Understanding How Blockchain Works
- 31 May 2022
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Blockchain technology is changing our world. It is disrupting almost all markets and ways of doing business. If yet heard of blockchain, let me introduce you to this buzzword - Blockchain Technology.
Yes, blockchain technology is changing our world. In simple language, blockchain is a ledger or we can say, it is a digital ledger. A ledger is known as a book where a record of business transactions in the form of debit and credit is present, just like in a bank statement, which is also a ledger. In the same way, a blockchain is a digitized, decentralized, public ledger. This ledger is programmed to record virtually everything of value. Under this, each list of the record is referred to as a block. In this way, a blockchain is a continuously growing list of records called blocks, which are linked and secured.
Origination of blockchain:
The credit for blockchain invention goes to Mr. Satoshi Nakamoto. The idea behind this is to enable users to control their own money so that no third party, not even the government, would be able to access or monitor it. During the era of 90s, when internet technology (TCP/IP or HTTP) was in the infant stages, email was the first major application developed for the users. Later, more emerging emerged in the world on the internet and changed the entire scenario like websites, online chatting, gaming applications, etc all is possible through the internet. In a similar pattern, when blockchain technology emerged, bitcoin was the first major application that used this technology. These days this technology is used in a variety of applications like security, online voting, gaming, etc
While comparing, blockchain with the internet, we can say that where the Internet allows the computers connected to exchange information online. Blockchain allows computers to record information.
The Digital Economy, Wikinomics is mentioned about Blockchain that:
"The first generation of the digital revolution brought us the Internet of information. The second generation — powered by blockchain technology — is bringing us the Internet of value: a new platform to reshape the world of business and transform the old order of human affairs for the better.
Blockchain is a vast, global distributed ledger or database running on millions of devices and open to anyone, where not just information but anything of value — money, but also titles, deeds, identities, even votes — can be moved, stored, and managed securely and privately. Trust is established through mass collaboration and clever code rather than by powerful intermediaries like governments and banks."
What are the components involved in Blockchain technology?
Blockchain technology has three major components:
1) Private Key Cryptography
2) P2P Network (Peer to Peer)
3) Program (or, the blockchain protocol)
Why there is a need for blockchain technology?
Over time, there are lots of transactions involved in day to day running of businesses all around the world. This created a need to develop a technological solution that would bring everyone to the highest degree of accountability, with no more missed transactions, human or machine errors, or an exchange that was not done with the consent of the parties involved. Blockchain solves the problem of manipulation by bringing everyone to the highest degree of accountability. The reason is that data entered on the blockchain is immutable and adequately protected from fraud caused by the manipulation of transactions. Transactions entered on the blockchain provide a clear trail to the very start of the blockchain allowing any transaction to be easily investigated and audited.
The technology focuses not to record the transaction in the main register but on a connected distributed system of registers, all of which are connected through a secure validation mechanism.
What are the major areas where blockchain technology can be utilized?
1) Smart Contracts: Contracts regulate various aspects of our professional and personal lives, and they are essential to the functioning of modern society. Smart contracts are those that are embedded with if/then statements, written into code on a blockchain, and executed without the involvement of any intermediary, using blockchain technology. These contracts are automatically executed when predetermined terms and conditions are met. This leads to automation, triggering the next course of action when conditions are met. These contracts ensure safety, security, and time saving, by making the transactions traceable, transparent, and irreversible.
2) Asset Protection: This is one of the areas where blockchain technology can be immensely useful for the owner of the asset. Suppose, you are a musician who wants to ensure that a royalty would be provided to you whenever your music gets played, blockchain technology can help you protect your assets by creating an indisputable record of real-time ownership.
3) Personal Identification: Government needs to maintain a record of a huge amount of data related to the identification of citizens like date of birth, death record, marriage record, health record, education record, etc can use this technology to manage all the data safely and securely.
4) Payment Processing: This technology eliminates the need for an intermediary that is common in the conventional payment process. The removal of intermediaries and settlement on distributed ledgers would lead to a dramatic improvement in the transaction speeds compared to a conventional method of payment processing.
5) Crowdfunding: Unlike the traditional way of crowdfunding, a blockchain-powered crowdfunding campaign seeks to secure investment for a new project easily. However, such funding mainly comes in the form of bitcoin or other cryptocurrencies.
6) Entertainment purpose: Blockchain technology can be used for entertainment purposes also. One of the best examples is "CryptoKitties". It is a blockchain game on Ethereum, developed by Canadian studio Dapper Labs that allows players to purchase, collect, breed, and sell virtual cats. It is one of the earliest attempts to deploy blockchain technology for recreation and leisure. Each CryptoKitty is a non-fungible token (NFT). Each is unique and owned by the user, validated through the blockchain, and its value can appreciate or depreciate based on the market. CryptoKitties cannot be replicated and cannot be transferred without the user's permission even by the game developers. The game's popularity in December 2017 congested the Ethereum network, causing it to reach an all-time high in the number of transactions and slowing it down significantly.
Challenges in Blockchain:
1) Power Constraint: As we know that Blockchain technology needs the use of computers to run this network. This necessitates a lot of electricity for running. That is not appealing, considering the power shortage in developing countries around the world. Dependency on power to operate is a major hindrance in the use of this technology.
2) Transaction speed: Under this technology, blocks in a chain must be verified by the distributed network, and that can take time.
Emerging technology in the blockchain:
1. Binance Smart Chain:
Binance Smart Chain is an innovative solution to bring programmability and interoperability to Binance Chain. Binance Smart Chain relies on a system of 21 validators with Proof of Staked Authority (PoSA) consensus that can support short block time and lower fees. The Binance Smart Chain also supports EVM-compatible smart contracts and protocols. Cross-chain transfer and other communication are possible due to native support of interoperability.
2. Cosmos cryptocurrency:
Cosmos (ATOM) is a cryptocurrency that powers an ecosystem of blockchains designed to scale and interoperate with each other. The team aims to "create an Internet of Blockchains, a network of blockchains able to communicate with each other in a decentralized way." Cosmos is a proof-of-stake chain. ATOM holders can stake their tokens to maintain the network and receive more ATOM as a reward.
Leadership in Blockchain:
We at Koderspedia strive to be a leader in blockchain technology. We believe this technology is transforming the way we do business, from transactions and purchases to distribution and security. We’re excited to be part of this evolving technology and look forward to the transformation it brings to the many industries we participate in.
As a leading developer in blockchain, custom software, mobile application and web-based development, we look forward to hearing about your next project.
Please visit our profiles on Clutch.co, where we’re the number one ranked Northern California provider in the above combined services, on DesignRush.com, where we’re among the leading IOS and Android App Development Companies, and as a multi-service developer on GoodFirms.co.
Have questions about your project before you begin? Please give us a call at 1 (833) 4KODERS. We’re happy to help!
1. https://www.clearias.com/blockchain-technology, "Blockchain Technology – Everything you need to know in layman’s language"
2.https://www.ibm.com/topics/smart-contracts, "What are smart contracts on the blockchain?"
3.https://en.wikipedia.org/wiki/CryptoKitties, An article on CryptoKitties in Wikipedia.