A blockchain network is a shared ledger, which serves to be a platform for trading various property types. It contains all information about the assets (both tangible or intangible) and transactions that have taken place on the platform. An opportunity for the network members to access the complete info you need at the time of the request makes a blockchain network a great tool for doing business safely and effectively.
First launched as a Bitcoin blockchain, the concept of this system has grown into a potential worldwide database, which can be applied not only for bitcoin transactions and by financial institutions but probably in all spheres of human activities.
Blockchain Main Features
- Distributed Ledger Technology
The database is open for all members of blockchain networks. If we talk about private blockchain networks, it is possible to view the information only in case access to it has been delivered. All transactions are recorded only once — there is no risk of duplication, typical for an ordinary business network.
Perhaps the most important feature of all is that the data you are about to get is recorded only once and can never be changed. Each time transaction occurs, it will be recorded and for future tracking. Even if a mistake has occurred, this will be saved for viewing, along with a new correct piece of information.
- Smart Contracts
A smart contract is a default list of trading rules that have to be followed by all parties that are about to commit a transaction. This contains specific terms and conditions for corporate bond transfers, info about shipping and travel insurance, and other details.
Why Blockchain Technology is a Great Idea?
Blockchain technology has occurred as an alternative to a typical business network, which has a number of downsides. Unlike the latter one, a blockchain network provides data security — only those people or company representatives that you invited may enter the network. The transaction has to be validated before recording, and it will not be changed even by the system administrator in the future.
How Crypto Money Started Blockchain Technology Development
Blockchains were first introduced at that time when people began to use cryptocurrencies, such as Bitcoin, Bitcoin Cash, Litecoin, and Ethereum. Blockchain technologies helped crypto owners commit transactions to buy any goods or services they wanted to. Later, it became possible to purchase those assets not only for cryptocurrencies.
Monetary transactions are also possible on contemporary blockchain platforms. Here is a more detailed story of where this all began:
- A mysterious someone, calling themselves Satoshi Nakamoto, first introduces the idea of blockchain;
- Satoshi commits a successful Bitcoin transaction with a computer scientist;
- The following year the first-ever Bitcoin purchase takes place. A programmer bought two pizzas worth $60 with his 10,000 Bitcoins. Today this sum equals $80 million;
- One BTC is worth $1, and some organizations begin to accept Bitcoin as donations;
- Cryptocurrency and Bitcoin are discussed on media, and the first matter-related magazine is launched;
- In 2013, BTC was worth $100, and the Bitcoin Market cap first surpasses $1 billion. Buterin publishes an article where he talks about wider possibilities for a blockchain than just Bitcoin operations (such as smart contracts);
- Several gaming companies begin to accept BTC as payment, 200 blockchain organizations establish R3 to study the possible ways of developing blockchain technology, PayPal officially announce BTC integration;
- In 2015, the number of merchants accepting BTC exceeded 100,000;
- IBM informs the public about their intention to apply the blockchain strategy for cloud-based business solutions, the Japanese government agrees upon the legitimacy of blockchain technology and digital currency;
- In 2017, one Bitcoin reaches the value of $1,000, ledger system gains support and approval from Wall Street, and Dubai announces their plan to become a blockchain-powered government by 2020;
- Facebook, creating a blockchain group, commits to join the blockchain-based projects, and hints at the possibility of presenting their own digital currency;
- The Chinese central bank announces that they intend to develop their own cryptocurrency, Twitter and Square CEO are officially hiring blockchain experts for their company’s crypto plans, the New York Stock Exchange announces the creation of Baakt — a digital wallet company that specializes in crypto trading;
- In 2020, one BTC cost almost $30,000. The Bahamas introduce Sand Dollar — the world’s first central bank cryptocurrency, and blockchain becomes one of the main players in the fight against COVID-19, storing medical research data patients’ information.
Why Are Digital Currencies So Valuable?
In the world of today, over 6,000 different cryptocurrencies exist on the market, with Bitcoin being the most expensive of all (it costs approximately 60,000 US dollars).
