What is Blockchain? Is it Right for You?
Today, a growing number of industries view blockchain as a valuable technology – separate from bitcoin or other cyber currencies. With its decentralized nature, blockchain has become a mainstream technology that powers applications in contemporary times. People’s faith in this technology has grown as its popularity and potential intrinsic features have grown, resulting in widespread adoption across many industries throughout the world. But first, back to basics. What is it and how on earth does it work?
1. What is Blockchain?
Blockchain is a distributed, peer-to-peer computer network that employs encryption to record transactions and monitor assets, both tangible and intangible, using a fixed, digital ledger. These transactions, known as blocks, are subsequently recorded, duplicated, and stored on each network-connected server, or node.
Unlike traditional databases, which store records in a single location, a digital ledger is basically a decentralized database that various people control; its distributed ledger technology (DLT) gives each node in the network its own copy of the ledger (Anyone can offer their server as a network node). If a record has an inconsistency, the technology can detect it by comparing it to the other participants’ copies of the record. This feature makes digital ledgers’ records completely tamperproof. The real-time changes on the digital ledger create a single source of truth for all users, ensuring that every detail is exact and dependable.
Blockchain development is the process of establishing distributed ledger technology (DLT) that securely records transactions and monitors assets within a network, whether they are tangible assets such as money or real estate or nonphysical assets such as copyrights. Creating and implementing a blockchain application from the ground up takes a lot of work and study. Finding and selecting the correct protocol and programming language to meet your needs is the first step in the development process. We’ve compiled a list of the most important elements to consider while building a blockchain application.
It’s useful in a multitude of businesses since it allows information to be shared rapidly, correctly, and securely. Whether you’re monitoring orders, accounts, payments, production, or other data, a blockchain network provides permitted network members with transparent delivery and storage.
2. Blockchain is a disruptive technology
Digital ledger, the ground-breaking technology that underpins Bitcoin, has been sluggish to gain traction. Blockchain technology, hailed as one of the most revolutionary technologies in decades, lies at the center of the transition from a centralized server-based internet architecture to a cryptographic transparent network. Digital ledger has enormous promise.
Trust is fostered through blockchain technology
In essence, digital ledger is “an open, distributed ledger that may efficiently and permanently record transactions between the two parties.” Instead of a central server, blocks of information are stored on a decentralized peer-to-peer network on a blockchain. Each block of data is available to everyone and cannot be changed retrospectively without affecting all following blocks and without network collaboration. In reality, the most amazing qualities of blockchain technology that generate confidence are transparency and decentralization, which provide a paperless approach to verifying ownership of the information or even money!
Third-party intermediaries are replaced by cryptography – Have you ever considered what happens when you send money over the internet? What looks to be a simple procedure is actually a time-consuming one in which accountants and bookkeepers on both sides keep different documents to guarantee the transfer is accomplished correctly. For users, this means significant wait times, transaction costs, and the possibility of human mistakes.
However, blockchain technology has the ability to eliminate the need for middlemen entirely. Peer-to-peer consensus algorithms will openly record and validate transactions if blockchain technology is used, eliminating the need for manual bank verifications. This will cut financial transaction costs, delays, and overall complexity.
To put it another way, digital ledger “replaces third-party intermediaries as the custodian of trust, with all players executing complicated algorithms to validate the integrity of the system… When parties transfer assets directly with each other or swiftly confirm ownership or authorship of information, the usage of distributed ledger can cut overhead expenses — a process that is now unachievable without either a central authority or an impartial intermediary.”
distributed ledger offers a new approach to managing trust and may help organizations become more transparent, decentralized, efficient, and secure. According to IDC, $2.1 billion was spent globally on blockchain technology in 2018. According to Netscribe, the distributed ledger area will grow by 42.8 percent every year until 2022.
Large banks, such as Barclays, are striving to integrate blockchain, the technology that underpins Bitcoin, to make their operations faster, more efficient, and more secure. The technology is especially useful in supply chain management since it allows for transparent and decentralized permanent documentation of transactions.
The technology’s potential is unlimited, from authenticating data in insurance contracts to constructing decentralized versions of peer-to-peer ridesharing apps or a decentralized network of IoT gadgets that can interact internally to eradicate faults or update software. On a bigger scale, Dubai plans to place all of its papers on blockchain by 2020 in order to increase government security and efficiency.
Automated Business Operations
Every company strives for operational efficiency, which leads to increased revenue. Introducing public transaction ledger into an organization’s processes has various benefits, including:
- Cloud storage is easier to use, transparent, and secure, allowing users to instantly access information as needed.
- Financial transactions that are quick, secure, and saved on the network to speed up future transactions. Furthermore, data saved on the network may be readily and correctly accessed at any moment for an audit. It enables the implementation of smart contracts, which automate the process of entering into and administering contracts between two parties.
- Improving an organization’s performance requires optimizing business operations. Public transaction ledger can bring transparency and eliminate the need for a centralized authority, allowing businesses to rewire their processes for increased efficiency.
