Blockchain Technology and How It Improves Your Business
What is Blockchain technology?
Is it the same as Bitcoin?
Actually, it is not.
Later, we will see the differences.
But, Bitcoin is what most people know.
Why is this so?
Well, something interesting is happening.
It seems as if everywhere we turn, there’s someone trying to get us to buy Bitcoin.
For example, many promotions fill the net.
You probably receive emails about it.
And, if we believe the marketers, all we need to do is invest in Bitcoin.
And soon, we’d be rich.
Well, today, keep your wallet.
Since this is not another plug for Bitcoin.
Granted, it is highly popular.
Since it was introduced in 2008.
Actually, our theme is its underlying technology:
It is known as Blockchain.
And it is the most exciting technology of our time.
So, one vital question to consider is:
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Is It a Passing Fad or a Sustainable Revolution?
In truth, it is here to stay.
It will remove intermediaries.
Paving the way for peer-to-peer transactions, Bitcoin is the first application.
It came first, While blockchain technology came second to lend some legitimacy to it.
And, it&8217;s vital to note that apart from Bitcoin, there are other applications.
By the way, blockchain is a general purpose technology.
Therefore, it applies to many facets of life.
In fact, an expert says:
It currently has about 700 applications.
You can see that this is huge.
And smart folks ought to know about it.
Because it’s poised to change our lives.
It offers many opportunities.
But, it&8217;d also eliminate a lot of jobs and kills many businesses.
It&8217;s so game-changing.
Microsoft and IBM invest millions of dollars in it and many start-ups are exploring it.
Even venture capital firms have invested over a billion dollars in it.
Ethereum is its second most popular application.
It executes peer- to- peer contracts.
In fact, many experts see Ethereum as &8220;Blockchain 2.0&8221;.
That is an advancement on Bitcoin at this point.
It&8217;s pertinent to ask a vital question:
What&8217;s the technology&8217;s main benefit?
It enables the secure transfer of assets!
We all know the fact that distrust is a great barrier to economic activities.
This is the reason we have many intermediaries who seek to protect buyers and sellers.
The Technology of Trust
Fortunately, Blockchain technology ensures trust.
In fact, some call it “The technology of trust.”
In truth, it’s not a trust-based model.
Rather, it’s a proof-based model.
Its algorithm and cryptographic code provide the proof.
And it&8217;s the proof which engenders trust.
Key Facets of Blockchain Technology
We’ll explore what it means, how it works, and its evolution.
And, we will learn about cryptography and Ethereum.
Finally, we will learn about how it&8217;d benefit your business.
Let’s get started.
What Is Blockchain Technology?
Most transactions require some middlemen.
Especially, financial institutions and government.
But, we incur huge costs because of their role.
The costs are time and charges.
What are their key roles?
Intermediaries keep records of transactions.
They verify and validate their authenticity and that of the parties involved.
This is the way we have done things for ages.
We assumed there must always be intermediaries.
But, Blockchain technology upends this inefficient way.
It eliminates the need for intermediaries.
We’d see how, soon.
It solves a major problem with online transactions: The problem of trust
Let&8217;s take a deep look at what the technology entails and how it solves that problem.
The blockchain is a combination of technologies.
Essentially, it has two parts.
A network that verifies and facilitates transactions and an immutable, decentralized ledger.
At this point, it’s akin to how the internet was in its early days.
The infrastructure is being built.
There&8217;s still a lot of work to be done.
So, it’s hard to predict its future.
But we know for sure, it is the main technology for the next few decades.
Its effect will be like that of the Internet.
So, what exactly is it?
Many of us are familiar with databases and ledgers.
We use them on a daily basis.
So&8230; what is blockchain technology?
Essentially, it is a secure, super-sophisticated database.
Is that not exciting?
And, what are databases and ledgers used for?
We use them for capturing and storing vital information.
But, our methods are inefficient.
Thankfully, blockchain rescues us.
Open or Private Networks
It is a blend of algorithm and data structure.
Which removes these inefficiencies.
But, it differs from the databases and ledgers we are used to.
Because it is decentralized and distributed.
This means there is no single, central authority.
And yet, it is safe, secure, and open.
Such that all on the network can access.
And follow a trail of the transactions.
Its algorithm ensures the uniqueness of each transaction.
It also makes it extremely difficult for hacking.
