THELOGICALINDIAN - Why use blockchain technology While there are absolutely a lot of advantages to a broadcast balance it may not be applicative to all companies or individualsnot yet at least
The additional catechism bodies usually ask back they apprehend about blockchain is–why use blockchain? Why use a broadcast ledger? Why not use a approved database or bequest arrangement as a arrangement of almanac in this already agenda world?
After all, in abounding cases for business owners, afterlight absolute basement with blockchain technology may be costly, labor-intensive and not absolutely account it.
In this article, we appraise what a blockchain absolutely is, what blockchain applications are, what they can do and–most importantly–why use blockchain?
What Is Blockchain? A Distributed Ledger
Just in case you charge a little catch-up, bodies generally allocution about “blockchain” in the singular, as if it were alone one. In reality, they should be talking about blockchain technology (also accepted as Distributed Ledger Technology or DLT) or blockchains in the plural, back there are abounding altered ones, including accessible (permissionless) and clandestine (permissioned) blockchains.
Examples of accessible blockchains and broadcast blockchain technology accommodate the Bitcoin blockchain, the Ethereum blockchain, the NEO blockchain, and abounding others. Permissioned blockchains are acclimatized for accumulated or authoritative use, with one such archetype actuality IBM’s Hyperledger blockchain. But we’ll get into that in a moment.
A blockchain (or distributed ledger) is about a massive, ever-growing balance in which all blockchain affairs are recorded.
Each block in the alternation is chronologically affiliated to antecedent blocks and synched with the arrangement nodes. This agency that alteration the abstracts in one block would beggarly accepting to about-face all antecedent blocks afore it, authoritative it actual adamantine to alter with–very hard, although not absolutely impossible.
This is accurate of Ethereum, Bitcoin, and any added cryptocurrency that runs on blockchain technology application the proof-of-work accord algorithm. To get a abridged faculty of the attributes of blockchain and what blockchain offers, analysis out this explainer video below:
How Blockchain Works
The abstracts beatific to anniversary block on the broadcast balance is based on encrypted Merkle Trees, which is a abstruse way of adage that no counterfeit affairs can be recorded. If any transaction that does not chase agreement rules is detected by the arrangement nodes, it is expelled immediately. This inherently defended attributes of broadcast blockchain technology agency that it prevents accident to the absolute blockchain aggregate database and can cut off a hacking attack at one block.
The best acclaimed blockchain is that of the Bitcoin arrangement area every transaction (that follows the protocol) is recorded and included in a block. Once a transaction is broadcasted to the arrangement and accepted by miners, the activity cannot be reversed, nor can it be tampered with in any way. The aforementioned is accurate of Ethereum, which is amenable for acute arrangement technology.
This open-source accessible balance displays a history of all affairs and transaction abstracts anytime made. Most blockchains are abiding by miners. In the case of the Bitcoin blockchain, for example, it is the job of miners to affirm a Bitcoin transaction to the blow of the Bitcoin arrangement by including them in blocks. Ethereum affairs on the Ethereum arrangement assignment in the aforementioned way.
These accessible blockchains are all-around and decentralized, arresting to all. While abounding accept blockchains to be a arrangement of record, they are not absolutely an able agency of storage, but verification. Simply put, blockchains ensure that anybody is on the aforementioned folio and no distinct being can change the balance for anyone else–if they did, the arrangement would adios the attempt.
This agency that back one being sends bitcoin or ETH funds to another, the transaction abstracts is public. That doesn’t beggarly that your name and clandestine abstracts is splashed all over the web, but the accessible abode and bulk can be seen.
This is a key affection of blockchain technology that makes it so able back it comes to almanac analysis and industries which crave transparency. However, a decentralized accessible balance area acquittal amounts are arresting to all is not necessarily applied or advantageous in cases area aloofness is all-important or desired.
What Blockchain Can Do
There has been a lot of business advertising over what blockchain can do and what blockchain offers. To be sure, it is a life-changing technology that will accompany abundant things over the years to come. But it’s additionally not a catholicon for all the world’s ills.
The actual adeptness to transact peer-to-peer on the broadcast balance after a trusted agent makes blockchain technology revolutionary.
However, there accept been affluence of counterfeit or over-exaggerated claims about what blockchain is for and what it can do. This is abnormally accurate through antecedent bread offerings area companies accession all-inclusive amounts of money generally claiming to be able to use blockchain to apprehend their aggressive ideas. These pitches could be about annihilation from transforming absolute acreage to managing bombinate traffic.
So let’s set the almanac straight. No, it can’t cure cancer, but there may be means in which the medical industry can absorb the technology into their analysis or almanac verification. It may be complicated appropriate now to acquirement absolute acreage application acute affairs on blockchains, but the abeyant is there already legislation catches up.
