According to the reports, The blockchain technology market is expected to grow from USD 207.5 Million in 2018 to USD 6064.7 Million by 2023, at a Compound Annual Growth Rate (CAGR) of 79.2%.
The growth of this market is driven by factors such as high transparency and immutability of blockchain, increasing need for reducing transaction costs, and increasing need for improving productivity.
What is Blockchain technology? How does it work? Benefits and the future of blockchain technology. You will find answers to these questions and many others. Sounds great? Let’s get started with the basics first.
What is Blockchain Technology?
According to Wikipedia, a blockchain is “a continuously growing list of records, called blocks, which are linked and secured using cryptography.” that can be used to solve many issues.
Moreover, Blockchain is a distributed database that keeps a continuously growing list of records called blocks. Each block contains a timestamp and a link to a previous block. Full information about blockchain can be read here. This technology has its applications in banking, insurance, commerce, healthcare, and governments apart from being another cryptocurrency support system.
How does blockchain technology work?
Let’s understand the working of blockchain by taking a closer look at a block. Each block contains some data, the hash of the block, and the hash of the previous block. The data that is stored inside a block depends on the type of blockchain.
The Bitcoin for example stores the details about a transaction here, such as the sender, receiver, and amount of coins. A block also has a hash. You can compare a hash to a fingerprint. It identifies a block and all of its contents and it’s always unique, just as a fingerprint. Once a block is created, its hash is being calculated. Changing something inside the block will cause the hash to change.
so, in other words: hashes are very useful when you want to detect changes to blocks. If the fingerprint of a block changes, it no longer is the same block. The third element inside each block is the hash of the previous block. This effectively creates a chain of blocks and it’s this technique that makes blockchain so secure.
Let’s take an example:
Here we have a chain of three blocks. As you can see, each block has a hash and the hash of the previous block. So block number 3 points to block number 2 and number 2 points to number 1. Now the first block is a bit special, it cannot point to previous blocks because it’s the first one. We call this the genesis block.
Now let’s say that you tamper with the second block this causes the hash of the block to change as well. In turn that will make block 3 and all following blocks invalid because they no longer store a valid hash of the previous block.
So changing a single block will make all the following blocks invalid. But using hashes is not enough to prevent tampering. Computers these days are very fast and can calculate hundreds of thousands of hashes per second. You could effectively tamper with a block and recalculate all the hashes of other blocks to make your blockchain valid again.
So to mitigate this, blockchains have something called proof-of-work. It’s a mechanism that slows down the creation of new blocks. In Bitcoin’s case, it takes about 10 minutes to calculate the required proof-of-work and add a new block to the chain.
The security of a blockchain comes from its creative use of hashing and the proof-of-work mechanism. peer-to-peer networks, anyone can join. The creation of blockchain technology peaked a lot of people’s interest. Soon, others realized that the technology could be used for other things like storing medical records, creating a digital notary, and even collecting taxes.
History of blockchain and Bitcoin:
History of Blockchain:
Blockchain technology is the accumulation of more than 10 years of research into cryptographic currencies and distributed ledgers. It began around 2008 when bitcoins were first created.
A new financial platform built on top of the internet. A system that would liberate money from banks and allow direct, peer-to-peer transfer of value without the need for a third party.
It was difficult to explain but easy to grasp. And just as it felt good to get out of an old system, even if only for a brief period, Bitcoin’s simple idea spread across the web like wildfire.
It took no time at all before the blockchain began to transform other areas of commerce. Traditional commerce wasn’t the only place where you could talk about money moving away from banks. The concept was easy and so was the implementation. Other applications over time expanded outward and downward, first into other financial sectors and then into services such as health care and even food safety.
History of bitcoin:
The history of bitcoin begins around 2008 when the creator of bitcoin Satoshi Nakamoto (probably not his real name) outlined the basics of a new financial system that does not require banks or transaction fees. Unlike previous attempts at creating a digital currency, Nakamoto solved the problem of debasement – by solving the double-spending problem and developing a decentralized trust protocol.
What are the different types of blockchain?
The flow of information on public networks is transparent. They are very private and accessible to everybody. It is a decentralized blockchain that lets anybody see and approve transactions. Bitcoin is a great illustration of how public networks may operate.
Only authorized personnel may observe and approve transactions in this controlled form of blockchain. In private networks, the network administrator plays a crucial role in allowing users to join the network. The fundamental benefit of private networks is that they are less transparent, which is advantageous for safeguarding sensitive data
Furthermore, because just a few selected users’ accounts are necessary to validate private blockchain transactions, they are faster.
They are a semi-centralized variant of blockchain in which the design allows anybody to openly access information but only known persons may authorize transactions.
Benefits of Blockchain Technology
- Blockchain in insurance improves the underwriting and risk assessment process by enabling the flow of sensitive data based on anonymity. It speeds up claims processing thanks to smart contracts and reduces the cost of fraud.
- In theory, blockchain voting would allow people to submit votes with a low risk of fraud. Also, blockchain automates vote counting and eliminates the need for paper ballots.
