Blockchain Technology: An intuitive guide you will ever read in 2022

Apr 29,2022 by Meghali Gupta
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Blockchain was started as a distributed ledger in 2008. Now accepted as the most trustable way by millions to sell, buy, and crypto transactions of over 1 trillion dollars. Since then blockchain technology has become huge on its own. 

There is a huge demand for blockchain technology in private and government organizations. However, Organisations are researching and deploying blockchain technology to meet a variety of needs. Most of these requirements have nothing to do with digital currency. 

Blockchain offers security, transparency, immutability, and traceability across a distributed network and makes it suitable for use cases.

To better understand blockchain technology, you need to be a good diver because without diving deep into this blog you don’t understand it. 

Insight on Blockchain Technology

Mainly, Blockchain is the backbone of bitcoin and cryptocurrency. Initiated as the distributed ledger, now go beyond the crypto. It allows the distribution of digital information over multiple nodes in the network. In addition, it uses in other infrastructures also. 

Hence, The limitation of Blockchain is not fixing to this only, it is much more than this. Thus, we cover the following points in this blog, have a look.

What’s inside- 

  1. What is Blockchain Technology?
  2. How Does a Blockchain Work?
  3. Why Blockchain?
  4. What is the use of Blockchains?
  5. Mention the characteristics of Blockchain?
  6. What are the different types of Blockchain?
  7. Is Blockchain Secure?
  8. What are the business benefits of blockchain?
  9. What’s the future of blockchains?
  10. Conclusion

 Ready to dive in.

What is Blockchain Technology?

As defined earlier, a blockchain is a distributed ledger or database, that is shared among peer-to-peer network nodes. The main purpose of blockchain is to store information electronically in digital format. 

Mainly, the crucial role of blockchains in cryptocurrency makes it popular. The most popular one is Bitcoin, we use it for maintaining a secure and decentralized record of transactions. Additionally, Blockchain guarantees security to records of data and without any third-party validation, it generates trust. 

As the name suggests, a blockchain is a combination of data blocks that combines together to create a continuous chain of immutable records. These blocks follow the sequential order to join and get an exact timestamp when it is added to the chain. To avoid failure, each computer present in the network maintains a copy of the database.

The crucial difference between a blockchain and a typical database is how the data is structured. The information collects in groups or blocks in the blockchain. Each block has specific storage capacities. Once one block is filled, another block is automatically linked to the previous one and in this way, it forms a chain of blocks.  

How Does a Blockchain Work?

The purpose of blockchain is to record and distribute digital information but not edit it. Hence, a blockchain is a base of unchangeable ledgers or records. We can’t alter, delete, or destroy the transactions in the blockchain. As a result, blockchains are also known as distributed ledger technology (DLT). 

Blockchain stepwise working

Here’s an example to make you understand the working of the blockchain smoothly.

Transaction Step: 

Suppose two parties A and B want to exchange some digital currency or a digital representation of any other asset. They Initiate the transaction in this step.

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Transaction Step

Block Step:

The transaction data is sent to the blockchain decentralized network of participating computer nodes.

Block Step

Verification Step: 

The participating nodes of computers evaluate the transactions and through mathematical calculations verify the transactions.

Verification Step

Hash Step:

After the successful verification, the transaction is time-stamped with a cryptographic hash. The transaction is linked with other transactions to form a block, which is summed up to an ever-growing chain of transactions.

Hash Step

Execution Step:

In this step, the encryption of the block completes. The unit of transaction moves from a party A to B.  Thus, the transaction record is permanent; you are not allowed to alter or remove anything on the blockchain.

Execution Step

Why BlockChain?

There are several reasons for choosing blockchain technology over others. Thus, it helps in the verification process of the multistep transaction and traceability of transactions.

With less compliance cost, it can provide secure transactions, and increase the speed of data transfer processing. Hence, the following are the reasons to opt for blockchain technology.

  • Security
  • Real-time tracking
  • No single point of failure
  • Reduce Cost
  • Trusted Transaction
  • No third party involvement
  • Unalterable copied only

What is the use of Blockchain?

Probably, you’re wondering what this progressive and potentially strong blockchain technology can actually do in the real world. Well, the uses of blockchain technology are as follows – 

  1. Payment processing and money transfers – We use blockchain to expedite the transfer of funds from one party to another
  2. Monitor supply chains – It allows businesses and consumers, to view how products performed in terms of quality.
  3. Retail loyalty rewards programs – It is a token-based system that rewards consumers, and stores these tokens within a blockchain. 
  4. Digital IDs – We can use them to control their digital identities
  5. Data sharing – Also, we can use it as a marketplace to share or sell unused data
  6. Copyright and royalty protection
  7. Digital voting – Blockchain offers the ability to vote digitally, but it’s transparent enough that any regulators would be able to see if something were changed on the network.
  8. Real estate, land, and auto title transfers – Blockchain can store titles on its network, allowing for a transparent view of this transfer. As well as, presenting a crystal-clear picture of legal ownership.
  9. Food safety – Blockchain data is immutable, due to which it would be able to check the transport of food products from their origin to the supermarket.
  10. Immutable data backup – We use Blockchain as a backup source for cloud data centers — or for any data
  11. Weapons tracking – Further, we use it to create a transparent and unchanging registry network. Also, it allows law enforcement and the federal government to track gun or weapon ownership.
  12. Equity trading – Blockchain could rival or replace current equity trading platforms to buy or sell stocks. 
  13. Managing IoT networks
  14. Expediting energy futures trading and compliance
  15. Tracking prescription drugs – Blockchain offers drugmakers the ability to track their products on the basis of the serial and/or batch numbers.

