Blockchain - what is blockchain technology and how does it work - technologyarticles278
Blockchain technology - Entering the new world
Queries cracked in this blog are:
- What is a blockchain?
- Where is blockchain used?
- What are the advantages of blockchain technology?
- How is blockchain technology going to change the world?
What is blockchain?
Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.
Key elements of a blockchain:
- Distributed ledger technology
All network participants have access to the distributed ledger and its immutable record of transactions. With this shared ledger, transactions are recorded only once, eliminating the duplication of effort that’s typical of traditional business networks.
- Immutable records
No participant can change or tamper with a transaction after it’s been recorded to the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the error, and both transactions are then visible.
- Smart contracts
To speed transactions, a set of rules — called a smart contract — is stored on the blockchain and executed automatically. A smart contract can define conditions for corporate bond transfers, including terms for travel insurance to be paid and much more.
How blockchain works :
As each transaction occurs, it is recorded as a “block” of data
Those transactions show the movement of an asset that can be tangible (a product) or intangible (intellectual). The data block can record the information of your choice: who, what, when, where, how much, and even the condition — such as the temperature of a food shipment.
Each block is connected to the ones before and after it
These blocks form a chain of data as an asset moves from place to place or ownership changes hands. The blocks confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered or a block being inserted between two existing blocks.
Transactions are blocked together in an irreversible chain: a blockchain
Each additional block strengthens the verification of the previous block and hence the entire blockchain. This renders the blockchain tamper-evident, delivering the key strength of immutability. This removes the possibility of tampering by a malicious actor — and builds a ledger of transactions you and other network members can trust.
Question 2.
Blockchain technology can be integrated into multiple areas. The primary use of blockchains is as a distributed ledger for cryptocurrencies such as bitcoin; there were also a few other operational products that had matured from proof of concept by late 2016. As of 2016, some businesses have been testing the technology and conducting low-level implementation to gauge blockchain's effects on organizational efficiency in their back office. In 2019, it was estimated that around $2.9 billion were invested in blockchain technology, which represents an 89% increase from the year prior. Additionally, the International Data Corp has estimated that corporate investment into blockchain technology will reach $12.4 billion by 2022. Furthermore, According to PricewaterhouseCoopers (PwC), the second-largest professional services network in the world, blockchain technology has the potential to generate an annual business value of more than $3 trillion by 2030.
Cryptocurrencies
Most cryptocurrencies use blockchain technology to record transactions. For example, the bitcoin network and Ethereum network are both based on blockchain. On 8 May 2018 Facebook confirmed that it would open a new blockchain group which would be headed by David Marcus, who previously was in charge of Messenger. Facebook's planned cryptocurrency platform, Libra (now known as Diem), was formally announced on June 18, 2019.
The criminal enterprise Silk Road, which operated on Tor, utilized cryptocurrency for payments, some of which the US federal government has seized through research on the blockchain and forfeiture.
Governments have mixed policies on the legality of their citizens or banks owning cryptocurrencies. China implements blockchain technology in several industries including a national digital currency which launched in 2020. To strengthen their respective currencies, Western governments including the European Union and the United States have initiated similar projects.
Smart contracts
Blockchain-based smart contracts are proposed contracts that can be partially or fully executed or enforced without human interaction. One of the main objectives of a smart contract is automated escrow. A key feature of smart contracts is that they do not need a trusted third party (such as a trustee) to act as an intermediary between contracting entities -the blockchain network executes the contract on its own. This may reduce friction between entities when transferring value and could subsequently open the door to a higher level of transaction automation. An IMF staff discussion from 2018 reported that smart contracts based on blockchain technology might reduce moral hazards and optimize the use of contracts in general. But "no viable smart contract systems have yet emerged." Due to the lack of widespread use their legal status was unclear.
Financial services
According to Reason, many banks have expressed interest in implementing distributed ledgers for use in banking and are cooperating with companies creating private blockchains, and according to a September 2016 IBM study, this is occurring faster than expected. Banks are interested in this technology not least because it has the potential to speed up back-office settlement systems. Moreover, as the blockchain industry has reached early maturity institutional appreciation has grown that it is, practically speaking, the infrastructure of a whole new financial industry, with all the implications which that entails. The blockchain has also given rise to initial coin offerings (ICOs) as well as a new category of digital asset called security token offerings (STOs), also sometimes referred to as digital security offerings (DSOs). STO/DSOs may be conducted privately or on public, regulated stock exchange and are used to tokenize traditional assets such as company shares as well as more innovative ones like intellectual property, real estate, art, or individual products. A number of companies are active in this space providing services for compliant tokenization, private STOs, and public STOs.
