Blockchain technology: what is it? And its top applicationsApr 12, 2019
If you are looking for a piece of information, how would you get it?
Probably, the answer you will say is dependent on your age.
If you belong to 1990s or 2000s generation, it is very likely you will immediately answer Wikipedia.
If you are much older, you will possibly reply with books or paper encyclopedias. But let me focus on one of the most genuine and credible encyclopedias ever; Britannica.
Wikipedia is looked upon as the world’s top decentralized source for a wide range of information including science, history, sport, religion, fashion, industry, etc.
The open-to-public free online platform is estimated to have around 270.000 editors each month. Those editors can refine, update or even remove content from the informative platform.
Despite the concerns about the credibility and reliability of its content, Wikipedia has undoubtedly added a lot to people knowledge and facilitated research methods.
On the other hand, Britannica is based upon selling its content. The famous encyclopedia hires around 4.000 editors who create its content.
Then, you have to pay money to get the information you need. In addition, you have no access to edit or correct the information provided by the platform.
What is blockchain? And how is it distinguished from traditional banks?
To build up the previous analogy, you can imagine blockchain technology as Wikipedia. However, PayPal or traditional banks can represent Britannica.
How PayPal works
PayPal is a banking service provider where you can keep your money, follow up on your finance and do the daily transactions you want.
So let us put it this way. PayPal has a centralized ledger for you where all your transactions are recorded. This ledger is filled in by bankers at PayPal.
The time you make a transaction or cash withdrawals, those bankers get your ledger updated. Every time you log into your ledger, you have to trust PayPal’s authority that your money is safe with them.
That is how PayPal’s work? What happens on the other side with blockchain technology?
The blockchain provides a decentralized ledger which is operated and updated by the parties involved within it.
In more explanation, around 6.000 computers are connected together to provide a sharable record of financial transactions of users involved in the blockchain.
Updating ledgers on the blockchain
What is most powerful about this technology is the way the ledgers get updated. Every 10 minutes, the whole ledger is updated and the recent transactions are added.
The updating process is so unique, but still challenging for all parties. An energy-intensive mathematical problem pops out every 10 minutes.
All 6.000 computers, also known as miners begin to compete together to find the answer.
The more powerful and advanced your computer is, the more chances you have to figure out the solution to the problem.
Once a computer gets it done, it shares the solution with other computers. Once the answer is confirmed by others, the computer can now update the blockchain with recent transactions.
If 50% of computers approved the update of the network, then the added transactions acquire validity and authenticity.
One extraordinary element that has been introduced to the world is bitcoins. Bitcoins represent the digital currency created by Satoshi Nakamoto, the Japanese computer programmer.
Bitcoins is thought to go with the same trend as blockchain.
Instead of relying on cash money, bitcoins enable their owners to buy whatever products they need and are recognized similarly as money.
The digital currency promotes the blockchain technology and contributes to its prosperity.
Being digital, this will facilitate the work of blockchains to record the financial transactions.
Insights from the process of updating the ledger by blockchain
Since its debut, the way blockchain works has received huge impression and acceptance among keynote financial specialist and entrepreneurs.
William Mougayar, the Canadian venture advisor and 4x entrepreneur gave a remarkable analogy to elaborate the impact of blockchain technology.
In addition, he introduced a list of significant areas where it can considerably help.
“That’s how databases work today. Two owners can’t be messing with the same record at once. That’s how banks maintain money balances and transfers; they briefly lock access (or decrease the balance) while they make a transfer, then update the other side, then re-open access (or update again)”
Said Mr. William to display a clear flaw with databases.
“With Google Docs (or Google Sheets), both parties have access to the same document at the same time, and the single version of that document is always visible to both of them. It is like a shared ledger, but it is a shared document. The distributed part comes into play when sharing involves a number of people.”
Another exemplary author and Tedx speaker, Ian Khan illuminated the potentials of blockchain to afford accountability and authentication for financial transactions.
“As revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved.”
He added, “Above anything else, the most critical area where Blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.”
Blockchain continues to gain interest within multiple applications
So is the newborn technology limited to financial applications and transaction-recording purposes?
Basically, this is how things were upon its invention in 2008. But things are no longer the same.
The blockchain technology is on the way to get extended to more areas and applications rather than the conventional ones.
Interestingly, the job market has displayed a tremendous rise in blockchain jobs by around 631% since November 2015.
Back to blockchain future applications, let me introduce you to the top three potential areas blockchain is anticipated to conquer very soon.
The business world has been thinking to integrate the smart technology into the process of crafting business contracts. On their pursuit to do so, a project called Ethereum was launched.
Ethereum is an open source blockchain project assigned to enable the coding of contracts. These contracts will be activated once specific conditions are met.
So far and at this level of development, a smart contract can get programmed to carry out simple functions.
For example, a payment can automatically be delivered to the investor once he is done with a part of the project.
The sharing economy
As sharing economy ventures such as Uber and AirBnB are flourishing, the blockchain technology has a promising opportunity in the scope.
Talking about Uber, it works as a specific intermediary that affords you the service and hence loading an additional cost on you. By enabling peer-to-peer payments, you will no longer need to pay for the ride as well as the service.
Blockchain will provide the chance of direct interaction between parties and accordingly decentralize the process.
Supply chain auditing
Concerns about the quality of the products we consume every day are increasing. Indeed, customers have no observation over or awareness about the supply chain processes the products undertake.
Blockchain can help to erase these fears. Throughout distributed ledgers, it is possible for customers to ensure the backstories of products we consume are genuine.
To your surprise, the Ethereum blockchain project also serves in this interest.
The blockchain marks one of this era’s most intelligent technologies the human has ever reached.
The revolutionary invention will contribute to turning the foundations of how humans used to trade upside down.
Digital currency is expected to take over and paper money shall be useless.
Not only this, but blockchain is now invading new areas rather than the financial ones.
This will eventually contribute to giving parties more supervision and monitoring over transactional processes and the products they consume every day.