Let’s look into some key reasons why everyone is so interested in crypto money:
- Each crypto token has its unique ID number, which is not known by anyone except its owner — such a system makes crypto security relatively reliable in comparison with the real money situation;
- Crypto money is kept on your personal account, which is not connected with any central banks — there is no need to cooperate with the third party for transactions;
- Wise investments in digital money have already made a number of people around the world much more wealthy than they used to be, with some of them becoming billionaires. However, you have to understand that luck is not an ultimate factor in the world of financial operations;
- Several companies, such as Tesla, have affirmed to accept Bitcoin as official payment for their produce.
Still, the reliability of cryptocurrencies still causes controversy. We can’t ignore the fact that digital money is extremely volatile, along with the digital market still being in the process of the regulation (most governments have not passed any crypto-related laws).
How Does Blockchain Work?
Blockchain transactions are recorded as blocks of information, which you consider important to add. This might be a detailed description of your asset, involved parties’ personal data, precise geolocation data, and time of the transaction, or any other transaction data you wish to be known on the entire network.
When the asset is purchased by another blockchain member, another block of actual data is formed so that the future owner can see its way from the very beginning. The system works really accurately, so you can be sure that the data blocks have not been altered. Recording transactions happens automatically.
Each previous block is connected to the next one, and they build up a chain — a blockchain, which is never separated.
The blocks contain three key elements: its data, a nonce — a 32-bit whole number, and a hash — a 256-bit number wedded to the nonce. Once the first block of a chain is created, a nonce automatically generates the cryptographic hash, and the data stored in that block is considered signed. This block will never be changed unless it is mined.
Miners are specialists who are supposed to create new blocks on the chain through mining. Their block is added to the chain once they have found the so-called golden nonce — the nonce connected to the certain hash. There are approximately four billion possible nonce-hash combinations. That is why this process is considered extremely complicated and is very well-paid. Changing any block requires re-mining not only this block itself but also all the blocks that come after. This is impossible without an enormous amount of time and computing power.
For a blockchain to remain independent and safe for all its members, it is crucially important to keep decentralized. It is a ledger distributed to various nodes — electronic devices that maintain a copy of the blockchain.
Mining a new block should be algorithmically approved before verification. Every action that occurred in the ledger will be viewed by any node possessing access to this information (that depends on a type of blockchain network).
Members of a network not only can store and access information on their device but also display personalized ads, measure ad performance, measure content performance, select basic ads, actively scan device characteristics, and apply market research in order to make the most of their membership.
Types of Blockchain Networks
- Public Blockchain Networks
Membership in a public blockchain network is open to any individual who desires to enter the platform. Easy access to data is both this type of a distributed ledger’s advantage and drawback. As the level of security, there is not the most trustworthy, there is no or little privacy for the transactions you deal with, and substantial computing power is required. The most common example of a public blockchain is a Bitcoin network.
- Private Blockchains
A private blockchain is similar to the one described above because it is a decentralized peer-to-peer network. However, there is a managing group, which will control who exactly might enter the platform as a member, execute a consensus protocol, and submit transactions. This type of decentralized ledger may be run by a corporation. However, it won’t be completely similar to the one below.
- Permissioned Blockchain Networks
The key difference between the permissioned distributed ledger and a public blockchain is that you have to be invited into the community to become a member here. Most businesses opt for a permissioned blockchain network to maintain security. All stakeholders should approve the info to validate transactions on such a platform.
- Consortium Blockchains
If several corporations decide to do business together, they may organize a Consortium blockchain. Only those individuals who are a part of a member company will be allowed to join.
In 2013 Vitalik Buterin first introduced the concept of what later become Ethereum blockchain — a traditional transaction ledger with the execution of computer code. The platform developers can create their programs, which can communicate with one another on this peer-to-peer network.
Ethereum tokens can concert tickets, music files, or NFT — blockchain-based tokens that store digital media. NFTs have become wildly popular because they offer a new wave of digital creators the ability to buy and sell their creations while getting proper credit and a fair share of profits.
Businesses see more and more benefits from using blockchain technology. Here are some of the most widely-spread:
- Supply Chain Management
With the use of blockchain technology, tracking your products throughout the supply chain and organizing the events gets to a new level.
More and more patients use their devices to solve healthcare-related problems. Blockchain may serve as a connection to the base storing data, which does not reveal the patient’s identity, such as age, gender, and overall medical history.