Games
Blockchain technology, such as cryptocurrencies and non-fungible tokens (NFTs), has been used in video games for monetization. Many live-service games offer in-game customization options, such as character skins or other in-game items, which the players can earn and trade with other players using in-game currency. Some games also allow for trading of virtual items using real-world currency, but this may be illegal in some countries where video games are seen as akin to gambling and have led to gray market issues such as skin gambling, and thus publishers typically have shied away from allowing players to earn real-world funds from games. Blockchain games typically allow players to trade these in-game items for cryptocurrency, which can then be exchanged for money.
The first known game to use blockchain technologies was CryptoKitties, launched in November 2017, where the player would purchase NFTs with Ethereum cryptocurrency, each NFT consisting of a virtual pet that the player could breed with others to create offspring with combined traits as new NFTs. The game made headlines in December 2017 when one virtual pet sold for more than US$100,000. CryptoKitties also illustrated scalability problems for games on Ethereum when it created significant congestion on the Ethereum network in early 2018 with approximately 30% of all Ethereum transactions[clarification needed] being for the game.
By the early 2020s, there had not been a breakout success in video games using blockchain, as these games tend to focus on using blockchain for speculation instead of more traditional forms of gameplay, which offers limited appeal to most players. Such games also represent a high risk to investors as their revenues can be difficult to predict. However, limited successes of some games, such as Axie Infinity during the COVID-19 pandemic, and corporate plans towards metaverse content, refueled interest in the area of games, a term describing the intersection of video games and financing typically backed by blockchain currency, in the second half of 2021. Several major publishers, including Ubisoft, Electronic Arts, and Take-Two Interactive, have stated that blockchain and NFT-based games are under serious consideration for their companies in the future.
In October 2021, Valve Corporation banned blockchain games, including those using cryptocurrency and NFTs, from being hosted on its Steam digital storefront service, which is widely used for personal computer gaming, claiming that this was an extension of their policy banning games that offered in-game items with real-world value. Valve's prior history with gambling, specifically skin gambling, was speculated to be a factor in the decision to ban blockchain games. Journalists and players responded positively to Valve's decision as blockchain and NFT games have a reputation for scams and fraud among most PC gamers, Epic Games, which runs the Epic Games Store in competition to Steam, said that they would be open to accepted blockchain games, in the wake of Valve's refusal.
Supply chain
- Precious commodities mining — Blockchain technology has been used for tracking the origins of gemstones and other precious commodities. In 2016, The Wall Street Journal reported that the blockchain technology company, Everledger was partnering with IBM's blockchain-based tracking service to trace the origin of diamonds to ensure that they were ethically mined. As of 2019, the Diamond Trading Company (DTC) has been involved in building a diamond trading supply chain product called Tracr.
- Food supply — As of 2018, Walmart and IBM were running a trial to use a blockchain-backed system for supply chain monitoring for lettuce and spinach — all nodes of the blockchain were administered by Walmart and were located on the IBM cloud. In 2021, scientists from Nosh Technologies and the University of Essex developed a blockchain-based approach named FoodSQRBlock using QR code and cloud computing to digitize food supply chain data to improve traceability of food by the farmers and consumers. Nosh Technologies also developed a blockchain-based multi-layered framework named SmartNoshWaste using reinforcement learning-based machine learning to reduce waste in the food supply chain.
some benefits of blockchain are:
- Enhanced security
Your data is sensitive and crucial, and blockchain can significantly change how your critical information is viewed. By creating a record that can’t be altered and is encrypted end-to-end, blockchain helps prevent fraud and unauthorized activity. Privacy issues can also be addressed on blockchain by anonymizing personal data and user permissions to prevent access. Information is stored across a network of computers rather than a single server, making it difficult for hackers to view data.
- Greater transparency
Without blockchain, each organization has to keep a separate database. Because blockchain uses a distributed ledger, transactions and data are recorded identically in multiple locations. All network participants with permission access see the same information at the same time, providing full transparency. All transactions are immutably recorded, and are time- and date-stamped. This enables members to view the entire history of a transaction and virtually eliminates any opportunity for fraud.
