Heard about Bitcoin and Blockchain lately? You probably have, thanks to the buzz surrounding these record-breaking new technologies. Do you also want to understand what blockchain is and what are its real applications? It is highly recommend that you start your journey by reading this blog post.
We wish you all the best on your journey to a new digital world….and here we go.
Digital Transaction: A Little History
When it comes to digital transactions, stocks or anything of high value, people and businesses heavily rely on intermediaries like banks and government authorized financial institutions to ensure trust and certainty. Banks and other financial authorities perform a range of important tasks, such as authentication & record keeping, to complete and manage transactions. This resulted in double spending problem in which the same unit of value is spent more than once. Due to the presence of intermediaries like banks, peer to peer transfer of digital assets has not been made possible until the discovery of blockchain. Blockchain made it possible to conduct digital transactions without a third party intermediary.
What is a ‘Blockchain’?
A blockchain is a decentralized, distributed public ledger that is used to record and manage the database of digital transactions. Originally invented by Satoshi Nakamoto for use in the cryptocurrency Bitcoin in 2008, blockchain distributed ledger technology (DLT) now seems to appear in a variety of commercial applications. Bitcoin cryptocurrency is the first blockchain-based digital currency that have revolutionized digital money, government, financial industry and beyond.
According to Sally Davies, FT Technology Reporter, “Blockchain is to Bitcoin, what the Internet is to email. Blockchain is a big electronic system using which you can build applications and currency is just one of them.”
Investopedia says, “A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions.”
Instead of having a central administration to maintain a traditional database of digital transactions, a distributed public ledger makes it possible to build a network of replicated databases, which can be synchronized via the internet and will be visible to everyone within the network. Since blockchain ledger is distributed and decentralized, everyone involved can see the transaction information at any point of time and can monitor the progress of the transaction. The data related to transactions are saved inside cryptographic blocks, connected in a chronological manner. This creates an endless chain of data blocks, and hence the name blockchain.
Understanding the Concept of Blockchain
Blockchain has gained considerable traction in recent years as the technology has become more mainstream with industries and companies. We, at Fuel4Media, and many global leaders see blockchain as having the potential to become the significant technological innovation since the Internet.
The concept behind the blockchain is similar to that of a database, except the way we interact with that database. The blockchain is a distributed database, like a global spreadsheet that runs on millions of computers worldwide. It’s open source, so anyone can see what’s going on. It’s a peer to peer network so it doesn’t require powerful intermediaries to authenticate transactions.
The blockchain can be seen as a unique software design in which a number of peer computers work together to follow the same “consensus” process for recording what information a block should hold, and where all related interactions are verified by cryptography. This allows everyone in the network to review all transaction steps and reduce the risk of fraud. Here are the five essential facts about Blockchain technology that you need to know:
- Blockchain and Bitcoin are not the same. Bitcoin in built on the blockchain technology. Bitcoin is a cryptocurrency and the first decentralized digital currency launched on the concept of blockchain.
- There are three types of blockchains: Public, Private and Consortium.
1) In a public blockchain, anyone can download the required software and read and write the data stored on the blockchain as it is accessible to everyone in the world.
2) A private blockchain is controlled by one organization and only participants, who have the permission to write, send and receive data, can take part in activities conducted on that blockchain.
3) In consortium blockchain, a few selected parties are predetermined and they can participate in the consensus process.
- People think that since blockchain is a public ledger, their private information is visible to everyone on the network. This is not correct. Visibility of information depends on different use cases and the technology deployed. For business purposes, all transactions are private and only visible with the appropriate permissions.
- Not just one blockchain, but today there are dozens of different protocols, considered as blockchains and can be classified as distributed ledger technology. For example Ethereum, Corda and Ripple.
- Blockchain is not just a buzzword. It has the potential to enhance the capabilities of banks, financial firms, companies and others. Businesses can saver 70% on their operations and 30-50% on compliance.
How does blockchain work?
To understand how blockchain works, you need to know the components of a blockchain. There are three principal technologies that combine to create a blockchain. These technologies are:
1) Private key cryptography
2) A distributed network with a shared ledger
3) Means of accounting for the transactions and records related to the network
- Private key cryptography: In cryptography, there are private key and public key that are used to encrypt and decrypt code. For instance, when someone sends you cryptocoins over a Blockchain, they send a hashed version which is known as the “Public Key”. There is another key which is hidden from other users on the blockchain, which is known as the “Private Key.” A Private Key is used to derive a Public Key. You can know your own Private Key, but others cannot and it should not be shared with anyone else. A private key is used to generate a signature for each blockchain transaction. This signature confirms that the transaction has come from the user that owns the cryptocoins. A public key is then derived from the private key mathematically and transformed with a hash function to produce the address where you will receive your coins.
