The majority of the population know blockchain as the underlying technology that operates Bitcoin. However, the potential of blockchain technology extends way beyond cryptocurrencies. Even the world’s biggest personalities like Richard Branson and Bill Gates admire this innovation. Not only this, many financial institutions and insurance companies are eagerly waiting to incorporate this technology into their system.
For people who are not familiar with blockchain technology, here in this article, we will be explaining the entire framework in an easy-to-understand manner.
What exactly is a blockchain?
Blockchain is a public network that has a decentralized framework. It allows businesses and users to store and exchange data and currency quickly in a safe manner. If we divide the term into block and chain, it defines itself more clearly. Here “blocks” represent data storage that chronologically connects, forming a permanent “chain.”
Whenever users add a new block to the chain, it makes it more complex to perform any changes in the previous blocks. Therefore information stored in decentralized networks becomes safer with time. Apart from this, there are other characteristics of blockchain that make it suitable for diversified business applications.
Some unique characteristics of blockchain:
With every information you find on a blockchain network, you can be sure that it is 100% accurate. This is because blockchain records each activity of the transactions.
When the system records a block, it gets a timestamp. Also, every member of the network can access the public data of the block. Moreover, these transactions can not be changed or deleted which makes it complete immune to any alteration.
The term refers to a system where no central authority controls the processing of a platform. In the case of blockchain, no financial institution interferes with its work.
Instead, it is shared over multiple computers that are present in the network.
Because of this, users don’t need the permissions of third parties for transaction approvals.
Immutability and security
When new blocks join the digital ledger in the platform, the system makes data available to every user right away. Also, no one can make any changes to this data. Hence blend of these two features makes the blockchain highly secured.
How does a transaction take place in a blockchain platform?
● Firstly the system records transactions or exchanges in a ledger. Then this record collects the digital signatures from the relevant members within the network.
● Secondly, the system performs a decentralized process among various nodes in the framework. Here every Pc member of the network verifies the transaction from their end. If they find any unfamiliar modification, they reject the transaction right away.
● Once a transaction gets approval from the members, the system adds it to the block records. Every block has a unique code known as a hash. It helps users to locate the particular blocks.
● Once the whole process of block addition completes, a single block can contain various transactions. The hash makes sure that every block is being added to the ledger in the correct order.
What is the future of blockchain?
Blockchain technology is still in its progressive phase and has not reached its peak in terms of advancement. In the past, many governments attempted to curb its progression through implementing restrictions on firms involved and working on blockchain. Nevertheless, there is a paradigm shift in terms of how the public and government perceive blockchain technology now. Instead of considering it as a threat to the established money economy, it is being widely accepted and utilized to improve the existing technology infrastructures. Acceptance of Bitcoin as a legal tender by the El Salvador government is another remarkable and much-awaited move. Now, the blockchain community is assured that this technology is going to see nothing but growth in the future. Below are some of the prominent aspects of blockchain that could disrupt the existing technological infrastructure in near future.
The emergence of pragmatic governance models:
We can see the wide adoption of pragmatic governance models that will enable big and varied platforms to facilitate better decision-making. Additionally, it will process permission schemes and transactions more efficiently. It will assist in standardizing data from diverse sources as well as extracting robust data sets.
Around 68% of CIOs and CTOs expect better scalability in such models. In the coming two to three years, experts predict the possibility of communication across various blockchain networks as a feature of organizations.
Possibility of interconnectivity
Interconnectivity between different blockchain platforms will allow businesses to streamline their process more efficiently. It will let them interact with different parties about any issue of smart contracts not working with different networks.
Although the high level of interconnectivity between different networks will take many more years, it is not impossible. 83% of businesses expect platforms that can allow Interoperability and interconnectivity between different blockchain platforms. Also, many businesses believe that this feature is necessary. Blockchain platforms like PolkaDot are actively working on Interoperability. It has been providing the best level of interconnectivity in comparison to other platforms.
Introduction of retail Central Bank Digital Currencies (CBDCs) by central banks
Currently, a few countries in MENA, Asia, and the Caribbean are actively experimenting with CBDC. Undoubtedly there will be continuous development in their initiative. They are doing it to find a better payment platform and redefine existing payment systems.
This initiative is especially going to influence the retail CBDCs. Hence we can deem that there will be an increase in the use of tokenization of transactions. Additionally, experts say that the adoption of digitization for currencies and security will see a rise.
Apart from this, blockchain adoption in various industries, including healthcare, art, retail, supply chain, etc., will take over.
Blockchain Vs Cryptocurrency
Blockchain has a spectrum of use cases, cryptocurrency such as Bitcoin is one of them, and certainly one of the most debatable. Cryptocurrencies are a kind of cash in digital form, kept in digital wallets. It works almost exactly as real-world cash and can buy everything that a legal tender is capable of. Digital currencies(alternatively used for cryptocurrencies) are minted on blockchain infrastructure and have the feature of Immutability, transactions could not be reversed and every transaction will be recorded in the public ledger. It makes such currencies circulating on a blockchain system immune to theft. Such exclusive features are giving hype to these digital currencies supported by distributed ledger technology.
Considering the safety and economic feature of digital currencies, many countries are inclined towards minting their own central currencies through blockchain.
The Road ahead
Blockchain Theorist, Melanie Swan writes in her book Blockchain: Blueprint for a new economy, “The potential benefits of the blockchain are more than just economic – they extend into political, humanitarian, social and scientific domains, and the technological capacity of the blockchain is already being harnessed by specific groups to address real-world problems”. She considers blockchain as an ‘Extremely disruptive technology’ and it has the capacity of ‘reconfiguring all aspects of society and its operations. These claims have been proven right in the past and the present rapid adoption of this technology ensures that the future will embrace this technology.
Gargi Sinha is working as Senior Journalist at Confea. She has completed her Masters in Journalism from Delhi University. She has interest in crypto and blockchain technology.