Blockchain is one of the hottest technologies of today. It started out as a ledger for cryptocurrency transactions to be recorded securely with encryption and distributed in a decentralized manner. However, today it is much more than that and its potential is endless.
The Blockchain is starting to be felt across many industries as it is changing the way agreements are signed and kept. Blockchain consulting is a great way to familiarize yourself with the technology and find ways to tap into it for a wide range of projects.
What is the Blockchain
The Blockchain is not easy to describe in a few words. There is also no single Blockchain, but many. Notable examples include the Bitcoin Blockchain for cryptocurrency record keeping and the Ethereum Blockchain used for creating decentralized apps and smart contracts.
The Blockchain is a decentralized network of nodes functioning as a ledger. Users who make agreements or transactions, for instance, share this data securely through encrypted blocks on the digital ledger. There is no central figurehead that acts as a broker and takes a cut out of transactions or controls what is recorded.
Thus, the Blockchain can take away the middle-man or broker and allow companies to sign secure agreements without involving third parties. This is a huge deal across many industries, from real estate to banking.
The Blockchain uses advanced encryption between each node and the user. The data or information recorded is distributed, but not copied. It does not have to be tied to finance at all, the data can be virtually anything.
Why the Blockchain Is Worth Considering from a Business Perspective
Many businesses today have agreements between parties that are not as binding as they would like. These agreements are prone to be lost, misfiled or even altered by nefarious parties. Other people also join companies and roles get switched within these companies as demotions and promotions occur.
These agreements have traditionally been signed by the present parties on paper that is prone to deteriorate over time. This is where the Blockchain comes in.
As a digital ledger with encryption across a decentralized network of nodes, information stored is virtually lossless, secure and available on-demand. There is no central authority controlling the flow of data. Thus, no entity will be able to tamper with it through updates, acquisitions or other common actions among brokers or middleman companies.
Every node or computer tapping into the network has its own copy of the entire Blockchain. Thus, there are thousands if not millions of copies in existence and readily available. Even if it could be modified, there are so many copies available of the Blockchain that the questionable block could easily be verified by other nodes on the network.
The shared nature of the network of nodes makes it much more difficult to manipulate. A hacker would need to manipulate every block from each node or user having access to the network.
How the Blockchain is Structured
This is where the issue of privacy and anonymity comes in. Even though the information recorded on the blocks within the chain and ledger is available for all who share it, unauthorized parties do not have to identify information about the parties involved. The transactions may not be anonymous, but they are private. This means they are limited to usernames or digital signatures.
Various Blockchain networks have a series of tests in place for new users that want to join and allow their computers to function as nodes. This is done to make sure each user is trustworthy and will be a productive member of the larger chain. These tests are called “consensus models.”
Usually, users want to join the network in order to let their computers mine or add to the block. Mining can have financial gains and other benefits for them. However, the process is not easy. It involves solving complex mathematical problems and a lot of computational power.
What are Blockchain Blocks
Information on the Blockchain ledger is stored in blocks. Blockchain is just a chain of blocks in its basic nature. These blocks consist of three parts:
- The blocks store information about transactions that include the date, time, monetary value and things of this nature.
- The blocks record information about the parties participating in the transaction or agreement. No real names have to be used as the information is recorded without specifically identifying the people involved. A digital signature is used instead, that functions as an online username.
- Each block is distinguished from other blocks on the ledger with the use of a unique digital code called “hash.” This is how the information is separated and can be distinguished from everything else on the same ledger and even from similar transactions by the same parties involved.
An individual block on the chain can store up to 1MB of data, which means a few thousand transactions can be hosted on it.
Anyone in the business or financial world looking at the Blockchain’s inner workings should see why the digital ledger is so attractive. Its system allows for information to easily be identified and distinguished from many other financial transactions with the use of the hash code. It is again decentralized and part of a shared network, thus you should not worry about the data disappearing or being revised by third parties.
It is difficult to alter blocks already added to the Blockchain because each one contains its own hash along with the hash of the block that came before it. The hash is created mathematically with a code consisting of letters and numbers. Altering anything within this code would be noticeable.
New blocks are also always stored chronologically and in a linear fashion. They are always added to the end of the chain.
All of these things and more make it very useful for finance. Any business can benefit from a ledger that is secure without the worry of anyone being able to alter it. However, the Blockchain is moving beyond just the recording of financial transactions and is starting to be used for other purposes as well.
The Blockchain’s Far-Reaching Potential
If you are involved in transactions on a large scale and work within, say, the real estate industry, you probably know the painful process of securing long-term contracts. You may even have a lawyer involved that checks each bit of information as well as separate accountants that fact-check and record it.
The Blockchain can eliminate the need for lawyers to always be present with the use of the previously-mentioned smart contracts. These contracts are digital agreements converted to computer code and stored on the ledger.
Smart contracts are an example of what the Blockchain is capable of. Another example is smaller transactions between freelancers and employers on a public service site within the gig economy. Instead of Fiverr or one of the other companies acting as a middleman and taking a cut, the Blockchain would record the transaction for free and store it as a block on the ledger.
This example is simplified, of course, as the site in question would try to get a cut in some way to function as a business. However, an entire network could be created using the Blockchain amongst gig economy users themselves. This way, it would be employers that would use this network, so that everyone saves costs and eliminates the middleman.
These examples show just how far-reaching the Blockchain can be and how it continues to evolve. Blockchain development offers companies the ability to create software on the cutting edge. New ideas arise and more networks get set up that showcase the Blockchain’s potential.
There are many benefits in learning about the Blockchain and in finding ways to implement it within the software. Do not be left behind and play catch up with this technology, embrace it into your workflow.