- A distributed, shared ledger: A distributed ledger is a database that is shared, replicated and synchronized across a network that is spread across multiple sites, institutions or geographies. All the information on the network is securely and accurately stored using cryptography keys and can be accessed using cryptographic signatures. Centralized ledgers are prone to cyber-attacks but distributed ledgers are harder to hack because the distributed copies present in the network at different locations need to be attacked simultaneously for a cyber attack to be successful. Not just for recording and managing digital transactions, distributed ledger can help government organizations in tax collection, issuance of passports, licenses, voting procedures and more. This technology can prove to be beneficial in industries such as finance, music and entertainment, supply chains of various commodities and more.
- Means of accounting for the transactions and records related to the network: Blockchain technology confirms and validates transactions in a unique way. Blockchain allows the one person to use their private key to attach information regarding the transaction to the public key of the second person. This information together forms part of a block, which also contains a digital signature, timestamp and other relevant information about the transaction. This process of sending information and validating blocks requires huge amounts of computing power. For open, public blockchains, this involves mining. In mining, each participant offers their computing processing power to service the network. Each participant of the blockchain work on each block and then compare the results of their work with the rest of the network until there is a consensus to add and authenticate a block.
Blockchain is in its early stage now. It has the potential to truly disrupt multiple industries and make the processes more secure, transparent and efficient. It is an intelligent creation by Satoshi Nakamoto that has the capability to transform the digital world. So, without further ado let’s get familiarized with some of the key features of blockchain.
- Decentralized and Immutable: A decentralized system allows users to transfer and receive assets from anywhere in the world through the Internet. These assets could be a token, contract, and other important documents. All transactions are immutable, which means that they cannot be altered or deleted. Any centralized database can be corrupted and also requires third party service to keep the information accurate. Blockchain technology responds well to the unauthorized changes. Blockchain is easier to track and removes the need of third parties.
- Better Security: Blockchains tend to have better security than the highest levels of our financial systems. It is impossible to hack the network. It can be hacked only when individual private keys if they’re not securely stored, but the network in itself remains fully secure. Blockchain is secured by many computers that confirm and authenticate transactions on the network.
- High Transaction Rate and Low Cost: Blockchain transactions can reduce transaction times and they can be processed anytime in comparison to the existing ways of transaction through banks which need much longer time to get processed. By eliminating third-party intermediaries, blockchains have the potential to reduce transaction fees and overhead costs for exchanging assets.
- Authenticity and Ownership: Because of the decentralized nature of blockchain technology, all data is complete, consistent, timely, accurate, and widely available. It provides new ways of assuring ownership for assets and intellectual properties.
- Integrity, Reliability and Longevity: Blockchain is decentralized and does not have a central point of failure and is better able to withstand cyber attacks or hacks. Users can trust that transactions are transparent and secure as there is not involvement of third parties.
Benefits of using Blockchain beyond cryptocurrency
To some businesses and industries, the blockchain technology is a lot more promising than the cryptocurrency for which it was designed first. The benefits of blockchain are more than just cryptocurrencies like Bitcoin and enough to sustain its relevance for generations to come. Here are the most important benefits of blockchain that may prove to be useful to businesses in different industries:
- Accounting: Recording transactions using blockchain network can eliminate human error, fraud, hacks and will protect the data from possible tampering. Businesses can only keep a single ledger rather than maintaining separate records. This will help to maintain the integrity of business transactions.
- Smart Contracts: Another cryptocurrency Ethereum uses blockchain technology and provides users the ability to develop smart contracts. Time-consuming contractual transactions can be automated using blockchain technology. Smart contracts andagreements can be automatically validated, signed and enforced through a blockchain construct, allowing businesses to save time and money in this time-consuming task.
- Energy Supply: Commercial establishments and house owners can take advantage of blockchain-enabled transactive energy grids for sustainable energy solutions. For instance, Powerpeers in Netherlands and Exergy in Brooklyn are already using blockchain to improve the tracking of clean energy.
- Global transactions: Payment processing services like PayPal process international payments, and charge sizable fees per transaction, plus they also have specific limitations, such as location restrictions and minimum transfer amounts. Perhaps that’s why more businesses as well as regular users are beginning to prefer cryptocurrency as international transfers.
- Supply Chain Management: The blockchain technology offers traceability and cost-effectiveness when it comes to supply chain management. Companies can track movement of goods, their quantity and much more. This will help to bring transparency in the payment, shipment and ownership transfer process.
- Voting: Blockchain concept can also be applied to the election procedure. It can bring transparency and eliminate electoral fraud in elections.
- Trading: Financial firms are now teaming up with blockchain development companies like Fuel4Media to develop new payment solutions and mutual-fund trading platforms using the blockchain technology. Blockchain simplifies not only the trading process by speeding up the processes, increasing the traceability and facilitating the availability of all records.
Fuel4Media provides various kinds of blockchain services for your startup or business including blockchain development, smart contract development, Initial Coin Offering (ICO) cryptocurrencies, wallet & blockchain-based banking app development and more. We leverage a variety of tools, platforms and technologies to build secure and reliable blockchain applications.
A larger number of companies have started leveraging blockchain for multiple applications. We have outlined some of the industry use cases here.
