Blockchain technology is one of the quickly growing and perhaps the most transformative technologies of this generation as it is changing the way several and numerous activities and interactions are being done in the digital world today including transactions and exchanges of information. Basically, blockchain is a system of recording transaction on several computers so that the records cannot be altered after the happening of the transaction. Due to its integrated approach of the blockchain it has the possibility to revolutionize most of the classical industries due to its transparency, security, and effectiveness in managing data and assets.
The Genesis of Blockchain
Looking at the history to just a few years back, the emergence of blockchain can be attributed back to the 2008 financial crises where there was so much distrust in the financial institutions. As a result of this a person, or a group using the alias Satoshi Nakamoto developed the first SDI called Bitcoin in 2009. Economically, Bitcoin's main use when it was initially introduced was intended for commerce and more specifically for introducing a new method of payment system that sought to do away with the intermediary, that is, banks. Blockchain was the underlying technology that made it possible for the creation of Bitcoins.
Blockchain emerged to the public perception as the technology that enables to secure and validate operations with Bitcoin. Yet soon, more and more people realized that it might have other uses, and indeed it does, and significantly more than that of cryptocurrency. The features of the technology the creation of a secure, non-falsifiable, and public record of transactions paved new opportunities in multiple domains, such as finance, health, logistics, and voting.
How Blockchain Works
Letting the reader have an understanding of blockchain technology calls for a definition of the part or concept referred to as 'block,' and its relation to 'chain.' In simple terms, a block in a blockchain is a list of records of transactions. Every block has a special identification code, which is also known as the 'hash' of the block, for which a cryptographic algorithm is used. This hash does not only refer to the block but also checks the block's integrity at the same time. When the information in the block is changed somehow, this generally alters the hash, indicating that the block has been edited.
Blocks are connected in the form of a chain so that the chain starts from the least and reaches the highest level. Every new block has the hash of the previous block; hence, forming a very secure and unalterable chain of information. This linking of blocks makes blockchain hard to tamper with, and that is why it is used when the data or information that is to be recorded is very sensitive. If an attacker wants to alter a single block, he would have to alter not just that block but all the subsequent blocks too which is practically impossible for large blockchains.
Another which are rooted for the blockchain is decentralised structure. As for the characteristics of their structure, it is necessary to point out that while the databases are usually concentrated and managed by one party, blockchain is based on the P2P network. Each participant in the network is called the node, stores the information of the entire blockchain database. When a new transaction is added, the nodes forward the transactions to the other nodes and authenticates the transactions using consensus algorithms. They also approve the legitimacy of a transaction and only a single transaction is entered into the block chain after many of the nodes have validated it.
The Advantages of Blockchain
The following are the benefits of blockchain that have made it popular in various fields -
Transparency and Trust: Another major advantage of its use is its ledger which is transparent. Every new transaction which occurs on the blockchain is also viewable by all the participants in the specific network. It helps in creating confidence with the participants because they can crosscheck with the data as presented. In industries such as supply chain management, which heavily rely on the trust, blockchain technologies will help prevent situations where two parties have different records.
Security: Another strength goes to Blockchain concerning the level of security offered by the technology. Due to cryptographic hashing and decentralization in the implementation of the blockchain, it becomes very hard or almost impossible for any one to change the blockchain. Also, the consensus mechanism prolongs the block chain and allows only the correct attempted transactions to be incorporated in the chain, thus adding to the block chain's security.
Efficiency and Cost Reduction: Blockchain eliminates intermediaries and due to this, it helps to optimize the processes and decrease expenses. In the financial industry for instance, it can be used to enable action of cross-border payments without having to go through banks of payment processors hence minimizing the charges and time taken to process payments. In the same way, in supply chain, blockchain has the ability to reduce the need of check and paperwork in tracking as well as verifying.
Immutability: After a transaction has been completed and put or recorded on the block chain, the data so entered cannot be changed or removed. This remains the most significant advantage since it is necessary to have an application where information is not easily changed, like contracts, title deeds, and other financial documents. Due to the features of permanent storage, all records created with the help of blockchain never alter and always remain truthful.
Applications of Blockchain Technology
Due to the fact that blockchain technology has been found to be very useful in the solution of a number of problems, many industries have adopted it and have utilised it in accordance to their needs.
Cryptocurrency and Finance: Of all the use of blockchain, the most prominent one is perhaps in the financial/personal assets management in the form of cryptocurrencies like Bitcoins and Ethereum. Blockchain provides efficient and safe transfer from one party to the other without the need for third parties hence minimizing costs. Aside from the cryptocurrencies, the blockchain technology is still being adopted by the other part of the financial services to address issues with regard to speed, integrity, and security in areas such as payment transaction, remittance, and funds management.
Supply Chain Management: Blockchain technology is changing the supply chain by offering an unchangeable and visible record of the supply chain procedure. This means that organizations can follow the movements of the products from the manufacturers up to the end user thus reducing on fake and substandard products in the market. It is quite helpful to integrate this level of transparency especially for industries such as the food industry and the pharmaceutical industry where products need to be verified as safe for consumption or use.
Healthcare: In the sphere of medicine, it has been implemented for storing and sharing patients' records in a reliable manner. Due to the de-centralized nature, the system of blockchain guarantees the fact that only authorized people having access to the data of the particular patient shall be able to get the needed information, but at the same time the data in the system of the blockchain shall remain insecure for the unauthorized users. Also, blockchain can be useful for optimising the processes, for example, clinical trials, where various actors need clarity and openness of the workflow.
Smart Contracts: Smart contracts are a form of executing the contractual terms that contain the provisions of the agreement coded into the blockchain. These contracts are self-working, which means they perform some action when certain conditions are met; they do not require third parties. Given the decentralised and tamper proof nature of Blockchain, smart contracts that are being adopted across fields such as; real estate, insurance and legal among are well suited for Blockchain.
Voting Systems: There are two types of voting systems that blockchain is said to transform: Source The following are some of the benefits of using a blockchain voting system: Therefore, through Blockchain technology, voting systems can help reduce fraud and improve the confidence of the voters on the actual casting process. Blockchain in elections has been trialled in some countries in pilot projects, which proves that blockchain positively affects democracy.
Current Issues And Future Prospect In The Use Of Blockchain
As much as it is beneficial, blockchain technology still faces several issues. One of the major issues that may be noted is the issue of scalability of the models. This is because more transactions result to a larger size of the blockchain when the number of transactions increases so does the size of blockchain hence slowing the rate of processing hence storage space will have to be increase. Furthermore, the carbon footprint of the underlying infrastructure with regards to energy requirements in the case with the proof-of-work consensus algorithm used by Bitcoin and similar cryptocurrencies.
Another challenge that remaines before the blockchain technology is regulatory issues which seems to remain uncertain at the time of its application. Currently, most nation's governments are struggling to come up with appropriate measures to use in controlling blockchain and cryptocurrency business hence leading to a situation where a number of them have provided measures that may be somewhat hard to understand. Thus, depending on the further advancement of the technology and discovering new applications for its implementation, it is possible to expect a better and more transparent definition of rules and legislation for using decentralized applications.
Blockchain technology has already been applied to several fields and is still in the developmental stage. Thus, the technology promises to remain central to defining the future of digital transactions, data, and trust in the digital environment.
