If you have heard of blockchain, chances are that you just know it because of Bitcoin. The hype of Bitcoin and other cryptocurrencies overshadowed the actual technology behind it.
Today, most people limit blockchain to just cryptocurrency and nothing else.
In reality, crypto is just the tip of the iceberg; the scope of blockchain exceeds crypto and other financial services.
Blockchain is behind most of the best systems like finance, supply chain, real estate record-keeping, content marketplaces, and data-keeping. Moreover, blockchain is now used as a primary technology behind most businesses as it ensures the safety of data.
If you are a business owner trying to explore ways of using blockchain for your business, here is everything that you need to know.
What Is Blockchain?
Blockchain is a virtual ledger or database that is shared across multiple computers. These computers are known as nodes, and they make a chain, hence the name “blockchain”. Within the system, these nodes store data and update the changes in real-time, maintaining a secure and decentralized record system.
Since there is no way to edit a block, every entry, transaction, or data update can be tracked very easily. This is ideal for companies maintaining data and facing security threats every day. Currently, the application of blockchain is not just limited to crypto; instead, it also strengthens the finance system and works as a core technology behind Decentralized Finance (DeFi) applications, Non-Fungible Tokens (NFTs), and smart contracts.
While big companies ensured privacy, security, and transparency initially through blockchain, it soon became popular among the masses, especially after the internet became accessible for all, and residential internet companies like Spectrum Internet started offering their reliable services at affordable prices, even small businesses and e-commerce sites opted for online crypto payments.
Today, blockchain development company is one of the most talked about thing in the business world in order to grab the best blockchain solutions.
How Does Blockchain Work?
Blockchain is made up of two words: Block and Chain.
A block is the container or a data packet that mainly helps in saving the transactions or any other related information. All these data packets are joined in the form of a chain, hence the name – blockchain.
Within the blockchain, there are several nodes involved, and each node is a computer with a specific user. Since there is not a single admin and the ledge is shared across the network, blockchain cannot be manipulated.
Here is a blueprint of blockchain transactions:
- When a transaction takes place, it is recorded by the system.
- The network of nodes validates the transaction data and approves it.
- This transaction is then registered within the block.
- Now the new block is linked via cryptography to the previous block and set right in the front of the chain.
- This data is updated to the ledger and shared within the network.
How Does Blockchain Promote Transparency?
As mentioned earlier, the data within a blockchain is stored and updated in real-time. The data management system of blockchains stores all the exchanges between the users. These digital documents are non-editable, transparent, and require no mediator.
Unlike most software, where the admin gets to make changes and updates without the consent of the users and other people, blockchain requires validation from everyone and records everything. Moreover, each block can be easily identified with the help of a unique alphanumeric code, known as a hash.
Hash works just like the digital fingerprint of each node, so it can be traced back and cannot be tampered with.
In case of manipulation of the data, the system records a gibberish string, which looks out of place. Eventually, this string is easier to detect at times. Another important reason behind the transparency of blockchain is its decentralization.
The system has a peer-to-peer control network that is fully interconnected. Within this network, each node stays in communication, updating the ledger. In case of any manipulation, the data discrepancy can be detected right away, since it does not match the information stored in the rest of the nodes.
How Secure Is Blockchain?
Tracing a discrepancy in the blockchain is easy, so anyone can spot the issue and trace it back to the person responsible for the issue. Here are some of the factors that can help in proving the level of security offered by blockchain:
- Several computers and devices approve each transaction on the blockchain in real-time without any intervention of a human. In case of any manipulation or mistake, the issues create only one copy and are rejected by the network.
- Blockchain does not require third-party verification, as it automatically verifies each transaction in real time. This eliminates the risk of human error, ensuring the process runs smoothly.
- Within the blockchain, there is no central data location. Instead, everything is stored across a network of computers (nodes). This networking style helps in reducing the chance of any possible data tampering.
- Data transaction via a central authority generally takes longer, as it verifies data one by one. Within the blockchain, each transaction takes just a few minutes to complete and verify.
- Blockchain maintains a data ledger that is public yet ensures privacy. This means that anyone can access the transaction details but cannot identify the person behind the transaction.
- Within a blockchain, each block has a specific identification, i.e. hash, that ensures that the block stays immutable once the transaction is verified.
- Blockchain lifts the monopoly of authorities and elites over money by helping anyone invest and work with blockchain. Anyone who wishes to invest or buy can start anytime without proving their age, gender, cash inflow, and other details.
How Is Blockchain Changing Industries and Businesses?
Blockchain has long been seen as a part of the technology and finance industry. While in most cases it is true, restricting its scope to just two major industries is not enough. From supply chain to data keeping, trading, and verifying, we see the role of blockchain in every industry possible.
For instance, most of the big retail stores across the country track their stock right from farms all the way to their shelves.
This is especially ideal for perishable goods like dairy products, poultry, meat, fruits, and vegetables. These stores track the shelf life of these products, determine the demand for these products, and order accordingly. With the integration of advanced food traceability software built on blockchain technology, businesses can monitor every stage of the supply chain in real time, ensuring safety, authenticity, and compliance.
Some of the food and retail giants that are using blockchain to reduce their food waste include Walmart, Nestlé, Tyson Foods, etc.
Apart from food and retail, the diamond industry is also using blockchain for tracking diamonds. Brands like the De Beers Group track, store, source, and verify the quality of diamonds by using blockchain. Apart from this, they also make sure that only ethically sourced diamonds reach the market.
Within supply chain management, blockchain plays a very important role. Small companies are using blockchain to ensure transparency and authenticity. This technology is especially ideal for people working in important export businesses as it helps them with cross-border payments.
Now, anyone can start a business and send money without delay or a long verification process, all thanks to crypto, powered by blockchain.
What Are the Pros and Cons of Using Blockchain?
In the world of blockchain, not everything is hunky dory. Just like any other technology, blockchain also has a few shortcomings. Here is a simple comparison of all the pros and cons related to blockchain that can help you understand it more.
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What Are the Challenges Related to Blockchain?
Although blockchain is a very sophisticated technology, it has its own challenges, which stand in the way of its dominance.
- Blockchain technology does not require any transfer or validation fee, making it a good option for users. However, maintaining the blockchain system requires a lot of money. For instance, Bitcoin mining farms require a lot of energy that even surpasses the annual energy consumption of some countries.
- There is no doubt that blockchain runs on automation and each transaction of safe. However, the speed of adding a new blockchain to the chain is very slow. Considering the speed, a blockchain network can only commit seven transactions per second, which is not enough to run a global financial system.
- Each transaction done on blockchain is easily traceable, yet it maintains the privacy of the user. This is the reason it is being used in illicit transactions. From money laundering to buying ammunition, terror financing, and drug dealing, blockchain is so far the best way of keeping transactions a secret.
- Crypto and blockchain are quite sophisticated yet new. Currently, authorities are finding it hard to regulate crypto. While most of the countries are struggling with policies, other countries have simply banned crypto. This ban has impacted the demand and value of crypto directly.
- Blockchain storage is becoming one of the biggest issues right now. As blockchain and its uses are growing, it now requires a lot of data storage as well as maintenance costs. The storage and maintenance means shifting to blockchain for supply chain, business, finance, and other industries is far too expensive and nearly impossible.