- In addition to cryptocurrencies such as bitcoin, the traditional banking sector also uses blockchain technology. Sending fiat currencies using blockchain is faster because the verification process is easier.
Pros and Cons Of Blockchain Technology:
.Decentralization: Blockchain technology provides a decentralized model for information storage and transfer, thus allowing independent parties to directly interact with each other without the interference or control of third parties (e.g. banks).
.Transparency and Anonymity: Blockchain technology is the most transparent and accountable tool ever created. The blockchain enables users to record transactions between two parties in a verifiable, permanent manner that cannot be edited or removed once submitted. Transactions can have thousands of witnesses, yet not a single one of those witnesses can alter the transaction in any way.
.Accuracy and Security: Blockchain technology is gaining popularity. The reason for this unusual trend is that it improves users’ abilities to verify and secure data while reducing overhead costs with optimization.
.Scalability: One of the biggest issues with blockchain technology is that it cannot be scaled up. Consequently, it’s not able to compete with other technologies on anything other than a small scale. Blockchains are not globally accessible at this stage. Therefore, they pose a limit to the number of users or transactions they can process efficiently.
.Blockchain Cryptocurrencies are highly Volatile: “Is blockchain a good investment?” some people question. This is dependent on your investment objectives and risk tolerance. Cryptocurrency’s popularity skyrocketed in 2021, with bitcoin hitting a new high of about $65,000 in April. However, due to its inherent volatility, bitcoin’s price had plunged over 50% by early June, before beginning to surge again.
.High Energy Consumption: Bitcoin mining is done via a network of high-speed computers that take a lot of energy. According to the University of Cambridge Power Consumption Index, if bitcoin were a country, it would be the 34th largest electricity consumer, after the Netherlands and ahead of the Philippines. Elon Musk, the CEO of Tesla, stated in May 2021 that the company would stop accepting bitcoin until it could find measures to lessen its carbon footprint. Other blockchain developers have come up with less energy-intensive alternatives.
Blockchain and the Finance Industry
The finance industry is highly disruptive and has been changing rapidly with technological advancements, such as the development of the Internet and the prolific growth of mobile devices. Blockchain is a quintessential example of financial technology and has drawn significant attention from academia as well as companies across the world.
How do decentralized ledgers and cryptocurrencies affect the finance industry? About 10 years ago, the government made it illegal to use Bitcoin on the premise that it is untraceable. Nowadays, it has become an extremely popular currency for online money transactions. Blockchain has a lot of potential for financial institutions and businesses as it will allow them to tune their services to better meet customer needs.
Ethereum, Smart Contracts, and Decentralized:
It is a decentralized, open-source blockchain that allows users to create smart contracts. The platform’s native cryptocurrency is Ether. Ether is the second most valuable cryptocurrency after Bitcoin in terms of market capitalization. Vitalik Buterin, a programmer, created Ethereum in 2013.
- Banking, web surfing, gaming, advertising, identity management, and supply chain management are just a few of the applications.
- Ethereum enables the smart contracts and applications built on its blockchain to run smoothly without fraud, downtime, control, or any third-party interference.
A smart contract is a concept implemented in the blockchain environment. Their role is to bind scripts and contracts together into a single deal. If a person wants to exchange real-world data, then smart contracts help them to do so in an automatic way.
- Smart contracts can potentially expand the scope and reduce transaction costs of many kinds of contractual arrangements.
- Smart contracts are a general mechanism for recording, verifying, and enforcing agreements in any domain where there is value to be exchanged.
Decentralization is a key concept in blockchain technology. Decentralization is the process of distributing or dispersing functions, powers, people, or things away from a central location or authority. The reason for decentralization is to provide greater freedom and efficiency. Decentralized blockchains are based on mathematics and open source software to provide transparent governance.
- Decentralization, i.e. the ability to run software on multiple devices, is one of the fundamental principles of blockchain.
- In decentralized systems, every person controls their own information in that databases are duplicated thousands of times across many different computers.
Future Of Blockchain Technology
In the coming years, blockchain technology will continue to improve, and the potential for it to change aspects of our lives will grow. Bitcoin still has not reached full potential (although it makes up a significant part of blockchain’s overall functionality). With time, more companies will begin to adopt the technology. There will be more innovation in this technology by many startups aiming to disrupt existing industries. Also, there is much more to blockchain technology than just finance.
Over the coming decade, blockchain will be a period of tremendous growth. According to IDC, by 2022 blockchain platforms will grow to support a broader and more mainstream set of use cases than it does today. By 2026, 60 percent of all business transactions carried out globally will involve blockchain in some way.
Hopefully, you now have a better idea of what blockchain technology is, and how it works. In this article, we have covered the basics of blockchain technology.
If you are intrigued by the technology and the possibilities for future applications, the blockchain will change your life forever. There is a lot more to cover on this topic. we would do it later. If you find that the post was helpful to you then don’t forget to leave a comment here and share this post with your friends and family members. For more technology-related posts check out our top programming language to learn in 2022.
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