Blockchain technology promises to revolutionize practically every sector of the modern economy. In this post, we take a look at why everyone’s so excited about blockchain and what do all the wide applications of blockchain really boil down to.
To create a basic level understanding of what blockchain is capable of, let’s look at the 10 things blockchain can do
1. Decentralized Database
Blockchains are called so because they are blocks where data is stored in linear containers. These blocks form a chain, so the name blockchain.
Anyone can notice that you’ve placed data there, since it is semi-public and carries your signature. However, only you can unlock what’s there in the block (container). You can do so securely by using the private keys to that data block.
Essentially, blockchain is a database with the “header”, where the information is stored as public. If you think that’s not very good for a database, you’re right. Blockchain isn’t the best database, but that’s not a problem. Blockchain isn’t meant to be the substitute of a database.
Instead, we expect developers to find ways to rewrite their applications that capitalize upon the strong points of blockchain’s state transition capabilities.
Simply put, blockchain has disrupted the database transaction process paradigm.
2. Distributed and shared accounting ledger
Firstly, blockchain is a semi-public and therefore distributed ledger. That makes it shareable across multiple entities without sacrificing security.
What’s more, the ledger is time-stamped. This makes every single transaction verifiable and traceable. All computers on the network can validate every single transaction. That becomes one of the key strengths of blockchain – it automatically prevents double-counting. As a result, the chances of both errors as well as fraudulent transactions are virtually zero.
This may appear to be the single most important application of blockchain but there are many more, equally powerful uses of blockchain.
3. Peer-to-Peer Network
You would’ve noticed by now that being shareable, there’s nothing that is “central” about blockchain. It’s architectured in a way that there’s no central server that dictates transactions – it remains a peer-to-peer network over nodes. Your computer, if a part of the network, can verify transactions happening over the network. You could call it thin computing in its best decentralized format.
Because of this, users can reach out to other users and transact with each other instantly, irrespective of geographical or time-zone differences. There are no intermediaries like a main server to filter or slow down the transaction. Hence, the transaction happens without delay. All nodes on the network have equal importance and can offer their knowledge of all transactions over the network.
This goes beyond just being a peer-to-peer network and creates a marketplace for users, a distributed economy. The size of such marketplaces varies greatly in size without compromising the integrity of blockchain.
Without doubt, cryptocurrencies (aka token) are the most popularly known application of blockchain. Famous examples of cryptocurrency include Bitcoin (BTC), Ethereum (ETH) and Ripple.
Basically, cryptocurrency is an economic proxy of the operations and security of blockchain, a cryptographically encrypted currency. Cryptocurrencies follow a set of protocols and are not dependent on a single government body, entity or authority. They have an open source code, which means anyone can available for everyone to use or modify.
Cryptocurrencies, like other currencies, can have a compensatory as well as production role. Miners who mine out cryptocurrencies and successfully validate blockchain transactions can be awarded the currency. Additionally, there is a consumption role, where you pay a small fee for running smart, blockchain-backed contracts (using Ethereum), an equivalent of transaction fee (with Bitcoin or Ripple). These costs and compensations are placed so as to prevent abuse of the blockchain system. In a larger, more advanced case, tokens may be used simply for internal value, asin DOAs (Distributed Autonomous Organizations).
Technically, it’s a currency and therefore can be traded over currency exchanges, pretty much the same way you trade Euros and Dollars. You can also buy goods and pay for services, with the help of Bitcoins. Such transactions are smooth and secure within the blockchain network.
Of course, when it crosses over and has to interact with traditional, real-world currency, there’s a chance of friction and delay.
Like any other asset, one can invest and transact in cryptocurrencies. As a result, it is susceptible to volatility and hence keeps away a large number of potential investors. The volatility originates from the genuine uncertainty. It is hoped that as it gains more acceptance and more understanding develops, the uncertainty will drop considerably. That would make cryptocurrency more stable in the long run.
5. Open Source Software
Technologies with open source software are not just transparent. They have the benefit of huge improvements by way of collaborations that add massive, valuable features on the top of the core software. That way, users keep tinkering and adding value to the core.
A good case is Bitcoin. Its core protocol is fully open source. From the time Satoshi Nakamoto was inspired by Nick Szabo, it was clear that open source was the way to go. Since its inception, Bitcoin is being maintained by a collaborative group of “core developers”. Their work is continually complemented by contribution from thousands of independent developers the world around. These independent developers constantly come up with complementary products, services and applications that benefit from the Bitcoin protocol and its robust nature. Eventually, we can see an extremely strong ecosystem being built around Bitcoin. Essentially, it’s the open source nature that has led to the level of excellence that Bitcoin is.
Source - Read More at: digitalbit.co.in