What are the characteristics of BlockChain?

A blockchain is a decentralized architecture with built-in security features to increase the trust and integrity of transactions. Through this section, we will let you know about the common characteristics of the blockchain. 

Decentralization

Blockchain technology uses a core of our futuristic society i.e.decentralized service. However, it utilizes the processing capabilities of all participating users in the blockchain network. As a result, it decreases latency and removes the single point of failure.

Immutability 

Immutability is one of the essential features of the blockchain. Moreover, it has the ability to ensure the integrity of transactions by creating immutable ledgers. 

In traditional centralized architectures, the databases can be altered and trusted by a third party. While in blockchain technology each block in the distributed ledger relates to the previous block constituting a chain of blocks. 

Transparency

Blockchain technology delivers a high level of transparency by sharing transaction details. However, the sharing of details among all participants and users is available in those transactions. There is no requirement for a third party in a blockchain environment. Hence, to improve the business friendliness and guarantee trusted workflow, the blockchain technology environment not required third-party. 

Better security: 

Though security is a crucial issue for most new technologies, a blockchain provides better security. The reason is, that it uses a public key infrastructure that protects data from malicious actions. In addition, Blockchain removes the single point of failure, which affects the entire system.

Efficiency: 

A blockchain improves on the classical centralized architecture. By dividing database records among the users the involvement of those in the network. Furthermore, the transaction distribution makes the blockchain more transparent to verify all records stored in the database.

In terms of cost, settlement speed, and risk management, a blockchain is more efficient than the classical centralized architecture.

What are the different types of BlockChain?

The classification of Blockchain technology is as follows.

Public blockchain

In this type of blockchain, anyone can join and check the transaction and verify it, just like Bitcoin and Ethereum. 

The drawback of this type of blockchain is the requirement for computational power. In addition, little or no privacy for transactions, and weak security. Hence, these are essential points of consideration for enterprise use cases of blockchain.

Private blockchain

It is a decentralized peer-to-peer network. In this type of blockchain, nodes will be restricted. That means not every node can participate in this blockchain, the management authority and access to data should be restricted in it. 

Based on the use case, this type of blockchain can significantly boost trust and confidence between participants. Thus, this blockchain can be run behind a corporate firewall and even be hosted on-premises.

Consortium blockchains

A consortium blockchain is perfect for business when there is a requirement of permission for all participants. That means, the node that had authority can be chosen in advance, and usually has partnerships like business-to-business. Thus, Hyperledger and R3CEV are popular examples of consortium blockchains.

What are the business benefits of blockchain?

Substantially, the key advantage of blockchain is its use as a database for recording transactions. The benefits extend far beyond those of a traditional database. Most notably, it eliminates the possibility of tampering by a malicious actor, as well as provides these business benefits:

  • Time savings. Blockchain slashes transaction times from days to minutes. The transaction settlement is faster as it doesn’t require verification from a central authority.
  • Cost savings. Transactions need less oversight. Participants can exchange items of value directly. As well as, blockchain removes duplicacy because participants have access to a shared ledger.
  • Tighter security. The stringent security features of blockchain protect transactions from tampering, fraud, and cybercrime.

What’s the future of blockchains?

Predication of any new technology is never easy, the same is with blockchain. There is an estimation that, if blockchain continues to move on the same path as it is going now then it affects several industries. Hence, the industry includes retail, mining, travel, healthcare, education, agriculture, and entertainment. 

Substantially, blockchain affects financial services, especially with the increasing movement toward decentralized finance. To handle the complex financial use cases, we use this process for permission. As a result, not only private but governments organization will also likely continue to embrace blockchain.

The work of Bitcoin Cash and Litecoin blockchains is almost similar to the original Bitcoin blockchain. Further, the Ethereum blockchain is an evolution of the distributed ledger idea because it’s not solely designed to manage digital money, unlike the Bitcoin blockchain. 

However, think of the Ethereum blockchain as more like a powerful and highly flexible computing platform. It allows coders to easily build all kinds of applications leveraging the blockchain.

For instance, if you want to do a charity for thousands of people continuously for a year. Then, you can make it possible in a few lines of code with the Ethereum blockchain.

Read More: 8 Key Challenges to Be Addressed for Adoption of Blockchain

Conclusion

Undoubtedly, blockchain is essential for our society. Its impact is very high and unparallel to the current industries. After the successful use of BaaS and other improvements, it is the time of opting blockchain technology in the industries.

So, after going through this blog, what are your thoughts about blockchain? Do your think blockchain is advantageous for business or not?

Share your suggestions in the comment section. As well as, you can approach our support team for any assistance on blockchain technology.

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