What is Blockchain Technology? If you have been following banking, investing, or cryptocurrency over the last ten years, you’re sure to have heard the term “blockchain,” the record-keeping technology behind the Bitcoin network. But you may still be questioning the real value of blockchains and their best use cases; however, the more people understand blockchain and how to use it, the more valuable it will become.
You may hear Bitcoin and Blockchain in the same sentence, but it is important to understand that they are distinctly different.
Bitcoin is a cryptocurrency, while Blockchain Technology is a distributed database. Bitcoin is powered by blockchain technology, but blockchain has found many uses beyond Bitcoin. For example, Bitcoin promotes anonymity while blockchain is about transparency. This is a very important benefit of blockchain and one of the main reasons it is so popular.
It seems complicated, and it definitely can be. Still, blockchain’s core concept is that it is a type of database that collects information and stores it electronically on a computer system. However, one key difference between your average database and a blockchain is how the data is structured. Blockchain technology collects information together in groups (blocks) that hold sets of information. When filled, blocks have certain storage capacities and are linked onto the previously filled block for a chain of data otherwise known as a “blockchain.” All new information that follows that new block is compiled into another new block that also will be added to the chain when filled.
This system inherently makes an irreversible timeline of data when implemented in a decentralized nature. When a block is filled, it is set in stone and becomes a part of this timeline. Each block is given an exact timestamp which makes it very difficult, in fact, nearly impossible to change, hack or cheat the system.
Essentially, it is a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. So, each block in the chain constitutes several transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. This is known as Distributed Ledger Technology, also called DLT.
Blockchain is a type of DLT in which transactions are recorded with an immutable cryptography signature called a hash.
This means that if one transaction were changed, you would immediately be aware that it has been tampered with. If hackers wanted to corrupt a blockchain system, they would have to change every block in the chain across all of the distributed versions of the chain at the same time. Blockchains, such as the infamous Bitcoin and Ethereum, are constantly and continually growing as blocks are being added to the chain, which significantly adds to the ledger’s security.
The main goal of blockchain is to allow digital information to be recorded and distributed but not edited. It was first outlined in 1991 by Stuart Haber and W.Scott Stornetta, two researchers who wanted to implement a system where document timestamps could not be tampered with. But it was not until two decades later, the launch of Bitcoin in 2009, that blockchain had its first real-world application.
With blockchain, you are supposed to be able to safely transfer money from one person to the other without a central authority. To do this, they rely on three leading technologies:
It is the combination of these technologies that give blockchain its uniqueness.
It is best to consider the ledger as a system to track and manage ownership of assets such as a house or the amount of cryptocurrency you possess. It is a technique that teaches us how to prevent third parties from reading private messages. And a distributed network of computers is a group of independent computers. This also works with bitcoin, so the ledger would track how much bitcoin and who owns what amount.
Executing a set of transactions means some people will have more Bitcoin, some less, and for some, the amount they possess hasn’t changed. A block is a group of bundled transactions. These blocks are linked together in chronological order and are collectively called the blockchain.
Cryptography ensures that data admitted to the blocks is valid and that the blocks stay linked in chronological order. The result is a documented immutable record of all consecutive legitimate transactions. An essential criterion for a good transaction is that a person spending money owns the money.
In a real-life scenario, you can give one banknote only to one person. You want cryptocurrencies to behave in the same manner, even though you can copy data in the digital world. So, in the digital world, we need to tackle this double-spending problem. Satoshi Nakamoto’s whitepaper has introduced a solution to this problem.
Nakamoto wrote Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin’s white paper laid out an inspiring new definition of money at a time when faith in the traditional financial system was still being salvaged.
The Peer-to-Peer network ensures that every computer within the blockchain has a copy of the shared digital ledger. That means that it is not a problem if a few documents get lost because there are always sufficient other computers that maintain a copy. Also, given the large number of participants in the blockchain bitcoin network, it is virtually impossible to tamper with a documented transaction. Because, by design, the majority decides that tampering would be required at the same time on 51% of independent computers, the shared digital ledger would need to be replaced by a new copy that contains the fraudulent transaction. This is basically impossible. That is why you cannot hack the blockchain.