- Real Estate Property Management
Those people who prefer to buy real estate to renting would definitely benefit from viewing all the transparent history of a potential new house. If you decided to purchase the property, you will be able to quickly verify finances and reduce fraud risks (thanks to encryption).
Blockchain eliminates fraud, reduces costs, and helps to protect intellectual property. Experts believe that the global market for media and entertainment will reach more than 1,5 US dollars by 2024.
There is a blockchain solution for those who commit energy supply transactions, buy and sell issue-related documents, emission allowances, and renewable energy certificates.
- Financial Services Industry Management
We have been using blockchains for less than a decade now, but during this period, it showed itself as a highly secure platform. If you are worried about fraud in financial institutions, the concept of a better-protected place for the network members to trade, finance certain projects, and track all the necessary information will definitely seem interesting.
Hacking methods are getting more and more sophisticated. Though, according to experts, the system of a blockchain provides end-to-end encryption, privacy, and a level of protection that cannot be interrupted.
Understanding Blockchain Governmental-Wise Potential
Our documents, such as birth and death certificates, marital papers, and real estate transfers, are supposed to be kept by governmental organs. In some areas, there still exists some documentation in paper form, which is highly questionable in terms of security. Blockchain technology can improve the situation massively.
- Identity Management
The process of proving your identity can become easier in the case of blockchain adoption.
The voting system has always been disputable. Blockchain may potentially become an alternative to the existing voting process because moving it into the field of electronic accessibility will help everyone owning a device make their choices at elections. All votes would be attached to unique identifiers, which will provide a certain layer of security without using observations.
Cooperating with the IRS is pretty complicated. Filing taxes often requires the third party’s help. Imagine that a blockchain works as a central database, helping you to get rid of most paperwork. Pretty appealing, right?
- Charity Organizations
Blockchain can become a platform for getting necessary information about various non-profit agencies. You will be tracking your donation to make sure it is used the way it was supposed to.
How Will Internal Audit Evolve With Blockchain Technology?
Internal audit is often connected to mistakes occurring due to the human factor. Blockchain implementation may become the perfect solution for a firm that does not want to lack outstanding analysis. There are a number of reasons why you will wish to get yourself a blockchain-powered audit in the foreseeable future:
Blockchains are decentralized. All the data kept on this platform is highly secure, as it does not belong to anyone. The technology itself is safe as well — the transaction record can be changed or hacked because of the system’s complexity.
You will have an opportunity to share a private or permissioned blockchain with only your corporate auditors and invited members having access to the database.
Since the data is kept on a decentralized chain of nodes, it will not be lost.
Speeding up the audit process minimizes the transaction turnaround time, one of the major criticisms the internal auditors face. Having more time implies that your auditors concentrate on more important and challenging tasks.
However, the auditors have to possess the right knowledge and skill set to operate the newly adopted blockchain technology to operate it effectively. To mitigate the risks, you should check on account security of the credentials and carefully code the smart contracts.
How Can Blockchain Power Industrial Manufacturing?
It is indisputable — blockchain is much more than cryptocurrencies. Experts are working on making a blockchain possible to help them streamline operations, get more visibility into supply chains, and improve their tracking systems. Blockchain may become one of the key factors in future design, engineering, producing, and scaling the products of manufacturers. What is more, the implementation of blockchains may result in better partnership with those companies that also rely on a blockchain.
How Are a Cloud and a Blockchain Different?
You gain access to the cloud via the internet. It is a platform that exists online. A blockchain is an encrypted decentralized system. Experts believe that blockchains will soon completely replace cloud-based cyberspaces, just like the latter have displaced legacy enterprise applications.
Disadvantages of a Private Blockchain
No blockchain is controlled by any central authority. Still, a private blockchain is more centralized because it is shared among the limited number of members allowed to access the data. The network is also more vulnerable in terms of security because it consists of fewer nodes. Private blockchain requires trust as authorized nodes must be trusted to verify and validate authentic transactions, unlike public blockchain.
Who Paved the Way for Blockchains?
The idea of a blockchain was first introduced by Satoshi Nakamoto. It is still unknown whether this is a person or a group of people. Though the necessity of a worldwide open, secure database has been obvious for a long time, it was launched less than 10 years ago.