Blockchain is one of the latest technologies that the world has even though it started as an anonymous invention. It is now the top technology trend of the present time and the years to come. But even with it being in the news, entrepreneurs, businesses, and even the world economies still find it hard to catch up on the trend – its usage, and proper understanding of the technology.
However, it is quite difficult to get a decentralized financial system. This is due to how much power centralized bodies have over the financial sector. Hence, the essence of Blockchain, which is the fundamentals of decentralized finance.
Briefly, let us discuss Blockchain and subsequent key points associated with it.
WHAT IS BLOCKCHAIN?
Blockchain is a shared digital ledger which records all transactions in public or private peer-to-peer network. It spreads across all the member nodes in a network. This ledger records in a sequential chain of cryptographic hash-linked blocks
Which explains the history of asset exchanges that took place between the network peers.
HOW DOES BLOCKCHAIN WORKS?
With a simple example, we will explain how this system works..
If you want to add Henry’s birth date in the ledger, you must broadcast his request on a P2P network which consists of computers, known as nodes. The P2P network validates the request by using algorithms. Once the request is verified, you can now add a new block to the ledger. Note that this block cannot be altered because it is permanent. Then you complete the transaction and add the birth date in Blockchain.
Now that we have looked into what and how it works, let us look into the pillars of blockchain technology.
THREE BLOCKCHAIN PILLARS
There are three distinguishing properties of Blockchain. They act as a decentralization torchbearer from traditional centralized mode of operations. These pillars hold the entire weight of its popularity especially in terms of business communication networks and security.
Decentralization occurs as a result of the existence of the ledger on multiple systems (nodes). Which is the exact opposite of a centralized system where you store all data in one place.
A digital signature drives every action, which you can also be trace back to a system. In extension, the decentralization factor makes it impossible for any of the nodes to perform an action without the others knowing. Also, Blockchain ensures utmost openness and transparency in the decentralized system.
As the fundamentals of DeFi, no participating node can alter data entered in the Blockchain. The only way out is for hackers to create a new block, something that the nodes will easily identify and reject.
TYPES OF BLOCKCHAIN
There are different types of Blockchain models. But they vary greatly on the basis of transparency and participation. It is however divided into three. They are:
This is an open Blockchain that allows anyone to join the network. The assumption with this one is that every single participative node receives a for performing their various duties honestly..
This is a closed Blockchain where privacy is of top importance. Every single one of the participative node is vetted and pre-selected. Because it is a trusted network, the idea behind the creation and participation is less profit-making and more business collaborations.
Presently, Public Blockchain comes with a very low transaction speed. On the other side, a Private Blockchain is able to support transactions at a much faster rate, especially because the final consensus is a lot faster.
Also, another difference between Private and Public Blockchain is the Blockchain app development cost. Public blockchain is more expensive than Private blockchain. In the Hybrid Blockchain, every single transaction happens quickly in a private chain and then is committed to the public chain when needed, for example when a public verification is needed.
Blockchain in real world industries
There is no single operative industry which does not have a use case for this technology. The technology holds the ability to convert all industries and businesses towards decentralization.
The market of blockchain development foresees the technology affecting these prime areas in no distant time.
From virtual currencies to open banking and the world-wide banking systems getting connected, Blockchain has the ability to affect the Finance industry as a whole, touching upon all its facets. In times to come, Decentralized Finance (DeFi) will adopt the finance software development.
Also, this technology will prove to be a game changer for the challenges that face the Healthcare domain. Every bit of the health information will be made accessible in real-time through the combination of Blockchain and Healthcare. Patients will have a detailed information about their ailment; causes and cure.
A decentralized government would undoubtedly erase every inch of tyranny and inject transparency, efficiency, and security in the system and processes.
The entire process of making a product available from the manufacturer to the end users will be transparent and accountable at every stage through Blockchain’s incorporation.
Recently, Blockchain in real estate is helping with mitigating existing challenges like excess paperwork, transfer of money, escrow and high commission rates.
The profit making image of charities and social groups will cease to exist, with the facility of smart contracts and transparency that Blockchain comes with. Even scammers who disguise to obtain pity from the public will be erased.
Getting access to students’ and teachers records, and course transcripts will eventually become a matter of few clicks. With the inclusion of this technology in Education sector, exam malpractice will be erased. Also, the accuracy of every result will be accounted for.
COUNTRIES THAT HAVE EMBRACED BLOCKCHAIN TECHNOLOGY
The rate of adoption and research around Blockchain spans across the world. While some have already started incorporating the technology, some are still working around their centralized systems. Almost every country is thinking of a future for their economy by spending time in understanding the basics of Blockchain technology.
More than 500 Blockchain projects have been registered in the Chinese government’s Cyberspace Administration. This administration is run by the state-owned banks, tax and court offices. China is also trying to expand its focus on this technology, especially in the education domain. In his speech, Xi urges for the development of initiatives like “Blockchain+.” This platform will be for personal development in the areas like employment, education, and health.