Blockchain Technologies are very popular as they are very secure and run on autonomy. And what better way than to look at how Blockchains Technologies are used in the real world.
In theory, a blockchain can be used to immutably record any number of data points, such as the obvious form of transaction. It could also be used to record votes in an election, product inventories, state identifications, deeds to homes, and much more. However, there are so many ways that blockchain technology can be used other than just recording transactions. They also help in the real world.
The Food Standards Agency (FSA) was aware that consumers would want more trusted and transparent evidence of the life cycles of the food they eat. So, back in 2018, they tested blockchain in the food sector. This technology was implemented at a cattle slaughterhouse and was the first time blockchain was used as a regulatory tool for the food sector. It was a huge success and is now being implemented in other UK food industry areas!
It can also help with Health Records. Blockchain Technology has huge applications in the healthcare sector, where a large amount of essential medical data must be stored and shared across the globe. The idea of a decentralized healthcare data system is an evident and valuable system that could save lives and improve patient care. This way, a patient essentially owns their health records; they can grant or deny access to doctors or researchers, preventing unauthorized access, third party resale, and tampering.
A more than likely avenue for blockchain is also in gambling games. Currently, the lack of transparency, regulatory controls, oversight, and the overwhelming power of gambling game companies can allow them to take advantage of vulnerable players easily. Blockchain technology can add a level of safety and certainty as game results running on the blockchain are determined as intended and without interference.
Companies such as Forte are already looking at the prospects of using blockchain. In a blog on its website, Forte comments: “We believe blockchain technology will unlock a new wave of economic and creative opportunities for players, developers, and entrepreneurs.
“The technology’s unique properties map perfectly to the digital nature of games and enable the secure ownership of in-game digital assets, thereby laying the foundation for ground-breaking blockchain- and crypto-native marketplaces and services for the games industry.”
Blockchain also offers the oil and gas industry a considerable boost in the entire transaction, price, trading, and payment ecosystem. Supply chain networks are the lifeblood of the sector, and blockchain offers a way to drive efficiency, prevent fraud and help with cost-effectiveness. Shipping vast quantities of supplies is a complex process that requires many different parties to participate, signing documents and ensuring the ships are following the correct routes. Blockchain can streamline the process by creating a secure data exchange on the system and a tamper-proof repository for the documents and shipping events. Using this system can reduce delays in shipping and fraud, saving billions annually across the entire supply chain.
Many resources can help you become a blockchain pro and helpfully explain a lot of the elements within Blockchain technology. Unblocktalent wants to help you become proficient experts at Blockchain Technology and help you understand its building blocks.
Smart Contracts are amongst the most widely discussed and debated topics in the blockchain industry. A smart contract is a contract that is self-enforcing and controlled by its specific terms and conditions, which stores and processes the contract through the use of Blockchain technology. To do this, all parties involved must negotiate and agree to the terms and conditions of the contract, as they would with a formal agreement. Whether in their entirety or in part in smart contract code, these terms are then stored in the blockchain. Smart Contacts allow reliable and consistent transactions to be carried out without the intervention of a third party.
Sharing information across a large network like a blockchain can be a challenging task. Sending the same data to countless nodes across the network can use a considerable amount of processing power, making it take a long time and often limit the value of data once it reaches the final destination. Gossip protocols can solve this problem allowing information to flow from node to node like information on social media.
A Gossip protocol is a peer-to-peer communication protocol designed to allow information to flow through a large network, like a blockchain. A gossip protocol will first send out data to a random group of nodes which will continue until every node on the network is “infected” with the data. This makes it much easier to spread information across the large network without relying on a single node to do all of the heavy lifting.
However, this is a lot of information to process, and it’s a never-ending stream of learning, especially as technology continues to develop, so this is where Unblocktalent can help as they have a clean environment on a complex subject, allowing you all to learn at your own level and pace. In addition, Unblocktalent has a glossary and several different blog posts and courses that can help you with your training.
The predicted market value of blockchain technology is enormous. The impact of blockchain on various industries can vary, so it is good to learn about its real value and its best use cases.