BLOCKCHAIN

What is Blockchain?

Blockchain is a digital, distributed, and immutable ledger for the process of recording transactions and tracking assets in a business network. Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.

Blockchain is typically managed by a peer-to-peer network for use as a publicly distributed ledger, where nodes collectively adhere to a protocol to communicate and validate new blocks. Although blockchain records are not unalterable as forks are possible, blockchains may be considered secure by design.

 

In simple terms, Blockchain is a digital, distributed, decentralised, public ledger and specific type of database. The blockchain is an incorruptible digital ledger of transactions that can be programmed to record virtually everything of value. Each list of records in a blockchain is called a block. So a blockchain is a continuously growing list of records called blocks, which are linked and secured.

Structure of Blockchain

Each Transaction is Recorded as a “Block” of Data

A blockchain is a decentralised, distributed, and public digital ledger consisting of records called blocks that are used to record transactions across many computers so that any involved block cannot be altered retroactively, without the alteration of all subsequent blocks. Those transactions show the movement of an asset that can be tangible or intangible.

Each Block is Connected to the Ones Before and After

These blocks form a chain of data as an asset moves from place to place or ownership changes hands. The blocks using a peer-to-peer network and confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered or a block being inserted between two existing blocks.

Transactions are Blocked Together in an Irreversible Chain

Each additional block strengthens the verification of the previous block and hence the entire blockchain. This renders the blockchain tamper-evident, delivering the key strength of immutability. This removes the possibility of tampering by a malicious actor and builds a ledger of transactions and other network members can trust. A blockchain has been described as a value-exchange protocol.

Structure Layers of Blockchain

A blockchain can be seen as consisting of several layers: Infrastructure (Hardware), Networking (Node), Semantic Layer (Consensus Algorithms), Data (Blocks, Transactions), and Application (User interface).  

Key Elements of Blockchain

Distributed Ledger Technology

All network participants have access to the distributed ledger and its immutable record of transactions. With this shared ledger, transactions are recorded only once, eliminating the duplication of effort that’s typical of traditional business networks.

Immutable Records

No participant can change or tamper with a transaction after it’s been recorded to the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the error, and both transactions are then visible.

Smart Contracts

A smart contract can define conditions for corporate bond transfers, include terms for travel insurance to be paid, and much more. A key feature of smart contracts is that they do not need a trusted third party to act as an intermediary between contracting entities the blockchain network executes the contract on its own. This may reduce friction between entities when transferring value and could subsequently open the door to a higher level of transaction automation.

Important of Blockchain

Business runs on information. Blockchain is ideal for delivering that information because it provides immediate, shared and completely transparent information stored on an immutable ledger that can be accessed only by permission network members. 

A blockchain network can track orders, payments, accounts, production, and much more. And because members share a single view of the truth, you can see all details of a transaction end-to-end, giving you greater confidence, as well as new efficiencies and opportunities.

Uses of Blockchain

Cryptocurrencies

Most cryptocurrencies use blockchain technology to record transactions. For example, the bitcoin network and Ethereum network are both based on blockchain technology.

Smart Contracts

Blockchain-based smart contracts are proposed contracts that can be partially or fully executed or enforced without human interaction. To speed transactions, a set of rules called a smart contract is stored on the blockchain and executed automatically.

Banking & Financial Services

Many Banks have expressed interest in implementing distributed ledgers for use in banking and are cooperating with companies creating private blockchains. Banks are interested in this technology because it has the potential to speed up back-office settlement systems.

Supply Chain Management

Blockchain technology provides transparency to the whole supply chain process. It gives businesses the ability to track the goods from the source points to their delivery points. These trackings are done accurately and provide a better way to handle goods and their condition.

Healthcare

In the 2020 COVID-19 pandemic, a blockchain to help employers, governments, airlines, and others keep track of people who have had antibody tests and could be immune to the virus. Hospitals and vendors also utilized a blockchain for needed medical equipment. Additionally, blockchain technology was being used to takes for health insurance payments to be paid to health care providers and patients.

Domain Names

The domain names can be controlled by the use of a private key, which purports to allow for uncensorable websites. This would also bypass a registrar's ability to suppress domains used for fraud, abuse, or illegal content.

Government Services

Any Government can use blockchain technology to change its process. By using blockchain, they can make their processes transparent and the public will have a better understanding of how their governments are working.

Benefits of Blockchain

Greater Trust

With blockchain, as a member of a members-only network, you can rest assured that you are receiving accurate and timely data and that your confidential blockchain records will be shared only with network members to whom you have specifically granted access.

Greater Security

Consensus on data accuracy is required from all network members, and all validated transactions are immutable because they are recorded permanently. No one, not even a system administrator, can delete a transaction.

More Efficiencies

With a distributed ledger that is shared among members of a network, time-wasting record reconciliations are eliminated. And to speed transactions, a set of rules called a smart contract can be stored on the blockchain and executed automatically.

Types of Blockchain

There are different major types of blockchain technologies are:

Public Blockchain

A public blockchain is the permission-less distributed ledger technology where anyone can join and do transactions, no access restrictions. It is a non-restrictive version where each peer has a copy of the ledger. This also means that anyone can access the public blockchain if they have an internet connection.

Examples of Public Blockchain: Bitcoin, Ethereum, and Litecoin.

Private Blockchain

A private blockchain is one of the different types of blockchain technology.  A private blockchain network is a decentralized peer-to-peer network. A private blockchain that works in a restrictive environment, i.e., a closed network. However, one organization governs the network, controlling who is allowed to participate, execute a consensus protocol and maintain the shared ledger. It is also a permissioned blockchain that is under the control of an entity.

Examples of Private Blockchain: Multichain, Hyperledger Fabric, and Corda.

Permissioned Blockchain

A private blockchain will generally set up a permissioned blockchain network. In permissioned blockchain participants need to obtain an invitation or permission to join.  A private blockchain is permissioned. One cannot join it unless invited by the network administrators. Participant and validator access is restricted.

Hybrid Blockchain

Hybrid blockchain is one of the different types of blockchain technology. Hybrid blockchain is best defined as a combination of a private and public blockchain. A hybrid blockchain has a combination of centralized and decentralized features. It has use-cases in an organization that neither wants to deploy a private blockchain nor public blockchain and simply wants to deploy both worlds’ best.

Example of Hybrid Blockchain: Dragonchain, and XinFin’s Hybrid blockchain

 

Consortium Blockchain

A consortium blockchain is one of the different types of blockchain technology. These pre-selected organizations determine who may submit transactions or access the data. A consortium blockchain is a creative approach to solving organizations’ needs where there is a need for both public and private blockchain features. Further, consortium blockchain is ideal for business when all participants need to be permissioned and have a shared responsibility for the blockchain.

Examples of Consortium Blockchain: Marco Polo, Energy Web Foundation, and IBM Food Trust.

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Sources: https://www.ibm.com/, https://wikipedia.org/, https://101blockchains.com/