Even though there is no central administrator.
The networks can be as open as the internet.
Or they can be private like an intranet.
The Death of the Intermediary
The network updates the records in real-time.
And, simultaneously on all the nodes (computers on the network), and in a chronological order, it replicates databases.
Such that the same record can be accessed by different people at the same time.
And all records are identical.
All parties can update the records but they cannot edit or erase any.
The network is transparent and reliable.
It’s easy to understand.
That it’s almost impossible to perpetrate frauds since all records are available and accessible to all.
They leave a trail that can be checked if the above seems far-fetched.
Think of Google spreadsheet which many of us use.
Think of how people in different locations even in different parts of the world can access it and work on it in real time!
It shows their inputs and edits at the same time.
The blockchain encrypts transactions.
It maintains their integrity.
When a transaction occurs on a blockchain, cryptographic code records and protects it and it is captured in a block.
Then, Miners, computers with high power attempt to validate the transaction.
The network timestamps the validated transactions and they are added to the preceding blocks to form a chain.
Discrete data records are the &8220;blocks&8221; while, how they are linked is the “chain.”
This process is where the name, blockchain, is derived from.
In effect, this chain is a trail which is accurate, safe, secure and open.
The history is a constantly updated version of what happens on the network.
But, unlike what we are used to, the blockchain network is the intermediary.
In effect, blockchain technology eliminates middlemen.
It&8217;s this chain of interlinked transactions that make it powerful.
How Did Blockchain Technology Evolve?
You&8217;d probably agree that:
What’s been shared above is super exciting.
Because, we can imagine how it’d provide a basis for a democratic, distributed global marketplace, and how it can foster cooperation on a global level!
So, how did it all began?
Satoshi Nakamoto&8217;s paper in 2008 led to Bitcoin&8217;s evolution.
The name is a pseudonym for a person or a group of persons.
The paper proposed a peer-to-peer electronic cash transfer system.
Blockchain technology came into being to validate Bitcoin.
But, as time went on, many realized that the underlying technology is more valuable.
In effect, the servant is now the master.
And, it has many potential applications.
Furthermore, these applications show that it is even more valuable than Bitcoin which it came into being to serve.
Now, let&8217;s look at how it will benefit your business.
But, first, we&8217;ll learn about smart contracts.
What Are Smart Contracts?
It&8217;s vital that we understand them since they will impact our lives, specifically, they are self-executing programs which help in the automation of processes.
As we explore them, you&8217;d be seeing how blockchain offers benefits.
Essentially, contracts are converted into code, and then stored on and are reproduced by the network.
The network ensures there are multiple copies.
Smart contract&8217;s main task is to transfer digital assets and currencies, once certain conditions are met.
In fact, anything that has value, such as money, shares, or property can be transferred.
Smart contracts stipulate the conditions and obligations of the parties to an agreement.
They also enforce the obligations.
Their value involves being able to execute many transactions and ensuring conflict-free transactions.
They will eliminate the need for intermediaries.
In fact, we can compare them to vending machines.
For example, when we put money into a vending machine, we get what we want.
In a similar vein, when we put bitcoin in the blockchain, we get what we want.
Smart contracts are stored on blockchain networks, because the networks are tamper-proof and secure.
Nick Szabo, a cryptographer, and legal scholar devised the concept of smart contracts in 1994.
He also laid the foundation for digital currencies.
What are the key benefits of smart contracts?
Beyond what was hinted at above.
They are accuracy, savings, and automatic backups.
While trust and autonomy are the rest.
Benefits of Smart Contracts
Let&8217;s look at each benefit.
The transactions are accurate.
Since there&8217;s no need to fill a heap of forms, you save a lot of money.
Since you don&8217;t have to pay any middleman, the network has multiple copies of the same records ensuring automatic backups.
Thus, transactions are trusted because of the encryption used.
And finally, you experience autonomy, since you are the one who initiates the transactions.
There&8217;s no need for any intermediary.
Smart contracts mitigate litigations.
They save time because they are automated.
And, they operate on an if-then basis.
They are executed once the conditions are met.
Smart contracts are currently being used in insurance, financial derivates, and property law, and in financial services, credit enforcement, and others.
Now, let&8217;s explore what makes blockchain safe and secure.
Blockchain Technology&8217;s Secret
We have been making references to it.