Japan is one of the leading hubs for Blockchain in the world. Having understood the importance of the technology, companies like Sony and Fujitsu are openly working in the direction of becoming blockchain technology companies.
Besides this, here are some pointers to how Japan is opening up to the technology:
- Japan is leading the traffic to ICO listing websites across the globe.
- The Japanese YEN accounts for 40% of the global trading Bitcoin volume only second to the US dollar.
- Japan is also the first country to have recognized Bitcoin as a legal payment option.
A few years ago, The US FDA, made an announcement that they have signed an agreement with IBM Watson Health branch. The purpose was to find the future of this technology in the sharing of patients’ data, safely. This partnership aims at addressing the absence of transparency and safety in the process of how health data is collected and processed.
The relation between Australia and Blockchain is not very old. The journey of the country in the Blockchain domain started in 2016 with Australian Security Exchange (ASX).
Here are the other significant events that have happened between 2016 and 2019 on the front of Australia and Blockchain’s relation –
- The Australian Securities Exchange (ASX) looked for opportunities in Blockchain for future trading.
- Also, Australia was awarded the tender for standardizing the blockchain technology.
- Incent and ChronoBank announced Australia’s first two Initial Coin Offerings (ICO)
- Australia’s largest bank, the Commonwealth Bank of Australia (Commonwealth Bank) issued a cryptobond
- Australian Securities and Investments Commission (ASIC) published ICO guidelines and the Power Ledger project raised $34 millions.
- WWF used blockchain to handle human rights abuses and illegal fishing.
- A real estate transaction was developed on Ethereum blockchain.
- Brisbane International became the first Crypto-Friendly Airport.
- Queensland Government backed the City of Bundaberg for accepting cryptocurrency payments for tourist attractions and local companies.
- Capgemini and Swinburn University will together develop a ‘Global Blockchain Centre of Excellence’ in Melbourne.
- South Australian Government announced its plan to use the technology for conducting an official election.
The Dubai government is working with the intent to become the first nation to bring all the public transactions on Blockchain by 2020.
They even estimated that the inclusion of Blockchain can save over 5.5 billion dirhams that otherwise goes into document processing tasks. Meaning they would be able to get back 25.1 million hours of their occupied resources and engage them in bettering their economy’s productivity.
In 2018, the UK’s FSA became the torch-bearer of Blockchain’s adoption. They developed a pilot to track meat distribution in the slaughterhouses to check if they followed compliances of the food sector.
- Defra integrated Blockchain to better the process of food traceability.
- HM Land Registry is also finding ways to add the technology in the process of investigation of how to improve property buying and selling process, and land registration.
- The Department of Work and Pensions is also assessing the technology’s power in checking how it can benefit the management of their money
The sentiment around India moves towards Blockchain technology is positive throughout. According to the NASSCOM 2019 Blockchain Report, the adoption rate in the country is on a constant growth and investments rise. In fact, the number of projects built by blockchain development companies have crossed the $20 billion cross across multiple industries.
CHALLENGES HINDERING THE MASS ADOPTION OF BLOCKCHAIN
Becoming a powerhouse right at the beginning stage comes with multiple challenges. The most challenging one is developing yourself fast enough to meet the massive expectations that the industries and economies carry.
Between increasing expectations and out of synch adoption rate, Blockchain is struggling with challenges that are slowing down its growth rate.
Some of these Blockchain challenges include:
This system is yet to support scalability irrespective of its adoption in the market. While Blockchain is prepared for small category projects, the same is not the case with the development of mid or high complex projects.
Slow and Cumbersome
The approval or rejection time it takes to validate a transaction is still very slow. On an average, the time it takes the nodes to reach a consensus lies in several seconds in case of simple transactions. This in turn grows up to several minutes in case of complex transactions.
High Energy Consumption
The energy required to validate a transaction and upload the blocks is very high. This high energy consumption, usually translates into a high cost, which makes the overall maintenance of a Blockchain project very expensive.
Lack of Adequate Skill Set
Blockchain is still at its early stage, meaning it will still take several years for it to reach a point where the number of developers involved in the process are high. The present state is not encouraging, because the number of developers and the technology development agencies are very limited
While the present of this technology might be in a working state, its future in terms of technology trends is extremely upward looking. The feature set that the technology comes with, promises a revolution, which would take the businesses towards decentralization, while bettering the world economy. Also, decentralization doesn’t look impossible again as people are gradually embracing cryptocurrency because they want to gain complete access to their assets and investments. In addition, one of the major factors hindering this technology is the authorities overseeing financial activities. They also pose as a big threat to decentralization. Once they come to terms with it, a decentralized financial is very much achievable.
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