Blockchain 101: A Guide for Business Owners
Imagine a world where you can send money to someone who doesn't have access to a bank in seconds rather than days, and you don't have to pay expensive bank fees./n Alternatively, you might keep your money in an online wallet that isn't linked to a bank, allowing you to act as your own bank and have complete control over your funds. You never have to worry about a third party taking it away or a government's economic policy altering it because you don't need a bank's permission to access or move it./n This is not a future world; it is a world in which a small but growing group of early adopters are living right now. These are just a few of the key blockchain technology applications that are revolutionizing the way we trust and exchange money./n Yet, for many people, blockchain technology remains a perplexing or even frightening concept. Even though blockchain technology is still in its early stages of development and use, this criticism is fair.
Blockchain 101: A Beginner's Guide to Blockchain
The notion or protocol that enables the blockchain's operation is known as blockchain technology. Cryptocurrencies (digital currencies secured by cryptography) such as Bitcoin are made possible by blockchain technology, much like email is made possible by the internet./n Beyond cryptocurrencies, the blockchain is a distributed digital ledger that can't be changed. This is a digital record of transactions or data that is kept in different places on a computer network. The blockchain can be used for a lot of different things./n Two essential blockchain qualities are immutability and distributed-ness. Because the ledger is immutable, you can always trust it to be correct. The blockchain's decentralized nature protects it from network threats./n On the ledger, each transaction or record is stored in a "block." Blocks on the Bitcoin blockchain, for example, typically contain more than 500 Bitcoin transactions./n The information in each block is dependent on and related to the information in previous blocks, providing a time-based chain of transactions. Thus, deriving the word "blockchain".
The Different Types of Blockchain
Blockchains can be divided into four categories:
1. Public Blockchains
Anyone who wants to request or validate a transaction can use public blockchains, which are open, decentralized networks of computers (check for accuracy). Miners (those who validate transactions) get rewarded./n In public blockchains, proof-of-work or proof-of-stake consensus techniques are utilized (discussed later). Ethereum (ETH) and Bitcoin (BTC) are two well-known examples of public blockchains.
2. Private Blockchains
Private blockchains aren't public, and access is restricted. The system administrator must give permission to everybody who wants to join. Typically, they are centralized and maintained by a single entity.
3. Hybrid Blockchains or Consortiums
Consortiums are a centralized and decentralized combination of public and private blockchains./n Remember that there isn't universal agreement as to whether these terms are interchangeable. Some people make a distinction between the two, while others consider them interchangeable.
4. Sidechains
A sidechain is a blockchain that travels in the opposite direction of the main chain. By allowing users to move digital assets between two different blockchains, it improves scalability and efficiency. A sidechain is exemplified by the Liquid Network.
How Does Blockchain Technology Work?
Many cryptocurrencies are powered by blockchain, but we'll focus on Bitcoin as a major example of how blockchain cryptography works./n A huge network of computers, also known as nodes, is used to input and communicate the selling and purchasing of bitcoin virtual currency. Users of the system can use bitcoin exchanges to buy apps, such as:
- Coinbase
- Gemini
- Binance
- Voyager
- Uphold
Each transaction is verified and confirmed by a network of thousands of nodes located all over the world. The nodes do this by using a set of computer programmes called "bitcoin mining"./n Because the first bitcoin miners to complete a new block earn bitcoin for their effort, the mining process is competitive. The funds for these monetary prizes come from network fees./n The sale is added to the distributed ledger as a new block once the transaction's blockchain encryption is verified. Most networks will also need to use "proof of work" to confirm that the bitcoin sale took place./n When the block is joined to the previous block of bitcoin transactions, the sale is considered complete. The hash, which is its cryptographic fingerprint, is the proof.
What Are the Real-World Applications of Blockchain Technology?
We can analyze how blockchain pertains to real life now that we've answered the question "how does blockchain work?" /n These are some of the applications:
- Property sales
- Legal contracts
- Medical records
Other types of digital documentation used in various industries include:/n Because of its authorization and capacity to reliably record transactions and firm interactions, the blockchain platform is a viable initiative for many entities./n For larger organizations, it has a significant impact on supply chain activity. Blockchain is used by private network services to properly monitor, track, and record product logistics and supply chains. Blockchain cryptography is used by many businesses to quickly find out where recalled foods were delivered and bought./n Blockchain technology has also produced smart contract technology, which is a significant product. Contract language is frequently complex and non-flexible when two entities do business together. Using blockchain technology, contract terms can be automatically updated, changed, or revised if a certain event or set of events happens./n Another area where blockchain technology can be used is in healthcare documentation. Healthcare records, like smart contracts, are frequently complex, unreliable, and flaky. Blockchain technology has the potential to improve patient outcomes by streamlining processes./n In addition to bitcoin, there are thousands of other unique cryptocurrencies that use blockchain as their backbone. Even though it's not clear if bitcoin will replace traditional payment systems in the long run, blockchain technology is here to stay and is always getting better.
Conclusion
Blockchain technology is only getting started. We'll start to see how the technology affects corporations, supply systems, medical networks, and individual investors as more individuals adopt it./n Although Bitcoin and Ethereum are the two most popular blockchain applications, the technology is used by thousands of other digital currencies. We don't know yet if digital currency will replace traditional ways of paying, but the options are endless.
