My Geek Score: We are living in the fourth industrial revolution, and it is more important than ever to discover ways to keep up with technology and embrace it in this day and age. That’s why I will introduce you to a mind-blowing technology – Blockchain, as it is one of the most talked-about inventions from the last decade.
Although blockchain technology is one of the most in-demand topics today, it is one of those things that may seem complicated at first, but the concept is quite simple.
This article is all about helping you cut straight to the chase, with an overview of different aspects of blockchain that will help you better understand what this remarkable technology is.
What is Blockchain Technology?
Blockchain technology is best explained as a transaction of a database that stores information in blocks and can be thought of as ledgers that are “shared” among the nodes of a computer network. As a database, it stores information in a digital format.
I know when you hear the words ‘block’ and ‘chain’ together, it can sound more complex than it needs to be.
But at its core, blockchain is just a method of storing information that ensures the fidelity and security of a data record.
In a simpler form, blockchain is a way to share transaction records between multiple parties securely.
And unlike traditional bank account ledgers maintained by one financial institution, blockchains are shared across a global network of computers, owned and operated by many people and companies.
Moreover, Blockchains are most famous for their crucial role in the cryptocurrency system Bitcoin, where they make it possible to transfer value, such as money or cryptocurrency, in a way that it is secure, reliable and resistant to outages.
However, this is just one facet of the many ways blockchains can be used beyond simple currency exchanges.
A Quick Glimpse of Blockchain History Timeline
Let’s take a trip down memory lane and explore the roots of modern-day blockchain technology.
The year 2008 was an exciting one. The introduction of digital information into currency – an idea that had been bantered around since the early 90s – came to life with the debut of Bitcoin, the world’s first decentralized and anonymous cryptocurrency.
However, the idea took another one year to come into reality. And the first version of blockchain was proposed in 2009 by Satoshi Nakamoto, thought to be a pseudonym used by the individual or group of individuals who proposed the technological foundations of Bitcoin and blockchain.
So officially, 2009 was a banner year for bitcoin and the blockchain, and this is where it all started when Satoshi Nakamoto mined the first bitcoin block and validated the concept of blockchain.
At first, its utility only included transactions on Bitcoin’s peer-to-peer network. Still, it later evolved to include other types of peer-to-peer transactions and transactions involving entities outside the blockchain.
How Many Blockchains are There?
The number of cryptocurrencies based on blockchain is growing at a high-speed rate. As of now, there are over 10,000 blockchains that individuals and groups have created in the past eight years, which is an incredible growth considering only one blockchain existed previously.
This number will only grow as the technology becomes more popularized and accepted in the mainstream.
However, the most highly-valued cryptocurrencies are all based on the blockchain. In short, in recent years, cryptocurrencies have seen a surge in popularity, and there are now over 6,000 on the market (according to Statista).
Research even shows that the top 20 cryptocurrencies back about 90% of the total cryptocurrency market cap.
How does Blockchain Technology Works?
Knowing what a distributed ledger is, it is essential to understand how blockchain technology works. In their simplest form, distributed ledgers are online databases that automatically store records of transactions.
This database is not hosted in any single location and is not controlled by one central agency. Instead, the database is distributed across multiple locations and can be accessed on the internet. This makes it easier for everyone to share data.
And so, Blockchain is a type of distributed ledger that maintains a continuously growing list of data records that grow with every completed transaction and are further added to it in chronological order.
Each node computer has a copy of the blockchain, which can be amended to include new blocks as they arrive. Nodes are used to detect and verify that the information stored in each block is valid, ensuring the integrity and chronological order of the blockchain.
What are the Benefits of Blockchain Technology?
1. Elimination of centralized authority: Traditional systems are controlled by centralized authorities, but blockchain technology allows users to control their transactions using cryptography. It also makes it impossible for data to be stolen or modified.
2. Reduces costs: Blockchain technology can significantly reduce costs because there is no need to pay third parties to verify transactions and maintain open communication lines between parties involved in a transaction.
In fact, blockchain technology will eventually create a fully autonomous, self-governing network that eliminates the need for third-party intermediaries such as banks or government agencies.
3. Speed: The use of blockchain technology can greatly improve the speed of operations in business processes and transactions by making them transparent and secure.
Additionally, unlike traditional banking systems, everyone involved in a transaction can monitor its progress with complete transparency on a blockchain network without any risks of scams or fraud.
4. Transparency: Blockchain technology has incredible potential to revolutionize how digital currencies operate. It reduces the need for trust between different parties because it establishes a way to verify, through decentralization, the validity of each transaction that has occurred.
And for industries that involve multiple stakeholders, blockchain can offer greater transparency in processes and agreements. This will lead to more efficient operations, fewer errors, and greater trust between parties.
