Blockchain technology (BT) is a term you’ve probably heard several times in the past few months, particularly in relation to cryptocurrencies, and you are not alone if you are asking just what it is so this article answers that question and discusses some of its applications.
What Is Blockchain Technology?
According to Josh Hastings of wealthofgeeks.com, blockchains basically store data in blocks linked together via cryptography. As new data comes in, it goes into a new block. Once the block fills up with data, it gets chained onto the previous block, which makes the data chained together in chronological order. The most common use has been as a ledger for recording transactions which other users on the network then verify and once it is confirmed, it cannot be altered or deleted, making such transactions much more secure and transparent than traditional transactions processed by banks or other financial institutions.
What Is the Origin of Blockchain Technology?
The first blockchain was created in 2009 by an anonymous person or group known as Satoshi Nakamoto with the purpose of facilitating digital transactions using Bitcoin.
What Are Some Recent Blockchain Technology Innovations?
Since 2009 other potential uses of BT beyond Bitcoin quickly became apparent to developers and entrepreneurs in other industries resulting in significant innovations such as:
- Smart Contracts are self-executing contracts with the terms of the agreement between buyer and seller directly written into lines of code thereby eliminating the need for a middleman.
- Proof of Stake is an algorithm that rewards users by allowing them to mine or validate block transactions based on how many coins they hold as opposed to the energy-intensive proof-of-work algorithm, which Bitcoin and other major cryptocurrencies use.
- Blockchain Scaling is an off-chain or side-chain solution which allows for transactions to be processed off the main blockchain, which frees up space on the blockchain and allows for faster transaction times.
What are Some of the Most Popular Applications for Blockchain Technology Today?
The most obvious application of BT is in the financial sector. Many banks and financial institutions are already experimenting with blockchain-based transactions and exploring ways to use this technology to make their services more efficient and secure.
Other applications of BT are endless and, as more people begin to understand the potential of this technology, we will likely see even more innovative applications for it. Currently, the most popular applications are related to: money transfers, non-fungible tokens (NFTs), the casino and gambling industry, data storage, digital royalties, logistic and supply chain networks.
How Secure is Blockchain Technology?
BT is very secure security because:
- there is no central point of control – no single point of failure – so hackers would need more powerful computers than the rest of the nodes combined to attack every node in the network to tamper with the data successfully and
- the data is spread across the network making it more protected from tampering.
As such, this is what makes the blockchain unchangeable or impervious to tampering.
What Are the Disadvantages of Blockchain Technology?
Because BT is still in its infancy:
- there are a lot of unknowns and a lot of risks which makes it a significant barrier to adoption for most businesses,
- the hardware and software required to run a blockchain network can be pretty expensive,
- there is the cost of hiring people with the necessary skills to maintain and operate the network.
In addition, BT:
- is not very scalable, by default. Each node in the network needs to process and verify each transaction, making it difficult to handle large volumes of transactions and, the more that do so, the greater the risk of the speed of transactions slowing down and
- is not very energy-efficient. The miners must solve complex problems whenever the ledger gets updated with a new transaction, which requires a significant amount of energy. In addition, each node in the network needs to be constantly running and that can use up a lot of energy, too.
As the technology matures, however, we are likely to see more businesses adopt it and, with time, the disadvantages of BT may become less and less significant.
What Are Some Of the Most Promising Aspects of Blockchain Technology?
While the full potential of BT is still unknown, it could revolutionize many industries and change the way they interact with each other online. Some of the most promising aspects of BT are:
- its ability to create a trustless system – a system where two parties can interact without the need for a third party to mediate or verify the transaction. This system could potentially reduce the cost of doing business and make it easier to conduct transactions online and
- its ability to create a decentralized database secure from hacks and data breaches given that it is decentralized, encrypted, cross-checked and jam-packed with nodes, ensuring highly secure data.
We’re still in the early days of blockchain development, so it will be exciting to see how this technology continues to evolve and change the way we do business.
Editor’s Note: Much of the information included in the above article was sourced from an article by Josh Hastings of wealthofgeeks.com.