A handful of highly tech-savvy companies, mostly startups, are shaking up old-school methods of doing businesses by implementing blockchain technologies to the forefront. Blockchain, a company headquartered in Luxembourg, provides a software platform for digital assets.
Its product offerings are all based on the advancing blockchain technology. The dominant cryptocurrencies utilizing this technology are Bitcoin and Ether, but many more applications are emerging almost on a very frequent basis!
Though there are no generally agreed upon consensus on the formal definition of Blockchain, what it essentially means is that it is a publicly distributed ledger maintaining an ever growing list of records or transactions (blocks) that are safe from any kind of revision or tampering and are fully traceable.
A blockchain database is a decentralised system managed autonomously through the use of peer to peer network and a distributed timestamping server.
Types of Blockchains
Blockchains are categorised into three main kinds
- Public Blockchains: A platform where every participant would be able to read on and write to.
- Consortium Blockchains: This platform is partially like the private blockchain. Instead of allowing any one person/company to have full control and participate in the verification of transactions process, some specific number of nodes are selected in a predetermined manner and the control is vested on them. For example, the UN outsoursing its transactions and voting system to Blockchain and allowing each member country to have a verifying node.
- Private Blockchains: A platform where only the owner of the blockchain has the right to making any changes in rules or other terms. For example, claim settlement in a private insurance company
The figure below shows the three main kinds of blockchains and the examples associated with each of them.
Components of Blockchains
Main components of any blockchain ecosystem are as follows:
Every computer, connected to the internet, needs a node application specific to the blockchain ecosystem that it wants to participate in.some of the examples of nde application are bitcoin wallet application and bankchain application. Participation through node application may or may not be free from any restrictions.for example, in case of a Bankchain as a Blockchain ecosystem, only banks are allowed to participate.
2.Distributed Ledger (database)
The distributed ledger means the shared contents and databases available to the participants of a particular Blockchain Ecosystem. The shared ledger lists down the rules or guidelines that need to be followed in each node application in the blockchain ecosystem.For example if you are running a Bitcoin node application, then you have to abide by all the rules set down in the program code of the Bitcoin node application.
Can one participate in more than one node application? Absolutely! You can be a part of as many node applications as you wish and are allowed to (i.e. node applications where there are no restrictions to enter).
The consensus algorithm provides permanence and security to the data in the blockchain. It depicts status of the network and how the nodes in the network arrive at an agreement regarding what transactions to accept. What protects the blockchain from tampering is the fact that changing a block can be done only by making a new block from its predecessor and it also requires re-generating all successors and redoing their contents. It is to be noted that every block in the blockchain contains a hash of its predecessor block, thus having a chain of blocks with enormous amount of work contained in them.
For example, the time taken by Bitcoin to arrive at a consensus of the ledger is a few minutes while that of ripple is merely a few seconds.
Some Use Cases of Blockchain Technology
Suppose you wish to pay your remote employees residing in a different country. The options open to you are through fund transfer by means of bank to bank transfer, through credit or debit cards, or through Western Union. The cost of transaction through blockchains is almost negligible when compared to the transaction costs mentioned in any of the above three methods. Another use case could be in the retail sector where they can ensure the authenticity or premium or high value luxury items like gold and diamond. A lot has already been written about the use cases of Blockchain technology in the financial institutions.
It would not be an exaggeration to say that there will in fact not be a single industry that would remain untouched with this technology in the very near future. Nearly every industry ranging from government to private institutions pertaining to healthcare, banking, insurance, education, supply chain and retail services and even agricultural sector are working on how to leverage this technology to bring in greater efficiency in their operations, thereby eliminating the role of the intermediaries altogether.
For the laymen interested in Blockchain Technology, I hope reading this helped you build some ideas, even if minor ones for that matter, on what this technology is all about and in case you are an expert or happen to be working on it and have some interesting insights, lets connect!
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