What is Blockchain Technology?
When a company asks you to invest in their blockchain-based enterprise, are you losing out on a once-in-a-lifetime opportunity? Stay tuned for answers to these and other questions in this article.
How do we recognize whether someone is fake or real in today’s world? For instance, a dollar bill, a driver’s license, or a vote in the election. How do we know whether it’s true or not?
We keep a record of it. Each dollar bill has serial numbers that the bank records. The DMV records your driver’s license number, and voting records are used to track who voted and who didn’t, so the same person will not vote twice.
Whenever you want to verify that a document is legit, you look it up to the relevant authority. We even have the Notaries, licensed by the government, to act as witnesses to attest and record the validity of the information of identities. You’ll observe that all of these processes have one thing in common: they’re all highly centralized, which means that there’s a centralized entity, whether it’s a bank, a government agency, or a single individual, who can issue and authenticate the data.
These central authorities have a lot of power.
Blockchain technology is a unique and forward-thinking approach to decentralization. It is a solution to the centralization issue. It’s a method that enables anyone to collect information without centralized power. It’s a decentralized method of keeping track of a ledger that’s nearly hard to fake.
Elements of Blockchain
A blockchain needs four elements to have a life of its own. There are some Blockchain elements you should focus on in 2022 and 2023.
1. Peer-to-Peer Network:
The initial need is a peer-to-peer network or a collection of equally empowered computers known as nodes. We need this network to communicate and share information across the internet.
Cryptography is the second component. It’s the skill of maintaining a conversation in a difficult situation. Even when evil players are present, it allows you to validate communications and confirm the validity of your messages.
Because of the first ingredient, the “peer-to-peer network,” we require cryptography. This network is open to everyone, even bad actors. It’s wonderful that you can communicate, but you must also ensure that your communication remains unaffected.
The third element is a consensus algorithm. You can use the term “rule” for “algorithm.” This means we need to agree on the rules for adding a new page, also known as a block, to your records.
Consensus rules come in a variety of rules. In the case of Bitcoin, we employ a consensus algorithm called “Proof of Work.” According to this method, to gain the right to add a new page to our ledger, someone must solve a math problem that demands computational resources to tackle.
Computers all over the network do calculations to answer a time-consuming arithmetic problem. That’s why, when one of them discovers the solution to the problem, they broadcast it to the network. They’re essentially exhibiting a “work-proof.”
Other consensus algorithms don’t require much energy, just the algorithm type that the Bitcoin blockchain employs. Different algorithms have pros and cons, but to run a decentralized ledger, you will need to choose one; otherwise, it will be very hard with so many individuals in the network that it’s difficult to achieve an agreement.
4. Punishment and Reward:
Finally, the last element is punishment and reward. This factor is taken from game theory, and it ensures that people’s best interests are served by following the rules at all times. So far, we’ve created a network with a safety mechanism to communicate and a set of criteria for achieving a consensus.
Now we’ll tie everything together by rewarding individuals who assist us in keeping track of our data and contributing new pages. This token, or coin, is given out every time a consensus is established, and a new block is added to our chain.
Bad actors that try to stick or manipulate the system, on the other hand, will either lose the money they paid on computational power or have their coins taken away from them.
It’s crucial to remember that the punishment and reward system is based on psychological behavior. It transforms the system’s regulations from something you must obey into something you will ignore since it is in your best interests to do so.
How Does Blockchain Technology Work?
By taking the example of the Bitcoin system, let me explain how blockchain technology works:
Bitcoin transactions are entered and broadcast by a network of supercomputers called nodes.
Using algorithms, this chain of thousands of nodes throughout the globe competes to confirm the payment. Bitcoin mining is the term for this. The miner that fulfills a new block first is compensated with Bitcoin for their efforts.
These costs are made up of newly created bitcoin and network charges, which are passed on to the parties to a contract. The costs might climb or decline based on the number of payments. The purchase is added to a block on the decentralized system when it is algorithmically validated. The majority of the network must then confirm the transaction.
The sale is performed when the block is persistently linked to all prior blocks of Bitcoin transactions using a technological fingerprint known as a hash.
“The design of a distributed computer system that can be constructed, maintained, and trusted by organizations who are mutually skeptical of each other.” But it was Satoshi Nakamoto’s pseudonymous article “Bitcoin: A Peer-to-Peer Electronic Cash System,” a 2008 book that put an academic concept into reality”.
What is Hashing?
Hashing converts a long string into a unique string generally of much shorter and fixed length. The produced hash is fully dependent on the input; even a little change in the input will completely affect the output hash.
Secondly, in Blockchain, a unique kind of washing is used called cryptography caching because they cannot be practically reversed engineered, so to get a better understanding of hashing and how it integrates into Blockchain consider the list of transactions taken together and hashed, so the output hash is called block hash and stand as a unique identifier of that particular block.
Future of Blockchain
Governments all across the globe may profit from Blockchain in three ways:
1. Digital Voting:
The use of blockchain technology can aid in voting procedures’ safe and transparent conduct. Each vote would be tied to a single ID, and creating a false ID would be almost hard. Officials from the government may count ballots as soon as they are cast.
2. Transparent Budgeting:
According to transparency.org’s Corruption Perceptions Index, two-thirds of countries are deemed severely corrupt. Blockchain technology can help governments decrease corruption and waste by making budgeting choices more transparent.
3. Record Management:
National, state, and local governments maintain individual birth and death dates, material statuses, property transfers, and passports. Blockchain technology could dramatically simplify this recordkeeping and make the data more secure.
The absence of a clear and comprehensive grasp of each patient’s medical history by medical practitioners such as physicians and nurses is a serious concern in the healthcare business. This is because medical records are stored in distinct business systems.
We may exchange medical records on a blockchain, allowing other healthcare organizations to access the data in real-time. Prescriptions, previous doctor visits, previous operations, medical disorders, and so on are all examples of medical records.
3. Media and Entertainment
There are three major applications.
1. General Media:
Media firms are already using blockchain technology to combat fraud, cut expenses, and secure intellectual property. MarketWatch’s worldwide market for Blockchain in media and entertainment is expected to reach $1.5 billion by 2024.
2. Fan-to-Artist Direct Payments:
Fan-to-artist direct payments. When music streaming services like Spotify connect their apps to blockchains, they can ensure that artists get paid quickly and openly when their songs are streamed.
The lack of access to a customer’s data is common for trade show organizers. Blockchains can provide complete visibility of ticket information to all involved parties, which would result in more customized and relevant customers.
Blockchain technology is rapidly evolving, allowing for novel applications ranging from shared storage to social networks. In terms of security, we’re breaking new ground. Developers should prioritize safeguarding their blockchain apps and services as they construct blockchain applications.