However, it is difficult to find a legitimate cause for a dispute between smart contract participants. Therefore, it is reasonable to look to the future where the rule of law applies to smart contracts for resolving disputes between the parties.
Applications of Blockchain
1. Non-fungible tokens
NFTs are generally regarded as a way to own the rights to digital art. The blockchain prevents the data from being in two places, so inserting an NFT into the blockchain guarantees that there is only one copy of the digital work of art. This may seem like an investment in physical art, but it does not have the drawbacks of storage and maintenance.
NFTs have multiple uses and are ultimately a way to convey ownership of everything that can be represented by data. This could be a home ownership certificate, a video broadcast right, or an event ticket. Everything that is remote and unique can be an NFT.
Gambling is one of the most important applications of blockchain. The gambling industry can leverage blockchain to offer players multiple benefits. One of the biggest advantages of running a casino on the blockchain is to provide the casino to potential players. All transactions are recorded on the blockchain, so bettors can ensure that the game is fair and the casino is paying. In addition, blockchain eliminates the need to provide personal information such as bank accounts. This can be a hurdle for some potential players. It also provides a workaround for regulatory restrictions, as players can play anonymously and decentralized networks are not vulnerable to government shutdowns.
3. Real estate
Real estate transactions require a lot of paperwork to confirm financial information and ownership and then transfer the certificate and ownership to the new owner. By recording real estate transactions using blockchain technology, we can provide a safer and more accessible way to identify and transfer real estate. This speeds up transactions, reduces paperwork, and saves costs.
Customers and insurance providers can benefit from more transparency by using smart contracts on a blockchain. Customers would not make repeated claims for the same incident if all claims were recorded on a blockchain. Furthermore, adopting smart contracts might speed up the payout procedure for claimants.
5. Data storage
Adding blockchain technology to your data storage solution improves security and integrity. While data can be stored in a distributed manner, it is more difficult to hack and wipe all the data on the network, but centralized data storage providers may have a few redundancy points. It also means better access to your data, as access does not necessarily depend on the operation of a single company. In some cases, it may be more cost-effective to use blockchain for data storage.
Pros and Cons of Blockchain
Removes centralized control over the network.
Decentralization makes the system tamper-proof as each node contains the exact same copy of the updated records.
Reduce expenses as there is no third-party verification requirement.
Improves accuracy due to less human intervention and more algorithm
Technology infrastructure setup costing
Mining difficulties such as setting up highly computational hardware
Fear of possible use cases in criminal activities by hackers
Blockchain awareness and regulations need to be established
The above blog covered the working of a blockchain network in detail. and the essential part is the blog applications of blockchain.
Bitcoin is the first successful implementation of blockchain. Today, the world has found applications of blockchain technology in several industries, where trust without the involvement of centralized authority is desired. So welcome to the world of Blockchain
Frequently Asked Questions (FAQ)
Q1: What is proof of work?
Proof of Work (PoW) in the Blockchain is a consensus mechanism that lets miners add a new block to the network based on the computation work done to search for the correct Nonce and hash.
Q2: What are the top 5 Blockchains?
2. Hyperledger Fabric
3. R3 Corda
Q3: How do you convert Bitcoin to cash?
1. Decide which third-party broker exchange you want to use.
2. Cashing out with Coinbase or Kraken are a popular option.
3. Sign up and complete the brokerage’s verification process.
4. Deposit (or buy) bitcoin into your account.
5. Cash out your bitcoin by depositing it into your bank account or PayPal account (applicable to some services).