First, it&8217;s an indispensable component of blockchain technology.
The network maintains the integrity of what&8217;s transferred, and, it prevents hacking.
So, what is it?
Cryptography is derived from the greek, Cryptos which means hidden.
It is a means of encoding information, so that the recipient alone can access it.
Code encrypts plaintext.
It converts it to ciphertext.
And, the code converts ciphertext to plaintext.
Cryptography&8217;s objectives are authentication, confidentiality, non-repudiation, and integrity.
Let&8217;s look at what each entails.
Authentication means confirming the identity of the sender and recipient, and of the origin and destination of what&8217;s to be sent.
Confidentiality means only parties involved can understand the message.
The message cannot be changed in transit or while it is stored.
This is what integrity means.
The network detects the changes if they occur.
And finally, non-repudiation means that the originator cannot deny their reason for creating and transmitting it, later.
The main types are:
Symmetric-key cryptography, Public-key cryptography, and hash functions.
In Symmetric-key cryptography:
The sender and recipient use the same key.
The sender uses it to encrypt plaintext into ciphertext while the recipient uses it to convert it back to plaintext.
In Public-key cryptography, Cryptography uses two keys.
A public key encrypts while private key decrypts.
The private key always remains a secret while the public key may not.
Hash functions do not use keys.
Their purpose is to ensure that the message remains unaltered.
How It&8217;d Benefit Your Business
Security is one of the key benefits.
You know that cybercrime is debilitating and that this often leads to great losses.
Blockchain uses cryptography and is highly secure.
It’s almost impossible for a hacker to breach the system because of the way the network works.
It codes transactions as blocks.
Then it chains them to preceding ones.
In effect, the network connects all transactions.
It’s impossible to break this chain without detection.
Time savings and efficiency are the second benefits.
The network executes transactions faster since there are no middlemen.
And there are immense savings since there are no fees to pay.
The time savings are substantial.
For example, Blockchain reduced to four hours!
A transaction that would ordinarily take 7-10 days.
Don&8217;t you think that is amazing?
The example, about time savings, is a graphic illustration of the immense benefits.
The technology will unleash smart contracts accelerate efficiency.
They eliminate many traditional processes because these programs automate many transactions.
We can rethink processes using smart contracts and improve key facets of a business.
This results in great savings.
Accuracy and speed of record keeping are the third benefits.
All economic activities require tons of records.
This is time-consuming and expensive.
And is prone to human error.
Blockchain timestamps all information.
Furthermore, it checks and links them to others.
The audit process is the fourth benefit.
As currently practiced auditing is prone to errors.
And it is often provided late.
But with blockchain the technology captures all transactions in a sequence.
And the parties involved approve all transactions.
Thus, a permanent, continuous audit trail is always accessible.
Now, let&8217;s look at an advancement on Bitcoin.
What Is Ethereum?
Let&8217;s explore &8220;Blockchain 2.0&8221;
In the past, coding, cryptography, and math skills are required.
Ethereum, an open software platform has changed that.
Now, developers use it for rapid application development.
It is what enables smart contracts.
How does it relate to Bitcoin?
Bitcoin&8217;s blockchain is essentially about the mining.
And the transfer of the currency.
The Ethereum blockchain, on the other hand.
Executes decentralized applications.
Both are open source projects apart from being a blockchain network and a cryptocurrency.
It allows users to create their own digital tokens which represent valuables such as shares and assets.
Ethereum is also a programming language.
Vitalik Buterin&8217;s team developed it in 2015.
The Ethereum network uses Ether as its currency.
In essence, it is the reward for mining.
Therefore users pay for services with it.
They also defray transaction fees with it.
Essentially, Bitcoin is a currency while Ethereum is a programming platform which enables fast application development.
And safe and secure peer-to-peer transactions.
Truly, we can see that it is superior to Bitcoin.
In conclusion, blockchain is changing our world.
Since it offers great benefits.
By the way, its applications go beyond business.
For example, the health sector is applying it and government organizations can use it.
In fact, even charities can use it.
Interestingly, some firms are testing its use in the cloud storage sector.
If this works naturally, there will be no central administrator.
Furthermore, users can sell excess space and make more money.
Evidently, it is changing the economy.
Finally, there are near-limitless uses for it.
In fact, our imagination is the only limit.
So, what will you build with it?