3. Pros and Cons of Blockchain Application in Business
3.1. What value does Blockchain add to your platform?
Digital ledger is being used to alter business models in a variety of industries, including financial services, supply chains, government, healthcare, retail, and many more. Businesses benefit from this technology because it provides:
With the use of public transaction ledger, the history of transactions becomes more visible. Because it is a distributed ledger, all network members have access to the most recent version of the ledger. The ledger is validated by the network’s consensus, which means that everyone must agree on it.
All future records would be modified if a single record was changed. As a result, data stored on the cryptographic ledger is more secure, more transparent, and only visible to those with permitted access.
If your organization controls items that are exchanged through a complex supply chain, you know how difficult it can be to trace an item back to its source. When you record the supply of products from one location to another on the cryptographic ledger, you obtain a comprehensive audit trail that shows where an item came from and follows each stop along the way.
Previous blockchain records can be used to verify product authenticity and protect them from fraud.
The conventional methods are as follows: paper-based, time-consuming, and prone to mistakes when employing third-party intermediaries to verify authenticity. By automating and streamlining business operations, you may complete transactions quickly and safely. You don’t need to manage several ledgers since a single digital ledger shared with network members may be utilized for record-keeping. Everyone in the network has constant access to the same information, resulting in a speedy resolution.
Most firms prioritize cost reduction. You don’t need middlemen or third parties to create trust with blockchain since all network members confirm everything through consensus. To complete the transaction, you will not need to evaluate documentation because everyone will have access to an immutable version.
As the blockchain ecosystem matures and new use cases arise, developers will confront three major challenges: security, scalability, and decentralization. Developers are entrusted with addressing these difficulties without jeopardizing trade-offs, a situation known as “the blockchain trilemma.”
One of the key reasons why industries utilize blockchain is for decentralization. Blockchain technology, for example, allows clients to store and acquire bitcoin without having to hand up complete control of their assets to banks. Transactions are instead validated by consensus (a group of notes instead of one individual node). These transactions cannot be changed once they have been validated.
The time it takes for several confirmations to achieve a consensus is a trade-off of decentralization. The issue for blockchain engineers is to find a means to speed up this process.
The capacity of blockchain to handle an increasing number of transactions as demand grows depends on its ability to operate as intended while also defending itself from intrusions. Speed is a trade-off once again, especially as block sizes expand.
Bitcoin’s blocks were initially limited to 1 megabyte in order to lessen the danger of cyberattacks. Each currency, on the other hand, may record an endless number of transactions, with each transaction increasing the block size. As a result, blocks may gradually outgrow any size restrictions put on them, slowing down processing.
Although Bitcoin started the block-size discussion, developers will have an impact on other blockchain applications as they determine whether to raise block size without compromising performance.
Although one of the advantages of blockchain technology is security, it is also a difficulty for developers. Blockchain is a target for cybercriminals since it is perceived as a safe technology. Anything that compromises blockchain security will have a knock-on impact, threatening decentralization and scalability. In the case of a security breach, there is no centralized party to intervene without regulatory supervision.
Although security breaches in blockchain are uncommon, some have exploited acknowledged flaws in its architecture. Developers must be able to build blockchain networks that provide both business benefits and comprehensive security.
While designing a blockchain solution has its hurdles, it’s vital to remember that the technology is still in its infancy. Because technology is always evolving, blockchain technology has a bright future.
Blockchain is simply a chain of blocks, and each block of blockchain contains a set of metadata, batches of transactions and mining information hashed and encoded into a Merkle tree. Each block header consists of the current block hash, previous block hash and other essential details. To add a new block to the network, the blockchain uses consensus mechanisms, such as Proof of Stake or Proof of Work.
Decentralization means that the ability to control and make decisions is moved from a centralized entity to a distributed network. Since data is stored across its P2P (peer-to-peer) network, it helps to reduce the risks of data being held centrally. With decentralization, blockchain can provide a trustless environment, optimize resource distribution and reduce points of weakness in systems.
Blockchain is public to some extent since it is not owned by a single user. It can easily empower its user with openness and transparency, as it is accessible to anyone. In fact, anyone can suggest changes and upgrades to the system, and if more than half of the users agree, changes and upgrades can be made.
Setting standards is crucial for blockchain adoption. Since Standards Australia put forward a proposal to consider building standards for blockchain technology to the International Organization for Standardization in 2016, ISO Technical Committee 307, Blockchain and Distributed Ledger Technologies was created. There have been more than 50 nations joining the process of standardizing blockchain technology.
4.5. Centralized Blockchain
When a blockchain network is centralized, it means that parties’ identities are known. Only credible participants can transact on the ledger and any identity is known, so the transactions can easily be audited. A centralized blockchain should be used in highly regulated industries like finance to reduce risks.
5.1. Public Blockchains
A public blockchain helps to eliminate the problems that come with centralization, such as less transparency and security. As it does not have any restrictions, anyone can access it, send transactions, and even become a validator. The source code is often open source, so anyone can verify the transactions and no one can change records or transactions on the network. The most known use case for public blockchains is Bitcoin and Ethereum blockchain.
