Blockchain technology could change our world more than people imagine,

Jack Ma, Founder and Chairman, Alibaba Group.

Blockchain Technology in Layman’s Terms

With the declaration of crypto-taxation laws of Budget 2022, it becomes important for us to have a basic understanding of the technology on which it is based and what is the need for such a technology.

Let’s have a closer look at the technology to find it all out.

Need of the Technology

The main need of blockchain technology is to create a secured shared database where data cannot be manipulated easily. Let’s consider a scenario.

 In a national-level competitive exam, the marks of every student need to be secured to accurately calculate their ranks. But due to some malpractices and bribery, the marks of some students were manipulated to give an unfair advantage to them. It is very difficult to monitor such malpractices on such a large-scale exam. That is where blockchain steps in.

Another use of blockchain technology is to eliminate the middleman in the process of transferring data. How? Read further to find out.

What is Blockchain Technology?

A blockchain is a distributed database that is shared among its nodes. It facilitates the process of recording transactions and records 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.

It is a decentralized database where it is very difficult to change data since the access of data is given to everyone, thus making it more reliable.

The system is similar to a personal diary where we write what happened in our day. The whole diary is the blockchain system. Each day’s entries represent the individual blocks while the binding represents the nodes that connect each block to another (like a binding that connects one page to another).

The only difference is that the database is not personal but every member has access to it and changes in data (individual blocks) can only be done by a vote of all members of the database.

Blockchain and its Architecture

Every block has 2 major security components which makes it so reliable.

1: Hashing (Address storing)

Every block stores its data, its’ hash alongside the previous block’s hash. This creates a chain of blocks where information is shared equally among every participant. To tamper with data, one has to hack most of the nodes if not all of them.

This is consensus protocol – a collective verification of the chain elements possible due to the storage of the blocks’ own and previous blocks’ hash. It is like giving a copy of data to every participant so that no one can manipulate original data.

2: Proof of Work

It is used to confirm the transaction and to slow down the process of block editing/creation. A group of people competes against each other to complete the transaction. This process is called mining and miners are rewarded after mining successfully. The time is close to 10 minutes for crypto-currency-based blockchains. Paired with hashing, this makes tampering with data next to impossible.

As we have seen in Blockchain Technology data is stored across the network chain instead of a central storage system from which everyone shares in form of copies. This creates a trustable network where hackers don’t have a weak node to attack and manipulate data since every node is of equal importance.

History of Blockchain Technology

The concept of Blockchain technology first started around 1991 when researchers Stuart Haber and W. Scott Stornetta wanted to introduce a computational system for time-stamping digital documents so that they could not be messed with. The technology only came to the limelight in late 2008 when Satoshi Nakamoto developed a ledger for his crypto Bitcoin.

It soon blew up and made a name throughout the world thus giving way to the rise of other cryptocurrencies. Blockchain then jumped to areas outside of e-currencies, wherever sharing of important and sensitive information is required. The terms crypto and blockchain became especially famous in India when the value of Bitcoin was touching the skies during the pandemic.

Real-life uses of Blockchain Technology

Blockchain is a technology that is still getting better day by day. But in the ongoing time too, it has a variety of applications.

Cryptocurrency exchange:

The most popular and primary application of blockchain in real life is digital currencies that use cryptography to secure online transactions and whose value is dependent on demand in the market and is not under the complete control of the government. They are very volatile due to fewer laws on its taxations and price regulations.

Though it cannot be used in every purchase of goods or services, one by one, major companies are starting to accept crypto as a valid mode of transaction. Mainly it is known as something that gets traded though it doesn’t have any extrinsic value. The concept of Cryptocurrency gets mixed reviews even from known investors and market experts.

https://crypterium.com/news/post/best-cryptocurrency-news-websites

A few of the most famous cryptocurrencies are Bitcoin, Ethereum, Dogecoin, Litecoin, Shiba Inu. Bitcoin was created with its future vision as a currency, while Dogecoin and Shiba Inu were meme coins created for the sake of fun. Still, the valuation of meme coins is high and they have a very high chance of getting bust the next hour. Experts advise not to make portfolios based on them.

NFT’s:

NFT (Non-Fungible Token) – is a digital asset that represents ownership of a digital or physical item. Mostly it consists of digital art but it can vary from music, real estate to even ownership rights of an organization. Due to the application of blockchain technology, ownership rights of the asset is absolute as it makes it unique, safe, and irreplicable.

Any digital art that provides value can be made into a NFT
Mining of valuable metals and gems:

The mining industry has to manage the documents related to resource and reserve exploration, estimation, mine design, and planning process. Blockchain helps to improve the traceability of reserve estimation thus leading to better inventory management.

Blockchain has a broad network of asset and transaction data that helps to track the mineral chain. It leads to the automation of invoice reconciliation and assignment of a quality certificate that the customer sends to lab support for reassurance.

Other areas of application of blockchain:

1: Dapps and smart contracts

2: Bank-less money transfer system

3: Royalties tracking

4: Security of Digital Identity

5: Digital voting 6: Supply and inventory management

Future of Blockchain Technology: Bright or Dull

The technology is still in its developing phase and it still has a huge potential to grow.

The security and the universal applicability it provides will help it take over leading tasks and projects over every major industry of the digital space. The rise of metaverse will be also dependent mostly on blockchain to ensure privacy and to bring in web 3.0 where there will be no middleman for data transfer. Software giants acquire lots of data from us for their smooth functioning. If the data is breached or misused it can harm us in many ways that we cannot imagine. This is where blockchain technology comes into the picture.

Starting from crypto, Blockchain is on its way to conquer medical databases, demand and inventory management, and other businesses around the world. Although a young sapling now, when it reaches its peak glory, it will dominate the markets for a long time if not forever.

Have further questions about Blockchain and its applications? Leave us a note and we will reach back to you.

Author

Enthustiastic of recent developments in the field of technology and startups.