If you have been keeping an eye on the tech trends being discussed on magazines and social media, there’s a slim chance of missing the latest buzzword – Blockchain! Though IT influencers are betting big on this disruptive technology that is expected to transform all major industries, little is known about why it is garnering attention across the world. Here’s the complete picture.
Shortly after the 2008 global financial crisis, a group or person named Satoshi Nakomoto unveiled a peer-to-peer electronic financial system that allows parties to directly trade with each other without depending on third parties such as banks, notaries, credit reporting agencies etc. The system was to use digital cryptocurrencies called bitcoins and the underlying technology was termed Blockchain.
How it Works:
Transactions, since time immemorial, are being recorded in ledgers that are held by trusted third parties. The crux of the problem lies in the fact that the centralized copy of these ledgers can be removed/added/deleted by these intermediaries without public knowledge. How do we make sure that the authenticity of the records is maintained? Enter – blockchain. In a blockchain ledger, every transaction is logged with details such as time of entry, date, participants and amount. Each record will have a unique, unhackable key associated with it. When the second record is written, all contents in the first record along with its key go into the formula that produces the second record with its unique key. In this manner, a dependency on the previous records is created for each new record, converting it into a “chain” of records. Thousands of participants within an industry operate on a single blockchain so that each has a copy of the ledger. Tampering can happen, but the consensus algorithm checks the changes with the other copies, easily figures out the discrepancy, removes the muted record and replaces it with the original one. The ledger can be updated only after a majority of the parties express their consensus and information once entered cannot be erased. So what finally exists is a decentralized, immutable and distributed digital ledger that can be altered only by altering all subsequent blocks and the collusion of the network.
Types of Blockchain:
Public blockchain: In a public blockchain, anybody can become a member of the network and each user holds equal read/write rights to alter the data in the ledger. Due to the same reasons, verification of transactions is a time-consuming process and users incur a huge transaction fee. But on the brighter side, hacking becomes next to impossible due to the innumerable nodes involved. Examples: Bitcoin, Ethereum & more.
Private blockchain: Private blockchains, on the other hand, offer restricted or limited “read” permission while “write” permission rests with a single, trusted organization that can change the rules. Verification is faster and the transaction fee is minimal due to the reduced number of parties involved.
Permissioned blockchains: These are a blend of public and private blockchains. Instead of trusting a single authority with your transactions or allowing random participants access to confidential data, selected participants are vested with read/write permissions. Transactions are faster with minimal fees, yet secrecy is not at stake. A good deal right?
As you would be convinced by now, blockchain eliminates the trust gap and will have massive implications across industries! With intelligent devices expected to soar to 75.4 billion in 2025, blockchain can disrupt the IoT industry by providing reliable interconnections over a secure network without depending on central servers and assure the legitimacy of data. With Gartner estimating the business value-add of blockchain to grow to $3.1 trillion by 2030, blockchain certainly seems to be a promising technology that is here to stay!
Be it a B2B or B2C company in any industry – manufacturing, retail, financial, real estate, e-commerce and beyond, financial transactions are inevitable and this is where Blockchain comes into picture. Since the system eliminates intermediaries, you can do away with the transaction fees and delays associated with authorization. Decentralization prevents payment scams and the public nature of ledgers ensures transparency in transactions. In fact, the trend is transcending the boundaries of financial transactions and extending to all walks of life. It ensures data security in public cloud through encryption keys, expands the capabilities of manufacturing companies through intellectual property rights, simplifies the process of tracking down discrepancies by law firms through time-stamped ledgers, realizes pay-for-performance in HR firms… the benefits are endless!
So make sure you embrace the technology without further delay and strengthen your reputation as an innovator in your domain. Good luck!