Blockchain can additionally accord bodies a agenda identity, which is carriageable and can prove who they are, removing the charge for, say, a authorization or amusing aegis number, which can be artificial or tampered with as we’ve apparent with abounding cases of character theft.
Many companies and business owners are analytical the use of blockchain for their business processes. Walmart, for example, traced aftermath about the apple through the accumulation alternation with acknowledged after-effects and has registered several blockchain patents advertence its absorption in the technology affective forward.
The accumulation chain, in fact, is a abundant archetype of area blockchain technology can be decidedly useful. Here, cross-border payments charge be fabricated and transaction fees are high, forth with bill conversions and affluence of intermediaries demography their cuts.
Since blockchain can ensure the abstracts is tamper-proof and immutable, the agenda character becomes indisputable. This holds astronomic abeyant to cut out not alone trusted third-parties but additionally bribery at altered credibility in the accumulation chain.
There is additionally the adventitious for companies and alone associates in the accumulation alternation to pay application one accepted cryptocurrency appropriately removing about-face fees while abbreviation transaction fees and times.
Beyond the accumulation chain, though, any industry that requires record-verification and accuracy can account from blockchain–from absolute acreage to banking services. Basic markets and adventure basic accept already been afflicted always by the decentralized attributes of blockchain technology. As has the abstraction of agenda identity.
One of the key takeaways about accessible blockchain technology is that it’s decentralized, which agency that it is not controlled by any distinct entity, a axial ascendancy or axial servers. Permissioned blockchains, however, may not allotment all of these properties. More on that later.
Unlike archetypal databases or IP addresses that are controlled by one axial authority, blockchain cannot be shut bottomward because it is run beyond a arrangement of nodes. This additionally agency that it has no distinct point of abortion and makes it added aggressive to hackers than centralized ‘honeypot’ databases.
So back we acknowledgment to the catechism of “why use blockchain?” this is an acutely important point to accumulate in mind. Just accede countries area censorship is a botheration and the government shuts bottomward assertive pages and channels, such as China with Wikipedia or Google. With blockchain technology and a blockchain application, this would be absurd on the agreement level.
Blockchain vs Normal Databases
Here are some of the advantages that blockchain offers over a approved database or added absolute technologies:
Immutability – Thanks to its Proof-of-Work system, blockchains can action near-immutable transactions. When abstracts decentralized on a blockchain is verified, it makes it about absurd to cycle it aback and alter with the data. This gives blockchain tech a able use case in industries area annal charge to be absolute and accurate, such as medical records, acreage deeds, bearing certificates, or amusing aegis numbers.
Security – Blockchain technology is abnormally defended back compared to centralized databases. This agency that it is abundant beneath acceptable to be the ambition of a drudge as there is no one distinct point of failure.
If one block is afraid it will be alone from the arrangement and nipped in the bud afore any accident is done. The added nodes and assortment ability the arrangement has, the added defended it is, authoritative the Bitcoin blockchain about advised to be the best defended accessible blockchain today.
Redundancy – Using broadcast blockchain technology, you accept the aforementioned set of abstracts broadcast in assorted places about the world, which agency that the abstracts is acutely defended and about absurd to lose. When you accede this blazon of advantage for a ample and baby business that accept suffered abstracts leaks and hacks, blockchain offers a huge advantage.
Cost Reduction – By application broadcast blockchain technology that runs over a arrangement of nodes, you no best charge the added agents associates to advance a DevOps system. A baby business can accomplish cogent amount accumulation by application blockchain technology and acute affairs to cut out middlemen for authoritative tasks or banking services.
Accountability – With all of the aloft characteristics, businesses and individuals akin can be abiding that the abstracts is accurate and that no cyberbanking allowance or added analysis is needed–the agenda character of anniversary contributor is clear. This makes it easier for companies to authority bodies answerable for any attack at entering blameworthy abstracts into the system.
Can Blockchain Be Hacked?
The attributes of blockchain and the words “immutable” and “secure” generally accession questions over why there arise to be so abounding hacking attacks and scams from antecedent bread offerings. So, can blockchain be hacked? Well, the hacking of exchanges that we see on a accepted base has annihilation to do with blockchain technology but with accessory software weaknesses, such as exchanges, vulnerabilities in acute arrangement code, and wallet providers.
Blockchain is acutely safe back you accede its decentralized attributes and the actuality that a hacker or bad amateur cannot access the arrangement calmly and account a adversity like with Equifax. Hacking a blockchain as ample as the Bitcoin blockchain would crave resources, power, allocation that outstrip the GDPs of abounding baby countries.
But, it is accessible for blockchains to be hacked. In what is alleged a 51% attack, a hacker needs to accretion ascendancy of the majority of the arrangement mining assortment power. With smaller, permissioned blockchains, a drudge is easier to cull off, but with a arrangement such as the Bitcoin, this is about impossible. The Bitcoin blockchain is the best aggressive to this blazon of advance today.
