With the exponential growth of computer technology, data collection and analytics is playing a more important role in everyone’s lives. Blockchains, also known as distributed ledgers, are based on the structure of networking and can be viewed by anyone at any time. They allow the identification, sharing, and transfer of data digitally across a network of computers. Information, as well as the transfer of assets, is secure and transparent. Since all transactions are time-stamped and recorded in chains, it is impossible to change them.
What is blockchain technology? And how does it work?
As the name indicates, blockchain technology consists of two components: a block and a chain. Digital information is divided into blocks and stored in a chain. Each block has a series of characters attached to it called a hash. The hash is derived from the data in the block. Every successive block contains the hash of the previous one. And so, the blocks form a chain. If, for example, the data of a block is altered, it will have a different hash, which will no longer match the hash of consecutive ones. Basically, due to this system of coding, data cannot be altered once a block in a blockchain has been stored.
The fundamental aspects of blockchain technology include:
- complete and truthful transaction history
- encryption that makes it impossible to alter transactions once they are registered
- copies are spread around the network to computers, or “nodes”
- independent entity- anybody can check if something is wrong
The blockchain of today
Initially, this technology came into existence along with Bitcoin, a cryptocurrency introduced in 2008. But the concepts behind this model have gained momentum in various businesses. Institutions are still using the basics of carrying out transactions over a decentralized network, allowing them to track, verify, and transfer assets. With the help of cryptography, data cannot be tampered with and therefore building trust among participants. The potential of this technology is just being discovered- as an industry on its own and in facilitating in the growth of other industries.
- Banking and finance
Major banks worldwide are offering services through blockchain technology, enabling the quick, cheap and transparent transfer of money or assets. Cryptocurrencies, such as Bitcoin and Ripple, have facilitated transactions through the removal of international barriers by eliminating the need for currency exchange rates. Most importantly, the speed and security of transactions have vastly improved.
- Smart contracts
Companies and individuals are using blockchain technology to proffer and enforce contracts electronically. It creates trust amongst people who do not know each other by creating records of everything and it provides proof of who owns what at any given moment. Agreements of the contract are converted into code and are executed automatically. A prominent example is Ethereum.
- Automotive sector
The concept that data cannot be changed once it is entered promotes reliability among participants. For cars, the truth about its condition is the basis of many transactions. Through blockchain technology, like the autoblock, all kinds of information is readily available, including where it came from, miles driven, and history of repairs. This is revolutionary for car dealers, sellers, leasing companies, and insurance policy makers.
As with many NGOs and charities, donors have a hard time trusting them because they do not know where the money is going. Blockchains, like Giftcoin, overcome complaints such as corruption and inefficiency. Donations can be tracked to make sure they end up in the right place.
To ensure free, fair, and democratic elections, votes should be tamper-free. Through blockchain technology, public ledgers of all eligible voters can be created and voter ID verified. Votes can be cast anonymously online with greater security.
- Digital assets
Institutions are using new methods to raise money for expansions, new products or services. ICOs (initial coin offerings) are digital assets that provide incentives to attract investors. They are similar to stocks and shares, but tokens are purchased instead. Tokens, such as AutoCoin, can be stored in a blockchain wallet or used in exchange for company products and services. And if you are lucky, you can make quick bucks by selling them at a later date when its value appreciates.
Nowadays, renters must disclose the complete credit history to sign the lease. But with blockchain, there is more control over personal data. Instead, landlords can be given access to specific blocks of data to prove that sufficient income is available for rent.
A crowd contributes small amounts of money for online finance of new ventures. But trust and fees are major setbacks. However, with blockchain, smart contracts and easily verifiable reputations remove all hindrances.
The blockchain of tomorrow
In the coming decade, blockchain will revolutionize any industry where the transfer of assets, data, or privacy is involved. As this technology promotes the growth of businesses and startups, institutions can raise money through the use of ICOs (initial coin offerings). Investors can use cryptocurrencies such as Bitcoin, Litecoin, and Ether to buy tokens through smart contracts. Through the use of ICOs, crowdfunding, and smart contracts, business modules are drastically changing. It is even possible that virtual firms will evolve, and exist only as a blockchain.
Warning: blockchains ahead
As organizations have started to apply the technology, some issues have come up. Distributed ledgers may not be able to support as many applications or transactions needed by some institutions. For example, Bitcoin manages seven transactions a second, while credit card companies deal with several hundred in a second. But since the blockchain technology is only in its initial stages of existence, these hurdles will no doubt be eventually overcome.
Another negative aspect of blockchain is the misuse of anonymity in transactions, especially on the darknet.
A bigger issue is that many corporations are not willing to give up control. If they remain in power, a decentralized system cannot simultaneously exist. As a realistic assessment, blockchains may be great for some applications. But for others, a centralized database may still be a better option.
So, the question is should blockchains be given that much power? One adverse reaction is in plain sight: a lot of administrative jobs will be lost. However, in the long run, distributed ledgers are an idea that is unlikely to die.
Evie harrison is a blogger by choice. She loves to discover the world around her. She likes to share her discoveries, experiences and express herself through her blogs. Find her on Twitter:@iamevieharrison