Blockchain: What it is and why blockchain technology is the future

Blockchain technology is the future

08-04-2020

Blockchain technology is attracting increasingly greater attention from people. Even those who heard nothing about it just a year ago are now intrigued by it. And in this case, we are not talking about trading or bitcoin alone.

Blockchain is nothing short of incredible. In terms of relevance, this technology equals the invention of a wheel, an internal combustion engine, a computer, flight into outer space or the Internet.

Contents:

1. What is blockchain
2. Operating principle
3. Usefulness
4. Shortcomings of blockchain technology
5. Benefits of the blockchain
6. Application of blockchain technology in the foreseeable future
7. How blockchain can affect every aspect of life
8. Blockchain impact on finance world

What is blockchain

What is blockchain technology? On the one hand, the answer is pretty simple. This is a distributed ledger technology which is similar to record-keeping. The records of all actions performed within a network of interconnected computers are entered and stored, each having a certain code.

Bitcoin, which became the most popular cryptocurrency, serves as a conventional designation of actions performed inside the network. Anything from money to cars or real estate with a land lot can be encoded.

The actions performed by all users in the distributed ledger network should be confirmed, similar to the way entries are made in the ledger.

The strict order of the blockchain ensures uniqueness, security and flexibility when exchanging data.

This is made possible because absolutely all users will see that a certain asset now has a different owner, whenever the data is transferred within the network. They confirm the owner’s right to it and authorize this transaction.

Blockchain: What you should know about distributed ledger technology

Operating principle

To have a better understanding of what blockchain is and how it works, we will analyze the distributed ledger technology using a specific example.

Imagine that you wish to purchase Apple stock by paying bitcoins for it. The members of the network know that the stocks are owned by Apple, and you have a certain amount of bitcoins that you are willing to pay for it.

Having reached an agreement, you exchange thirty-digit codes within the blockchain network. This is when information is entered into the distributed ledger. Simultaneously, the data on the shareholder and a certain number of bitcoins are updated automatically on all computers within the network.

This is how blockchain technology ensures transaction security. To perform each transaction, a unique code is generated only by a certain party involved in the said transaction.

Creating a copy or changing this code is not possible since the unique code would have to be changed on all computers in the network simultaneously.

Now, once the transaction is made, the exchange transaction between the parties needs to be confirmed, which is possible only if the codes are accurate and match on all computers within the chain.

Making this transaction is allowed only provided that Apple stocks are assigned a specific digital code and the so-called hash. A hash algorithm turns an arbitrarily-large amount of data into a fixed-length hash.

Usefulness

Almost everyone already knows that you can use blockchain technology and cryptocurrency to make payments for anything and send them anywhere. But, first, let’s figure out what blockchain is and how it can be applied as illustrated by a home security system.

Let’s assume you have a digital security lock on your door. In order to open it, you need a special key with a thirty-digit code that is recorded on all of the computers within the chain.

The burglar will try to make changes to this code by uploading a virus file into your home’s security system. The technology will, in turn, instantly detect a forgery attempt by eliminating the malicious code from the network and blocking the user who is trying to do it.

Today, there are blockchain projects which use this technology in the field of information security and protection against malware and hackers.

As you can see, bitcoin and blockchain go far beyond just the payment system. A shining example is Ethereum, the revolutionary blockchain-based invention.

Blockchain: Ethereum

Ethereum is a unique, open source, blockchain-based computing platform that allows developing software aimed at exploiting advantages of the distributed ledger using a new unit called Ethereum.

Thanks to Ethereum, it became possible to write code to run on the blockchain and monetize software within the computer chain. This created a unique market for information products and sparked the emergence of new altcoins.


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Shortcomings of blockchain technology

Possibly, the only downside of the blockchain today is its complexity which slows down the process of its implementation in the society.

Despite the fact that there is a ton of information about bitcoin and blockchain investment, not all of those who are directly involved in it have a full understanding of what they are dealing with.

Benefits of blockchain

On the other hand, lack of understanding in a way becomes an advantage for the blockchain, since it makes it safe and secure.

The crucial positive feature of it is that the technology itself involves a direct exchange between the resource market players. Blockchain allows getting rid of the banks as a controlling authority, notaries, lawyers and other intermediaries who charge unreasonable fees.

All these functions are performed by technology independently in an automatic mode.

Application of technology in foreseeable future

The use of distributed ledger technology is under active consideration of the UN as part of the development of projects aimed at cutting the expenses associated with manufacture of food products and reducing their cost for the end user.

The core concept of such projects is to create a network of interconnected farms, groups of enterprises, factories and restaurants which are also linked to the consumer based on blockchain technology.

It is anticipated that farms will grow raw materials by avoiding any contacts with intermediaries, and factories and plants will process these raw materials. In turn, restaurants and consumers will buy it from the original manufacturer without intermediaries as well.

Perhaps this is what the world that uses the distributed ledger technology looks like.

Relevance of blockchain in this day and age

How blockchain can affect every aspect of life

Let's take a look at how blockchain will affect the labor market. Primarily, its application will have an impact on the process of salary payment and accounting of work performed, preventing shady customers from delaying payments. At the same time, the contractors will be keeping strictly within the boundaries of obligations undertaken.

Aside from that, the technology provides for intelligent production management through the use of robots, which will allow controlling the accounting, order placement, marketing, sales and logistics processes.

In addition, it will become possible to automatically identify the need for a particular product anywhere in the world.

Blockchain impact on finance world

Banks, stock exchanges, investment funds and insurance companies are already being founded based on blockchain technology. Cryptocurrencies are used increasingly often by sellers as a means of payment, sometimes even more willingly than dollars, euros or pounds. Needless to say, even stock exchange traders are actively trading cryptocurrencies today.

All this points to the fact that the development of distributed ledger technology is the future. You simply cannot ignore it if you want to keep pace with progress and time.


What to know:


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