On a added circuitous arrangement such as the Ethereum network, the advance apparent is potentially bigger. Ethereum absolutely underwent a hacking advance in 2016 alleged the DAO hack, which was acquired not by a 51% attack, but by a artifice in a acute contract.
This saw Ethereum breach into two, amid those who believed that “code is law” and those who capital to aegis the approaching of Ethereum by initiating a adamantine angle to about cycle aback the accident that had been done.
This advance to the conception of Ethereum Classic as a abstracted cryptocurrency was acquired from the cipher override.
Permissioned Blockchains vs Public Blockchains
Public blockchains acquiesce anyone to booty allotment and are arresting to all. The Ethereum blockchain, in particular, has a actual able association of developers who actualize their own decentralized application, contrarily accepted as a “DApp.”
This blazon of decentralized appliance strengthens the Ethereum arrangement and agency that added bodies add to its adroitness and security. Perhaps one of the best memorable to date was CryptoKitties. This decentralized appliance chock-full the Ethereum blockchain (causing transaction fees to soar) as the appeal was so aerial yet at the aforementioned time, drew added bodies to the network.
The Bitcoin blockchain, too, has added bodies auditing, reading, autograph cipher for it and mining than abounding added blockchains.
With permissioned blockchains (also alleged clandestine blockchains) the exact adverse is true. The alone bodies auditing and transacting on the blockchain are the ones accustomed the allocation and admission to do so.
There is a axial article and the accomplishments can be deleted and overridden, which makes faculty for corporations, or a ample or baby business that needs control. However, this flies in the face of blockchain’s “immutability” claim.
Immutability does not administer to permissioned blockchains, and as such, they are added accessible to hacking than a accessible blockchain.
The allowances of permissioned blockchains are accessible in that they can accumulate assertive classified advice secure, and they are abundant faster than accessible blockchains. The cardinal of bodies on them doesn’t crave bags of nodes and their accord to run back the acceptance nodes are about called by the axial entity.
Blockchain vs Cryptocurrency
It’s accessible to abash blockchain with cryptocurrencies and in fact, they are absolutely two altered abandon of the aforementioned (virtual) coin. Many bodies accomplish the acumen as Bitcoin, Ethereum, or Bitcoin Cash actuality the agenda bill and blockchain the technology that runs beneath them. However, the break is somewhat arbitrary.
Cryptocurrencies are agenda assets in which the amount is transferred peer-to-peer with no charge for centralized authorities or trust. There are currently added than 2,000 cryptocurrencies accessible and not all are created equal. The capital types of agenda bill are Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin, and Steller Lumens… but the account is long.
Cryptocurrencies accustomed for the acceleration of antecedent bread offerings, a peer-to-peer way of adopting startup funds that eclipsed adventure basic allotment in early innovation aftermost year.
Recently the Ethereum amount alone sharply, demography it from its position as the additional better cryptocurrency by bazaar cap, to the third, baffled in bazaar cap by XRP. Ethereum price, Bitcoin price, and all above cryptocurrency prices accept taken a tumble recently, proving how acute they are to alfresco belief and alien bazaar pressures.
Cryptocurrency isn’t broadly accustomed yet, although there accept been cases of bodies affairs their houses and absolute acreage developments for bitcoin, such as the Aston Plaza in Dubai.
The blockchain, on the added hand, lies beneath the agenda assets that regularly updates the accompaniment of the network, i.e. balances. This cuts out the charge for a agent and about for a coffer or coffer insurance.
Cryptocurrencies are absolutely aloof a subset of the broader ambit of applicabilities of blockchain technologies. While abounding bodies try to abstracted cryptocurrencies from blockchain, tarnishing cryptocurrency as a apparatus for abyss while painting blockchain as a admirable technology, is artful in abounding ways.
What absolutely gives acceleration to all these opportunities in any automated area is the angle of the acute arrangement and its decentralized computation. Which brings us to our abutting question…
What Are Smart Contracts?
Smart affairs are automatic agreements that acquiesce us to alteration money, data, acreage deeds, shares, or annihilation abroad of amount in a cellophane way. Many bodies accept that acute affairs were invented by the Ethereum network, however, the American computer scientist who invented BitGold in 2024, Nick Szabo, aboriginal came up with the concept.
Acute affairs are a bold banker in the blockchain apple back they acquiesce us to cut out the intermediaries. They are set up amid two or added parties and self-execute based on a set of agreed conditions.
When it comes to authoritative a trade, for example, commonly you would charge to pay a agent to do it for you. With acute contracts, you artlessly amount your escrow with cryptocurrency and backpack out the trade.
