An Introduction to Blockchain Technology

The crypto community is of course highly enthusiastic about blockchain. Yet they think about blockchain as simply an abstract technology that provides some cool tokens that go up in value, but often without understand what blockchain really is. So let’s get back to the basics, what is blockchain?

In simple terms, blockchain is a tamper-proof, distributed ledger that supports the procedure of monitoring assets and recording transactions within a network. Assets can either be intangible (such as licensing, patents, copyrights, intellectual property, and films) or tangible (such as a vehicle, cash, house, and land). Anything that has value can be kept track of and exchanged via blockchain networks, which decreases the risks and expenses for every party involved.

Businesses base many of their operations on information. The quicker the transmission rate and the more reliable it is, the better. This is why blockchain is suitable for providing this kind of information since it offers distributed, immediate, and entirely transparent data that is kept on a tamper-resistant ledger accessible only by the network participants with permission. A blockchain network can monitor accounts, production, orders, payments, and a variety of other things. Since members have a unified perspective regarding the truth, one could comprehend all the intricacies of a transaction from start to finish, granting them more confidence as well as additional efficiencies and possibilities. In my view, this is what makes blockchain interesting compared to current alternatives: transparency.

The Key Characteristics of a Blockchain

Here are the elements that form the basis of blockchains and make them what they are.

Distributed Ledger Technology (DLT)
Every network participant can access the shared ledger and its unalterable transactional record. Through this distributed ledger, transactions only need to be recorded once, which removes the duplication of effort that is usual for conventional business networks.

Immutability of Records
No network participant can alter or tamper with transactions once they have been recorded on the ledger. Should a transactional record contain an error, another transaction must be added to reverse it, with both transactions being visible.

Smart Contracts
To increase the transaction speed, smart contracts, which are a set of rules, are stored on blockchains and automatically executed. A smart contract could also specify the terms for corporate bond exchanges, travel insurance payments, and a lot more. Anything in DeFi happens with Smart Contracts.

How Does it Work?
Every single transaction is documented as a “block” of information or data as it takes place. Such transactions can highlight the movements of every asset, whether it be tangible or intangible. Each block of data can also record any kind of information: what, when, where, who, how much, or even the conditions, such as the food shipment temperatures, for instance.

Every block of data is linked to both the blocks after and before it. Such blocks then form an entire chain of data as the movement of an asset occurs from one location to another, or when its ownership shifts. The blocks can also verify the precise sequence and time of transactions, and they can link together in a secure manner, which stops blocks from being tampered with, or even the insertion of another block amidst two existing ones. Hence the name – blockchain; a chain of blocks.

Furthermore that chain is irreversible. Every block that is added then strengthens the validation of the preceding block and, thus, the whole blockchain. This is what makes the entire blockchain immutable and able to completely resist alterations by any malicious individual. Hence, it creates a ledger of transactions that every member of a network can trust.

Advantages of Blockchain Technology
There are many things that need to change within sectors. For instance, operations frequently expend time and resources on third-party validations and repetitive record keeping. On the other hand, various record-keeping systems may be susceptible to fraud and other online threats. Data verification may be slowed by a lack of transparency. And, transactional volumes have surged since the introduction of the IoT. All of this can slow down businesses, hurt bottom lines, and drive home the message that we need something better, such as blockchain.

More Trust
With blockchain, network members can be confident about getting reliable and timely data, and that their sensitive records will only be shared with members that have specific access.

Better Security
All network participants must concur on the reliability of data, and all authenticated transactions are unchangeable since they are permanently recorded. Therefore, a transaction cannot be deleted by anybody, not even admins.

More Efficient
Time-consuming record reconciliations are removed because of this distributed ledger that is shared across network participants. And then there are smart contracts as well, which can be stored on blockchains and be automatically executed.

Blockchain Network Types
There are numerous ways in which one can build a blockchain network, such as public, permissioned, private, or consortium.

Public Blockchain Networks
A public blockchain is a network where anyone can take part in or join, like Bitcoin, for example. Cons could include significant energy consumption, no transactional privacy, and poor security.

Private Blockchain Networks
In private blockchain networks, one organization runs the network, deciding who may participate, running a consensus mechanism, and maintaining the shared ledger. Depending on the application, this can significantly increase participant confidence and trust. Also, private blockchains can be managed behind a corporate firewall and even be hosted on the company’s premises.

Permissioned Blockchain Networks
Businesses that establish a private blockchain can often create a permissioned one too. That said, it should be noted that even public blockchain networks can be permissioned. Restrictions are placed on who can participate within the network and in which transactions, and participants require permission or an invitation to join.

Consortium blockchains
Here, several organizations share the management responsibilities of a blockchain. These pre-selected companies decide who can submit transactions and access the data. A consortium blockchain network is suited for commercial situations where all parties must be granted permission and bear responsibility for the network.

With numerous practical uses for the technology currently in place and being explored, blockchain is now creating a name for itself, thanks in large part to bitcoin and other cryptocurrencies. Nowadays, it is also a buzzword that every investor throughout the world has on their tongues. Thus, blockchain applications are well positioned to make both government and business operations more efficient, cheap, secure, and reliable, all with few or no intermediaries.