You surely have heard about the word. A revolutionary idea in the tech world. A technology that brought with itself some other innovations like Bitcoin and other cryptocurrencies. The fundamental layer of the future decentralized world, named Blockchain.
Blockchain is a innovative database that doesn’t rely on centralized servers. It consists of multiple nodes that each handles one or some of the network tasks.
The fundamental components of a blockchain are blocks. They connect as the database expands. Block expanding in various blockchains differ from each other and define the functionality of the database.
What Is a Blockchain?
Blockchain is a unique kind of database. Databases are solutions for storing data and information. As the name implies, they consist of tables that save the data.
This technology is different from all other kinds of databases because of the form it saves and transfers data.
Information is saved in a blockchain in groups. Each group of information creates a block. Blocks have limited storage space, and when full, they will be connected to the previous filled block. It creates a chain of blocks in the database – which is called Blockchain. So, blockchain doesn’t store data in tables and uses blocks.
The blockchain concept isn’t a new thing belonging to the 21st century. But the first significant implementation happened in this century with the first cryptocurrency, Bitcoin.
Bitcoin helped blockchain to move faster in technology communities and find new users along with use-cases. Blockchains are not limited to financial transactions, but the finance sector can benefit from this technology.
How Does It Work?
As mentioned before, blockchain relies on blocks of data to work. The data is stored in blocks that connect to each other and create a chain.
Decentralization is the first and most crucial benefit of blockchains. To understand it better, consider the Bitcoin blockchain.
It’s a blockchain that stores transaction data. It needs computers and storage spaces for that. The computers saving the data are not centralized. Every computer can keep this database. It creates a decentralized network of computers, “nodes,” that each one has the full history and data of the network in it.
The decentralized nature of blockchain makes it almost impossible for external forces to breach and tamper with the data. If any node claims different data, other nodes will find the difference and deny it. As a whole, it needs lots of computing power to breach a blockchain database. So, it’s often called a breach-resistant network.
What Types of Blockchain Are There?
Blockchain is not limited to financial transactions. It can be modified to serve multiple purposes. Besides, every individual or company can have its blockchain. They can create a database with the specs of blockchain to store and transfer data.
There are three main types:
Public are like public databases. It means that everyone can read the data on them. Lots of cryptocurrency blockchains like Bitcoin have public blockchains. It’s the reason everyone can run a node on them or easily create a unique wallet address.
Public blockchains have the benefit of broader collaboration. Because they target a greater audience-base, they can leverage their computing powers to protect and run the database.
A crucial thing about public blockchains is that although everyone can read the data on them, no one knows the data’s real property. Consider Bitcoin again. Everyone who knows your wallet address can know your balance but can’t connect that address to your identity.
A private is like a private database. You now know that every individual or company can develop its proprietary database. One can create a blockchain that is accessible to privileged nodes.
Although it uses blockchain databases’ fundamental components, it doesn’t let external actors see the stored data or transaction history.
Private blockchains are suitable for companies that want to rely on this technology for storing their data.
Besides, companies can create private blockchains to store and transfer data with more security and decentralization.
A hybrid is a solution that benefits from the aspects of both public and private blockchains. In a hybrid blockchain, we have a public blockchain that gives everyone access to a set of data.
But there is a private blockchain in the background that controls the accesses and management tasks.
What Applications Does It Have?
Although blockchain became famous for financial use-cases, today, it shows many opportunities in multiple sectors. Storage, supply chain, music, personal identity, and even the streaming industry can benefit from the blockchain.
Besides, smart contracts are one of the most useful products of blockchain that add to the use-cases.
Here are some examples of using blockchain in various sectors:
- Finance: cryptocurrencies and decentralized financial services like Uniswap, SushiSwap, etc. Startups like Circle, Chainalasys, and Chain are great examples of using blockchain as a money-transfer solution.
- Internet of things: or IoT is a disruptive industry that can use the decentralized nature of blockchain significantly. IOTA is one of the most successful projects in this industry. Startups like Filament leverage the blockchain power by offering smart sensors that can be connected to blockchain databases.
- Logistics: tracking the ownership and movement of a product is more secure and comfortable with blockchains. Lots of big companies like DHL have implemented blockchain in their logistics processes. One can see the same use case in the supply chain that helps you track the ownership and Genuity of assets easier.
Blockchain has indeed introduced many innovative solutions to the world. Not only do tech companies benefit from their powers, but traditional industries are also starting their tech journey with blockchain. Some of the most obvious benefits are:
Databases rely on cryptography for securing the data. Everything is encrypted in these databases, and cracking the private keys to the data is almost impossible.
Transparency was fading in the tech industry before blockchain was born. Public blockchains changed the game by offering the chance to trace and search every transaction for everyone. You can easily see the balance of a Bitcoin wallet, but the owner’s identity is secured.
This natural aspect of blockchain makes it a disruptive solution in the tech world. The database doesn’t rely on centralized servers and computers, thus has an increased level of security.
Besides, decentralization makes it possible for every user on the blockchain to connect and transact directly.
No one can easily change the history of incidents and transactions in a blockchain. It makes it easier to audit the database. Besides, people trust the blockchain by storing their data and assets.
The Future of Blockchain
The future of this technology depends on multiple factors. Next to the projects that need to find more users, regulators, banks, and traditional tech companies play vital roles.
Tech companies can help blockchain technology find more users. When companies like IBM enter this world, they show the technology’s features and benefits to more users. Enterprises will be attracted to the technology, too.
Regulators can accelerate the speed of blockchain growth by letting projects serve customers more comfortable. There are lots of burdens in the blockchain and cryptocurrency world currently.
Regulators are mostly worried about security issues, but some want to keep their data controls. After all, many players should collaborate for a bright future in the blockchain world.
Blockchain is one of the most disruptive technologies of the 21st century. It showed many new promises and features of the technology that can make our lives easier.
Although many organizations and people still don’t support the blockchain movement completely, the community is growing very fast. Thanks to the hype from cryptocurrencies, other projects can benefit from this growth, too.