Blockchain triumphantly appeared on the contemporary digital market, quickly becoming a hot topic within a short timeframe. Everyone is intrigued by the nature of the technology and its potential to change how the vast majority of industries work, from daily operations to key processes. However, such an excessive interest in blockchain makes it hard to understand what blockchain is and how it actually works. As there is so much different content available out there, this overview is designed to serve you as a lighthouse in a rebellious sea of blockchain buzz.
WHAT IS BLOCKCHAIN?
The exact meaning of the word “blockchain” is hidden in its etymology. On a basic level, blockchain is a set of interconnected “blocks” that hold information inside them, forming a “chain.” To gain a more concrete understanding, we need to look at blockchain at a technological level.
Blockchain is a distributed ledger technology (commonly referred as DLT) that allows numerous people to work and control the recording of any kind of information saved on the ledger (database, or “chain”). The definition may sound simple, but blockchain is significantly more complex. Some people even go as far as saying the technology would replace Internet (and call it, accordingly, “The Next Internet”).
As of today, blockchain is the backbone of most cryptocurrencies, including the widely popular Bitcoin and Ether. Due to its nature, the technology grants the highest level of security and transparency available for business transactions — which is one of the types of data that can be stored in “blocks.”
In essence, blockchain is a shared database that eliminates all the intermediaries from any transactional process. Individuals and smart devices connected to it (Internet of Things devices can be connected to a blockchain) can interact with each other without friction, and all the transactional information is saved without a chance to be deleted or modified. That sounds truly revolutionary, doesn’t it? Still, there is much more to blockchain.
IS BLOCKCHAIN A NEW TECHNOLOGY?
Upon closer examination, blockchain is not exactly a new technology. As it often happens with promising technologies, blockchain is an improvement over an already existing tech (which was also gathered in one place in this case).
Blockchain technology is comprised of cryptography (including for private keys that allow users to access their information on the chain), peer-to-peer (p2p) networks, and program features. Specifically, the technology deals with symmetric encryption that is secretly shared without revealing information to any intermediary; it relies on an p2p authentication system of records to provide ownership to a specific user over shared information; and uses secured program protocol, which prompts users to perform the transactions (Bitcoin uses it, its blockchain is an incentive-based system).
In sum, the combination of these three technologies enables blockchain to create a space that doesn’t need third parties to manage operations at any stage and guarantee the highest level of security and privacy over the data stored on it.
WHY BLOCKCHAIN IS A TECHNOLOGICAL BREAKTHROUGH?
By understanding blockchain as a space where information is stored and shared on the basis of already existing technologies, it’s logical to doubt its revolutionary nature. For example, Wikipedia works on a similar basis. What’s so new and outstanding about blockchain then?
The answer is hidden in the digital backbone of blockchain operations. While similar platforms still rely on centralized structure — which, in case of Wikipedia, means creating a ‘master copy’ — blockchain is a technology that doesn’t have central authority, and no one to create such a copy. In other words, blockchain doesn’t have a separate party or system to manage updates and provide security.
BLOCKCHAIN AND BITCOIN
Blockchain is the technology that underlies bitcoin cryptocurrency. A decentralized technology, blockchain allows users to determine and validate transactions – and that’s the reason why DLTs are commonly associated with money transactions. Also, this is the reason why blockchain is usually remembered alongside Bitcoin (and the latter often overshadows the technology due to the neverending Bitcoin buzz).
At the same time, the range of operations that can be managed by the technology goes beyond transactional operations. The industries whose operation would be transformed by blockchain include music, insurance, banking, advertising, and many more.
WHAT ARE THE ADVANTAGES OF BLOCKCHAIN?
Even though the introduction of a brand new technology is primarily just exciting, understanding the exact perks makes the process more valuable and rational. In the case of blockchain, the technology will allow a company to make their bottom line more efficient (think software and business infrastructure), help cut costs, and introduce the highest level of transparency and security available.
Blockchain eliminates the many needless third party actors, excludes repetitive and often laborious confirmation steps, and reduces any errors associated with these aspects of a typical transactional process. Finally, it helps to avoid the delays common to a typical payment process.
Together, all the benefits of blockchain will prompt companies to introduce different blockchain solutions to their business processes – with the aim to achieve higher profitability and processing efficiency.
Regarding the complexity and the promising perspectives of blockchain, referring to experts is the best decision to clarify the practical application of the technology in each specific case, as well as achieve both security and privacy.
CAN WE TURN THE INTERNET INTO A BLOCKCHAIN SPACE RIGHT NOW?
As of now, it is still early for blockchain to become “The Next Internet,” as many people often call it. In essence, this is because blockchain is both a disruptive and supporting technology for the business world. Instead of quickly replacing the existing structures, it aims at creating new structures that can change the situation on a market in a long-term perspective.
So, understanding the basics of effectively operating blockchain processes requires some time. The good news is we can already learn how to make it possible. Companies like Intellectsoft already offer fintech based solutions for businesses, including setting up cryptocurrency operations and digital wallets management.
THE BLOCKCHAIN YEAR?
So, are we living in the era of blockchain or just entering it? The opinions differ. Referring to the prominent business actors and experts in the field, the answer is rather “yes” than “no.” Notwithstanding the difficulties connected to introducing this innovative technology to daily operations, a number of companies (for example IBM) already have positive experiences in working with blockchain technology. You shouldn’t miss this early moment either — don’t postpone a meaningful and valuable transformation of your business with blockchain technology.
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