- Instant traceability
Blockchain creates an audit trail that documents the provenance of an asset at every step on its journey. In industries where consumers are concerned about environmental or human rights issues surrounding a product — or an industry troubled by counterfeiting and fraud — this helps provide the proof. With blockchain, it is possible to share data about provenance directly with customers. Traceability data can also expose weaknesses in any supply chain — where goods might sit on a loading dock awaiting transit.
- Increased efficiency and speed
Traditional paper-heavy processes are time-consuming, prone to human error, and often require third-party mediation. By streamlining these processes with blockchain, transactions can be completed faster and more efficiently. Documentation can be stored on the blockchain along with transaction details, eliminating the need to exchange paper. There’s no need to reconcile multiple ledgers, so clearing and settlement can be much faster.
- Automation
Transactions can even be automated with “smart contracts,” which increase your efficiency and speed the process even further. Once pre-specified conditions are met, the next step in the transaction or process is automatically triggered. Smart contracts reduce human intervention as well as reliance on third parties to verify that the terms of a contract have been met. In insurance, for example, once a customer has provided all necessary documentation to file a claim, the claim can automatically be settled and paid.
- Immutability
Immutability simply means that transactions, once recorded on the blockchain, can't be changed or deleted. On the blockchain, all transactions are timestamped and date-stamped, so there's a permanent record. As such, blockchain can be used to track information over time, enabling a secure, reliable audit of information. (That's in contrast to error-prone paper-based filing and legacy computer systems that could be corrupted or retired.) Omar pointed to Sweden's use of blockchain to digitize real estate transactions to keep track of property titles even as they change hands as an example of this benefit's potential.
- Individual control of data
Blockchain enables an unprecedented amount of individual control over one's own digital data, experts said. "In a world where data is a very valuable commodity, the technology inherently protects the data that belongs to you while allowing you to control it," said Michela Menting, a research director at ABI Research. Individuals and individual organizations can decide what pieces of their digital data they want to share and with whom and for how long, with limits enforced by blockchain-enabled smart contracts.
- Tokenization
Tokenization is the process where the value of an asset (whether a physical or digital one) is converted into a digital token that is then recorded on and then shared via blockchain. Tokenization has caught on with digital art and other virtual assets, but tokenization has broader applications that could smooth business transactions, said Joe Davey, director of technology at global consulting firm West Monroe. Utilities, for example, could use tokenization to trade carbon emission allowances under carbon cap programs.
- Innovation
Leaders across multiple industries are exploring and implementing blockchain-based systems to solve intractable problems and improve longstanding cumbersome practices. Field cited the use of blockchain to verify the information on job applicants' resumes as an example of such innovation. Studies consistently have shown that a strong percentage of people falsify their resumes, leaving hiring managers with the time-consuming task of manually verifying the information. But pilot programs that allow participating universities to put data about their graduates and their awarded degrees on the blockchain that can then be accessed by authorized hiring managers help solve both issues -- getting to the truth and getting to the truth quickly and efficiently.
- Reduced costs
Blockchain's nature also can cut costs for organizations. It creates efficiencies in processing transactions. It also reduces manual tasks such as aggregating and amending data, as well as easing reporting and auditing processes. Experts pointed to the savings that financial institutions see when using blockchain, explaining that blockchain's ability to streamline clearing and settlement translates directly into process cost savings. More broadly, blockchain helps businesses cut costs by eliminating middlemen -- vendors and third-party providers -- that have traditionally provided the processing that blockchain can do.
Question 4.
Blockchain may not be as famous as Bitcoin (BTC) and many of the cryptocurrencies that it works to power across an ever-evolving ecosystem, but the technology’s applications may be capable of stretching further than the coins it supports.
In the post-pandemic world, society is changing at a rapid rate, and so too is the concept of wealth. Where in traditional circles that hinge on fiat money, wealth can equate to cash, property, and generational financial security, but cryptocurrency takes the notion of wealth and stretches it further.
While blockchain-powered cryptocurrency projects can also deliver wealth in a traditional sense, the technology opens the door to other forms of wealth, such as privacy, decentralization, and personal safety from third-party and governmental intrusion.