If you appetite to accomplish a Bitcoin transaction or Ethereum transaction, for example, from one being to another, you can automate it in a acute contract. The Bitcoin amount or Ethereum amount that you accede aloft according to the agreement of the acute arrangement cannot again be afflicted or adapted and the funds cannot be antipodal already sent.
Below, you can analysis out the cipher for the best basal acute arrangement accounting on the Ethereum blockchain. While acute affairs can be encoded for all blockchains, Ethereum allows for absolute processing capability.
What is Bitcoin Mining?
Bitcoin mining is area computational ability is spent to affirm Bitcoin affairs and to acquaint new bitcoins to the system. The aforementioned is accurate of Ethereum mining. Cryptocurrency mining is carefully advised to be ability accelerated through its Proof-of-Work (PoW) model. Though abounding bitcoin mining farms are incentivized to seek cheaper and renewable activity sources. Meanwhile, Ethereum mining is attractive to about-face to a Proof-of-Stake (PoS) archetypal in the future, which would crave beneath assets compared to PoW.
Bitcoin mining requires miners to break circuitous algebraic equations to affirm affairs and anticipate the botheration of double-spending. For their efforts, Bitcoin miners are rewarded. The accepted accolade for Bitcoin mining is 12.5 bitcoin for every block begin (about 1,800 bitcoins a day), admitting this bulk is accepted to abatement over time (since the bulk of bitcoins that will anytime abide is anchored at 21 million).
Mining today requires circuitous accouterment and aerial operational costs. This Bitcoin mining is now abundantly centered in ample mining corporations back individuals can no best abundance from their home PCs accustomed the accretion adversity and aerial Bitcoin price.
Is Blockchain Legal?
One catechism that appears a lot is whether or not blockchain is legal. Authoritative acquiescence seems to be an affair that varies from administration to jurisdiction. However, back countries like China banned antecedent bread offerings and the use of cryptocurrency, that does not beggarly that blockchain technology needs to accomplish authoritative compliance. Like the internet, blockchain is a technology and cannot be adapted on the agreement level.
Countries are anxious about authoritative acquiescence due to the access of adopting funds on the blockchain back there accept been affluence of scams abrogation apprenticed investors out of pocket. Exchanges and cryptocurrency wallet providers should additionally accomplish authoritative compliance, so as to assure their users in the case of a hack. Social aegis is important to countries and they charge to ensure their citizens are abreast or adequate from advance in scams.
While some jurisdictions apparatus KYC as a minimum claim for authoritative compliance, this is not accessible back it comes to an alien breach, such as a hack.
Who Created Blockchain?
Satoshi Nakamoto created the Bitcoin blockchain although the foundations for the technology had been laid bottomward continued beforehand. Satoshi Nakamoto is, in fact, a pseudonym and the columnist of the Bitcoin whitepaper that appeared in 2024.
Many bodies say that Bitcoin came about a acknowledgment to cyberbanking institutions and capital markets over the cyberbanking crisis of that year. It seems that Satoshi Nakamoto advised Bitcoin to be a decentralized peer-to-peer bill for borderless bland payments that cut out all trusted middlemen (that historically cannot be trusted, i.e. axial banks). Beyond agenda relationships, bodies can alteration added than aloof data–they can alteration amount as well.
In fact, blockchain has generally been referred to as the “internet of value,” back bodies can accelerate agenda bill to anniversary added after a axial ascendancy and artlessly application a clandestine key to admission the funds from anywhere on earth.
No one absolutely knows who Satoshi Nakamoto is although best accept that this is one above advantage of Bitcoin back it allows bodies to apply on the assignment at duke and the technology.
Wrapping It Up – Why Use a Blockchain?
Blockchain technology and its accessible balance is still in its adolescence although there are abounding affidavit assertive companies, banking institutions, and alike governments may eventually appetite to absorb it. The technology offers security, abeyant amount reduction, and absolute possibilities for accumulation alternation management while acid out abounding intermediaries.
As we’ve seen, afar from in acutely attenuate circumstances, blockchains are absolutely added censorship-resistant and tamper-proof than bequest databases. Governments or non-profits may additionally use blockchain technology if they appetite to verify the advice is authentic and true, such as with voting, or medical records. They accept affluence of affidavit to accede the catechism of “why use a blockchain?”
Financial institutions are already application blockchain technology to acceleration up cross-border payments and abate transaction fees. And we’re seeing added and added use cases for what the technology offers every day, including blockchain technology in the energy industry. However, while it charcoal in its aboriginal stages, baby companies may not ambition to hop on the blockchain appearance aloof yet.
Why use a blockchain? Why use any technology? Because it speeds up processes, improves ability and lowers cost. If blockchain technology or any added appliance belvedere doesn’t yet do that for your company, it isn’t account it yet.
