Understanding Nits and Grits of Blockchain

Understanding Nits and Grits of Blockchain

Ever since the digital payments industry became popular, there has been a huge surge in digital transactions. Mobile applications provided easy and convenient ways to carry out transactions. Digital wallets further increased the favorability of digital payment methods using which people are able to store their money online. But digital payment systems also have few downsides which remain open to misuse and exploitation by hackers. Industry experts continuously research better ways to implement highly secure methods to carry out digital transactions.

Back in 2008, Satoshi Nakamoto invented Blockchain. Blockchain technology is a growing list of records, called blocks, which are linked using cryptology. Each record or block contains a hash function of the previous block, a timestamp, and transaction data. Additionally, blockchain data cannot be modified easily as it is an open, distributed and a more secure method of storing data records. It is managed by a peer-to-peer network which collectively validates the addition of new blocks. Once added, blocks cannot be altered without the consensus of network majority. It basically works on the principle of a distributed computing system.

Decentralized & Secure

Using Blockchain technology, Satoshi implemented a more secure, decentralized, and public digital currency. He gave it the name Bitcoin which became one of the most popular types of cryptocurrency. One of the applications of Blockchain technology is cryptocurrency. Moreover, the invention of blockchain for bitcoin solved the double-spending problem and that too without the need of any trusted authority or central server. This technology inspired more applications besides cryptocurrency.

The blockchain is used to record each transaction so that the record cannot be modified without the alteration of all subsequent blocks and the consensus of the network. They are authenticated by everyone who has access to that particular blockchain. Thus, blockchain-based exchanges are faster, safer, and comparatively less expensive than the traditional systems. Blockchain technology has raised quite a buzz in the information technology world as not only it provides myriad methods for safer transactions but its other features are being used in multiple areas including smart contracts, banking, healthcare, and much more.

Coming to the features of blockchain technology, it provides robust workflow, decentralization, openness, low amount of permissions required, and much more. Below are the detailed explanations of its every property:

  • Decentralization: As records are not stored in a central server, the blockchain eliminates a number of risks. It is resistant to cracking and hacking as it has no central point of failure. In order to complete a transaction using blockchain technology, a public key and a private key are essential.
  • Publicly open: The beauty of blockchain lies in its openness. The fact that blockchains are open to the public, they by design become more user-friendly than some traditional ownership records. Benefiting from its openness, blockchain prevents two transactions from spending the same single output in a blockchain, thereby reducing the chances of record duplicacy and double-spending.
  • Permissionless: The biggest advantage of deploying blockchain is that no access control or guarding against bad actors is required. This means users can add applications to the network without the approval or trust of others.
  • Permissioned: In this, there is an access control layer which governs who has access to the network. Network owner vets the validators on permissioned blockchain who further allows the submission of new applications in the network. It is also called consortium or hybrid blockchains.

Touching Multiple Industries

The usage of blockchain technology can be found in multiple industries, amongst which the cryptocurrencies are the most notable. People have become familiar with the name of cryptocurrency, especially Bitcoin. Many also see this as an investment opportunity. Areas, where blockchain is being implemented, are:

  • Cryptocurrency: It is a type of digital currency which works as a medium of exchange among peers. In order to secure financial transactions, it uses strong cryptography standardized protocols. This alternative currency has opened the gates for virtual currency which is opposite to centralized digital currency. Cryptocurrencies use distributed control systems as opposed to central banking systems. One of the most popular cryptocurrency is Bitcoin.
  • In 2009, Bitcoin was first released as an open-source software. Generally, it is considered as the first decentralized cryptocurrency. Since then, over 4000 variants of Bitcoin or other cryptocurrencies have been created.

  • Smart Contracts: These contracts are generated using blockchain technology. They have proposed contracts that could be partially or fully executed or enforced without any human interaction. Implementation of this technology reduces moral hazards and optimize the use of contracts in general. They are especially intended to digitally facilitate, verify, and enforce the negotiation of a contract without the involvement of any third party. Because of their digital availability, these transactions are traceable and irreversible.
  • Banking Industry: Major banking institutions are implementing distributed ledgers using blockchain. The potential to speed up back office settlement systems is the most instrumental thing due to which banks seem interested in this technology. But the finance industry is adopting blockchain with some precaution as they seem reluctant to place blockchain at the core of their business structure.

Blockchain is so much open to adaptation that it can be used to create a public and transparent data system for compiling data on sales, payment to content creators, tracking digital use, and much more. Sharing economy, Internet of Things, online voting, and gaming assets are some of the notable uses of blockchain technology.

Online giants like Facebook are also planning to start their own blockchain-based networks. In May 2018 Facebook revealed that it is working on a new blockchain group to launch its own cryptocurrency which will be used to facilitate payments on its multiple platforms like Facebook, Messenger, and Whatsapp. IBM, in collaboration with a startup, launched a blockchain-based application that allows patients to sell their medical data to pharmaceutical companies anonymously. Swiss bank UBS is trying to reduce its costs using blockchain technology. It has opened a new research lab dedicated to blockchain R&D.

Public vs Private Blockchains

There are absolutely no access restrictions in public blockchains. Such types of blockchains are open to anyone with an internet connection and he/she can send transactions to it. They can also become a validator within the network. A validator is the one who participates in the execution of a consensus protocol in the network. The most publicly known and largely used public blockchains are Bitcoin and Ethereum.

As far as private blockchains are concerned, they are permissioned blockchains. In order to join such a network, one has to receive an invitation from a network administrator. Within such closed networks, participation and validator access is completely restricted.

Besides the above given two types of Blockchain, there is a third type. It is called Consortium blockchain. It is often said to be semi-decentralized. No single organization controls it, but a number of companies might each operate a node on such a network. Access rights of a consortium chain are regulated by the administrators and they control the users’ reading rights as they see fit. Furthermore, they only allow a limited set of trusted nodes to execute a consensus protocol.

So far, only the surface has been scratched regarding the utilization of blockchain technology. It contains a plethora of usability features. Since 2014, academic research has been going on at MIT where a dedicated cryptocurrency club called Bitcoin Club is doing research and development on all types of cryptocurrency including Bitcoin, Ethereum, and Ripple. Overall the future of blockchain seems bright as for the first time ever, data will no longer be held by one central authority.

Hence some introduction to blockchain development seems worthwhile. Blockchain development is loosely based on the principle of linked list and tree data structures. As mentioned above, research and development on blockchain are underway by many organizations, which is why they require people with good understanding of these concepts as well as high-level programming languages like Python and Java.

Check AppFutura’s Top BlockChain App Developers for the best developers.

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Apporio Infolabs Pvt. Ltd. is an ISO certified mobile and web application development company with client base in more than 30 countries across the world. We are specialized in Location based and eCommerce mobile apps. We openly challenge any other company on Appfutura to match the our quality of coding.

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