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Blockchain Technology and Its Applications

Blockchain

What is Blockchain?

According to Wikipedia, Blockchain is a growing list of records (called blocks) that are linked together using Cryptography.

Each block consists of,

  • A cryptographic hash of the previous block,
  • A timestamp and
  • Transaction data.

Blockchains can be considered the most secure and immutable technology for recording and maintaining transactions and data. There are three main characteristics of Blockchain that help to maintain the security and immutability of the Blockchains.

Characteristics of Blockchain

Decentralization

Traditionally, data are stored in central locations which are owned by someone/organization and manage all the data/transactions by themselves. Those data can be altered by anyone in the organization or who has authority and also any threat to the centralized system can cause the loss of all the stored data. But when it comes to decentralization, all the data are distributed among the users in the network. Blockchain uses this method to maintain the integrity of data. Even if one node losses the data, there are a large number of copies of data in the network which helps to maintain the whole set of data as it is. Also, this helps to prevent alteration of data since there is data transparency.

Cryptography

As mentioned previously, since the data are decentralized, there must be a way to secure them. They are complex mathematical algorithms that deflect attacks. All the data in blockchains are hidden by hashing. Each block has a unique hash which is derived from that block’s transaction and the hash of the previous block. Since one small change in the input value creates an entirely new hash, nobody can get away with making small changes without invalidating the whole block.

Consensus

It’s the process that validates each block and adds it to the blockchain. Here, miners compete to solve the cryptographic puzzle based on the data contained in that block. Once miner shares their solutions with the network and if 51% of the network nodes accept the solution, the block is added to the blockchain. This is called proof of work and this ensures that each block passes a complex, mathematical process before becoming an immutable part of the blockchain.

Applications of Blockchain

Since blockchain is an emerging, trending, and the most secured technology for data transactions, there are various companies, technologies, products, and industries using blockchains.

Cryptocurrencies

Blockchains are mostly used in cryptocurrencies such as Bitcoin, Ethereum, etc. They use blockchains to record their transactions and since blockchain hides the sender and the receiver, it is considered secured and secret. Also, some countries consider these cryptocurrencies as illegal while countries like China implements blockchain technology in several industries including a national digital currency that launched in 2010.

Smart Contracts

According to Wikipedia, Blockchain-based smart contracts are proposed contracts that can be fully or partially executed without human interaction. They can be used to automate various processes which use blockchain technology. This reduces the friction between entities when transferring value.

Financial Services

Many banks have started implementing distributed ledgers for use in banking and are co-operating with creating private blockchains.

Video Games

CryptoKitties is a video game based on blockchain which was launched in November 2017.

Supply Chain

Several ways use blockchain technology in supply chain management such as precious commodities mining, food supply, and software development. Some companies use blockchain to track the origins of gemstones, diamonds, and precious commodities. Also, companies like Walmart use blockchain technology to track food items from their origins to stores and restaurants. According to Wikipedia, The Linux Foundation’s blockchain initiative, Hyperledger Grid was started in 2015 to develop open components for blockchain supply chain services.

 

Hope this article would help you to get a basic idea about what is blockchain technology, main characteristics of it and its major applications. Thank you for reading.