In the right hands, blockchain brings new meaning to wealth to a society that has experienced changing values in the wake of the recent health crisis, and the technology will emerge as a disruptive force across a wide range of industries.
As a peer-to-peer distributed digital ledger of time-stamped transactions, the applications of blockchain are virtually limitless. As data shows, technology can revolutionize lending, security, consumerism, business models, and digital property. And this is just the tip of the iceberg of its wider capabilities.
The underlying ethos of blockchain-powered cryptocurrencies has been to decentralize power away from central banks through digital finance, making technology a driving force in the fight back against the centralized control of banks and governments.
In a post-pandemic society that’s becoming increasingly wary of the hegemony of global governments and leading institutions, blockchain may be the technology that’s best placed to adapt to these deep-rooted cultural changes. Let’s take a look at the many ways blockchain can adapt to a rapidly changing world.
The Case for Security
Blockchain marketplaces are naturally more secure than their traditional counterparts. The nature of the public ledger is that the data within the blockchain is fully encrypted and protected, meaning that no single party has the power to manipulate the information within, making the technology ideal for startups to leverage.
We’re already seeing this being applied in the world of gaming and NFTs. Where there had been no truly safe spaces for gamers to trade and conduct transactions on their collectibles, users have been forced to place their trust in shady forums acting as makeshift marketplaces to facilitate demand - opening themselves up to cyber-attacks and scammers.
As data shows, cryptocurrency and gamers are a natural combination, with many significantly higher volumes of users trading cryptocurrencies than non-gamers.
To help cement the symbiotic relationship between gaming and crypto, blockchain startups like Gameflip have launched their own coin. Gameflips' FLIP is a token tailor-made for scaling the peer-level buying, selling, and trading of goods for video games.
The goal of these marketplaces is to offer a genuinely safe space for gamers to conduct transactions in confidence, all generated through immutable blockchain technology.
However, there are many more scenarios where blockchains can be used to provide greater security at a time when privacy is so scarce.
eCash, pioneered by Bitcoin’s ‘fallen angel’ and one of the ecosystem’s biggest innovators, Amaury Sechet, who diverged from the world’s most famous cryptocurrency to create Bitcoin ABC with the ambition of making the coin far more practical than its predecessor, has been designed with privacy and security as a priority.
Created using the revolutionary Avalanche blockchain, eCash is built on a consensus algorithm that enables instant transactions, fork-free upgrades, and enhanced security. Tapping into the societal concerns about privacy and mistrust of centralized powers, eCash’s blockchain focuses on bringing a technically sound, politically decentralized governance protocol to the crypto ecosystem as a means of championing the privacy of its adopters - all through an adaptive blockchain.
Supporting a Health-Conscious Culture
The Covid-19 pandemic has brought interest in healthcare back to the fore in both the developed and developing world alike.
The key issue with healthcare systems around the world is that there’s a lot of legacy technology at work when it comes to storing medical records and the transferring of medical data from one specialist to another.
This means that keeping a full medical record can be tough for patients as their history could span many years of different practitioners trying different treatment approaches and using different medicines along the way. In short, there can be a significant breakdown in essential collaboration and communication when it comes to maintaining the health of patients.
Blockchain can help to completely change how healthcare is managed by enabling decentralized record-holding with data becoming accessible as and when required.
This technology can also help to enable health practitioners in learning about patient cases more comprehensively and swiftly - ensuring that they can be treated faster with less waiting time in between gathering and interpreting the information.
Furthermore, blockchain can also combat the circulation of fraudulent drugs and treatments, due to its immutable qualities.
In a world that’s evolved to covet privacy and authenticity due to being burdened by an outdated and insecure financial ecosystem, blockchain stands as a leading solution for changing the world in line with societal awareness.
As we move away from the age of the pandemic and towards the era of the ‘new normal,’ it’s likely that blockchains will be front and center of the progress we make in addressing these new societal concerns and redefining the true meaning of wealth in the brave new world of digital finance.
If you think that blockchain cannot change the world, then you are not alone.
There are many experts who think blockchain is not enough to alter the course of actions of this world. However, recent findings do predict that blockchain will succeed in doing so.
As you can see the impact of blockchain technology, now you can know just how blockchain can change the world. We also managed to envision its impact on the future of our society. If you are just a novice who is just starting with blockchain technology.
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