What are the Main Challenges of Blockchain Technology?
Blockchain technology is yet in its infancy, which means that there are still several disadvantages of blockchain technology. That being said, you will overcome these disadvantages as the technology continues to mature.
The main challenges are:
• Blockchain use is somewhat limited: Blockchain technology is used for cryptocurrencies, and only a few companies have used it for other purposes. Thus, the applications of blockchain technology are rather limited at the moment.
• Blockchain is not easy to scale: As mentioned earlier, blockchain technology is still in its infancy stage. Scalability issues may arise when many people use it at once or when the number of transactions increases significantly.
• Blockchain technology is open to vulnerability: With cryptography in blockchain transactions, there are still some chances that hackers can exploit vulnerabilities in the system and gain access to sensitive information stored online. This can result in loss of funds invested by users and data theft through hacking.
• Scalability: While the distributed ledger technology has shown the potential to scale, it is still prone to bottlenecks given the size of transaction it handles in a second. So it would be early to conclude it has a disadvantage as the technology is still in its early phases and might take years before it is implemented on a large scale.
• Regulation: Blockchain technology can’t function properly without regulations because it gives anonymity. Some countries have already begun to tighten their grip on cryptocurrency companies and how they operate. Moreover, different stakeholders will want to implement different rules for their benefit when it comes down to governance.
Areas Where Blockchain Technology is Used
Blockchain technology is one of the most promising solutions for improving safety and accuracy in the supply chain and logistics sector. The technology has already found its place in several areas, including:
1. Financial services
The financial sector is one of the most advanced in adopting blockchain solutions for their needs and streamlining their operations.
Blockchains allow banks to offer more efficient services and increase transparency. From cross-border payments to domestic settlements, blockchain has been applied in multiple ways to make the transactions smoother, faster, secure, and transparent.
Blockchain technology is now being used in areas where no one thought it could be used. The insurance industry is one of the new industries working with blockchain technology to make transactions easier and more secure.
In addition, insurers can use blockchain technology to reduce fraudulent claims and reinsurers to help evaluate risks and process claims.
3. Shipping Logistics
Blockchains come into play when a product changes ownership, moves between companies, and even when the product is being transported. Many suppliers to big-box retailers, for example, use blockchain technology to keep track of shipments.
Trading may be the most obvious place where blockchain technology is used, and it all revolves around digital, peer-to-peer online transactions.
Inserting oneself in a distributed network of transactions then, using blockchains, draws more attention because of their many advantages, such as immutability and safety, as a secure way of making digital transactions.
5. Cyber Security
You can also utilize blockchain technology in cyber security. Various attacks and security breaches have been reported in companies, banks, and governments. Blockchain technology can help secure our data and communications in multiple sectors, including defense, finance, and health care.
How to Invest in Blockchain Technology?
Blockchain technology is disrupting the investment market, forecasting that it will be a whopping 162 billion dollar industry value in the next five years!
You can take advantage of this growth and put some money aside while the market is still low-key, putting you ahead of other investors when the time to strike comes.
Here are some options for investing in blockchain technology:
1. Stockpiling Bitcoin: One way to invest in the blockchain is to stockpile Bitcoin, similar to investing in gold or silver. If you believe in the usefulness of Bitcoin and other cryptocurrencies, then you might want to buy some and hold it as a long-term investment.
As you may have seen, the value of Bitcoins has skyrocketed these years. Many investors see this as a sign of a bubble, while others think it is still too early to tell.
Some investors believe that they will be worth ten times their value within the next five years. And so this trend has led many investors to buy Bitcoins and hold them for the long term.
2. Crowdfunding: The most common form of informal funding is the ICO, which stands for initial coin offering. This term covers everything from new cryptocurrencies issued by a developer working on a new blockchain project to companies selling shares of their company in exchange for investment.
While these opportunities may be suitable for tech-savvy people, they’re somewhat risky and do not have very high levels of protection in place.
3. Blockchain Penny Stocks: You can invest in blockchain technology stocks by buying shares in companies looking into ways of integrating blockchain into their businesses.
Several companies have made an initial public offering (IPO) where investors can buy stock in the company. However, this method can be made low-risk investments, although they are not without risk.
Note: However, investors should realize that cryptocurrency markets are volatile, and investing in individual coins can be prone to huge swings in value due to factors outside their control.
Hence we can conclude that Blockchain technology is undoubtedly one of the most exciting advances of recent years. It has already started to transform our lives in interesting ways, and it has the potential to do even more.
Blockchain is often compared with the internet because it’s a revolutionary technology. Just as the internet had phenomenal success in changing the way we live our lives, blockchain also promises change and improvement for many different areas of our lives.