5.2. Private Blockchains
A private blockchain is typically more efficient than a public one. It is a blockchain network that works in a limited environment or is under the control of an entity. Private blockchains are operated on a smaller scale, such as inside an organization. Since it is permissioned, it is beneficial for users to prevent third parties from accessing information.
5.3. Hybrid Blockchains
Both public and private blockchains have their pros and cons, and that is the reason some users prefer a hybrid blockchain. A hybrid blockchain is a type of blockchain technology that combines the best of both public and private chains. By using a hybrid blockchain, transactions and records can be verified when needed, even though they are not public. All the private information can still be kept inside the network, so it still protects privacy. However, hybrid blockchains are not 100% transparent, since information can still be shielded.
Sidechains are separate blockchains running independently with their own token, consensus, security, and protocol. A sidechain is connected to a main blockchain via a two-way bridge, and it needs to interact with the main chain. Sidechains use many validator selection methods, such as Proof of Authority, Proof of Stake, etc.
With its limitless potential, blockchain may be integrated into your existing business operations in a variety of ways, including:
6.1. Business Transactions
Blockchain technology, which powers Bitcoin and other cryptocurrencies, is poised to revolutionize trade. The lack of intermediaries will not only speed up the procedure but will also make it easier to transfer funds safely at a reasonable cost. The following are some examples of real-world applications in businesses: The blockchain is being used by Bitwage, Abra, and Coinpip for financial transfers and payroll processing.
6.2. Cloud Storage Distributed
You may also leverage Blockchain technology to provide quicker, more convenient, and secure cloud storage to your clients, as the Storj firm did. You’ll need to go with a reputable BaaS supplier for this.
6.3. Smart Contracts
A smart contract is a computer code that can be built into the blockchain to facilitate, verify, or negotiate a contract agreement. Smart contracts blockchain can be used to get around restrictions and reduce the cost of a subset of a large number of financial transactions. The best aspect is that these agreements are safe and inviolable.
Ethereum is the world’s first smart contract platform, which remains the most popular choice among developers to this day. It is the community-run technology powering the cryptocurrency ether (ETH) and thousands of decentralized applications.
6.4 Notary Public
The development of blockchain technology might potentially be considered for notary formation and authentication. The following are some real-life examples: Uproov, a smartphone multimedia platform, offers notary services based on the picture, video, or voice recording uploaded through blockchain by the user.
6.5 Blockchain Supply Chain
Because the supply chain mechanism involves the interchange of components from different entities, a failure at one end might have an impact on the entire operation. To address this issue, blockchain technology may be used to create safe and permanent auditable records that allow all parties to observe the whole process. Looking for some real-world examples? SkuChain and Provenance are two firms that use distributed ledger to improve supply chain efficiency.
One of the most promising applications of blockchain technology in supply chain management
6.6 In Digital Identification Process
Blockchain may be used in the digital identification process to offer us immutable, irrefutable, and secure digital IDs, resulting in fewer fraud concerns and a more smooth sign-in experience.
One of the real-world applications is the ShoCard, which utilizes distributed ledger to validate an individual’s identification on their mobile device.
6.7 In Loyalty and Rewards Programs
The blockchain helps businesses connect their consumers with gift cards, incentives, and other loyalty programs in a cost-effective manner by removing intermediaries.
Are you looking for a similar firm or example? GyftBlock, a collaboration between bitcoin API developer Chain and Gyft, offers secure digital cards that can be traded on the public ledger.
You must be enthusiastic to adopt blockchain technology applications into your organization now that you are familiar with the tech realm. Do you have a strategy or are you still unsure how to make money with distributed ledger? Many different industries can benefit from blockchain technology in terms of operational efficiency and competitive advantage.
- Real estate: Accurate land and property ownership records
- Finance: Lowering global payment, tax, and intermediate costs; preventing money laundering
- Supply chain: Accurate asset tracking from suppliers to customers
Many firms have profited from outsourcing their software development projects (including Blockchain projects) to software providers in Vietnam. One of the most popular companies within this industry, Newwave Solutions, has a long track record of successful projects in different fields like Game, Entertainment, Education, Business Intelligence, Fintech, etc.
Newwave Solutions’ experts have many years of experience with Blockchain technology projects
Read more: Fruits – A Successful Blockchain PoC Application with Various Functions
With many practical applications for the technology already being implemented and explored, this industry finally making a name for itself in no small part because of bitcoin and cryptocurrency. As a buzzword on the tongue of every investor in the nation, cryptographic ledger stands to make business and government operations more accurate, efficient, secure, and cheap, with fewer middlemen.
As we prepare to head into the third decade of cryptographic ledger, it’s no longer a question of if legacy companies will catch on to the technology—it’s a question of when. Today, we see a proliferation of NFTs and the tokenization of assets. The next decades will prove to be an important period of growth for blockchain. You can never go backward if you call us now for a free consultation!
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To Quang Duy is the CEO of Newwave Solutions, a leading Vietnamese software company. He is recognized as a standout technology consultant. Connect with him on LinkedIn and Twitter.