Blockchain Development Frameworks
There are various Blockchain technology-based frameworks. Different development platforms come with different benefits. We are explaining some of them here which are gaining the most traction in recent times:
- Ethereum: Ethereum is not only a Blockchain but it is also a development framework where one can realize a lot of wonderful ideas and implement. The most important aspect of Ethereum is the development of smart contracts. Smart contracts are written in Solidity and target the Ethereum Virtual Machine (EVM).
- BlockchainDb: BigchainDb tries to solve the scalability problem of blockchain. It can provide a very fast (1 million transactions per second) throughput. It acts as a Blockchain secure database and can be developed using nodeJS or a variety of other programming languages.
- Hyperledger: Hyperledger is a blockchain tool developed by Linux foundation and IBM. It provides the capability to create a private permissioned Blockchain.
- IOTA: Tangle is a blockchain technology which targets IoT market. Tangle can be developed using a JS library and a Python library.
Blockchain Use Cases
- Banking and Financial Institutions: Financial firms have been able to successfully leverage Blockchain to ensure transparency in transactions and reduce errors and cyber attacks. Blockchain services have enabled banking institutions to improve KYC process and remove middlemen for payments.
- Healthcare: Fragmented, risky and proprietary healthcare data can be completely redesigned on a blockchain-based system. That’s why healthcare companies to easily manage patient data and store data in a secured environment. The blockchain is an immutable database and patient data can be stored as digitally signed attestations which are safe and secure. Blockchain-based healthcare apps also give patients the ability to own and control their own health information.
- Automobile: Large automobile companies have also started leveraging Blockchain to create an open platform where users can control their driving data. Blockchain has also enabled automobile companies to improve management of plant logistics, supply chain, finance and service centers.
- Retail Sector: Retail companies are leveraging blockchain to improve loyalty programs. They can send digital tokens as part of their loyalty programs and customers too can send and receive tokens without the problem of online fraud. Blockchain also enables personalization when it comes to customer service in the retail sector.
- Internet of Things (IoT): Blockchain’s immutable characteristic prevents Internet-enabled things from sending misleading information. It enables business partners to access loT data without any intervention of centralized control.
- Supply Chain: As we discussed above how blockchain is helping the supply chain industry, many supply chain companies are now using blockchain to reduce frauds, facilitate exchange of documents and improve inventory management and so on.
- Document Registry Systems: Blockchain enables Systems such as Proof of Work (POW), Proof of Stake (POS), Proof of Concept (POC) and Proof of Existence (POE). Real Estate companies are using blockchain for documentation of property registration. This helps householders and real estate companies to eliminate flawed paperworks, forged signatures and defects in foreclosure and mortgage documents.
Blockchain Applications That Can Transform Your Business
We believe that blockchain technology could eventually be more important than the Internet for businesses like yours. Let’s take a look at these blockchain applications that could help your business to get to the next level:
- Digital Identity: Do you know fraud cases cost the global industries around $18.5 billion annually? Therefore, security is a top concern for businesses of all sizes. Blockchain technology can make tracking and managing digital identities secure and efficient, resulting in fraud reduction and protection of important data.
- Payment: By using blockchain technology, you can transfer funds directly and securely to anyone you want in the world at low fees. There aren’t any intermediaries that charge high fees and restrict transferring certain amount of money between two entities.
- Notary: Online entertainment companies and digital media firms are using blockchain to notarize proof of ownership of any digital creation. Project such as stampd.io are leveraging the blockchain concept for notary purpose. Blockchain technology can be used as a convenient and inexpensive notary service to notarize proof of ownership of an image, video, sound recording or any digital media created by users.
- Distributed Cloud Storage: Blockchain can provide users with affordable, fast, and secure cloud storage services. Presently, companies worldwide spend more than $22 billion on cloud storage alone. Blockchain distributed cloud storage can open a revenue stream for average users, and also reduce the cost to store data for companies and personal users.
- Networking and IoT: IBM and Samsung have teamed-up for a new concept called ADEPT, or Autonomous Decentralized Peer-to-Peer Telemetry. In this concept, blockchain is being used to provide a mix of proof-of-work and proof-of-stake to secure transactions. Blockchain will help to decentralized networking process through IoT devices and serve as a bridge between many devices at low cost.
- Smart Contracts: As we told you earlier, Ethereum’s decentralized platform runs smart contracts which remove any possibility of downtime, censorship, fraud or third party interference. Using smart contracts, businesses can bypass regulations, lower the costs and secure financial transactions.
Now when you have understood what blockchain is and how it is helping various industries transform their business operations, it’s time for you to take advantage of this technology. Don’t get left behind by the next wave of digital business. Fuel4Media Technologies can help you get ahead in the blockchain world.
We are one of the leading blockchain service providers having expertise in ICO, e-wallet development and Blockchain based DApps. We provide you the latest technology, quality development, 24/7 support, and timely delivery. Our full cycle blockchain development services include consulting & research, code writing, hyperledger composer development, cryptocurrency development, blockchain integration, smart contract, testing & deployment, marketing & ICO services.
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We would love to hear from you!