Essential Blockchain Technology Concepts You Need To Know
Blockchain technology uses a decentralized and digitalized registry system to keep tabs on ongoing transactions in different parts of the world. This system lies in contrast to the centralized systems traditionally used to govern fiat trading currencies. The advent of blockchain technology creates a more secure and diverse network that benefits trading circles worldwide.
This decentralized record-keeping system keeps a secure trail of transactions from the last deal back to that transaction’s origin. This record minimizes the possibility of fraud as any discrepancies can get traced back to their source. The system’s way of relating assets to their owners also makes it an almost impregnable system against identity forgery. Here are five blockchain concepts you need to understand.
Blockchain is Not Synonymous to Bitcoin
Blockchain and Bitcoin have often been confused by many as being the same thing. While they are related, they are not synonymous. Bitcoin is a digital currency that was the first cryptocurrency introduced in the world in 2008. It got supported on a registry system known as Blockchain that allowed its safe transaction from any corner of the world.
Blockchain acts as a ledger system that records every transaction that occurs on an asset. This time the asset is Bitcoin. These transaction records become available to anyone with relevant permissions at any point in the deal. The decentralized Bitcoin asset needed a data register that would make it virtually impossible to steal or forge. The Blockchain serves that purpose very well. Blockchain works by storing transaction details in a block of information. This block gets connected to another block of data and, by so doing, creates the blockchain effect. This digital registry has found use in both tangible and intangible assets tracking. Physical assets like gold and diamonds get kept track of the same way digital currencies are.
Data on Blockchain is Encrypted
Many people have a fallacy that anyone can access data stored on Blockchain. The data stored in this digital registry have security protocols that ensure only people with the right permissions can access it. Blockchain comes in three varieties, which give different accessibility permissions.
Public blockchains give accessibility to anyone who downloads the software. The blockchains allow anyone the right to read and write data on the platform without bias. The vital aspect of this permission is the unavailability of participants to overwrite data written before.
Private blockchains are the next type of digital data registry. This type gives access to the owning company as single entities own them. Select individuals get permission to read and add information on this registry, and the public cannot access them.
The third type of Blockchain is Consortium Blockchain. It gets fashioned in between a public blockchain and a private blockchain. Here, several companies or entities come together to manage their data registry. Several individuals have the right to read and write data on the log. They can also invite other users to do the same upon their discretion.
There are Different Types of Blockchain
Blockchain exists in more than one form. The misconception that Blockchain is just one comes from the notion that it is the same registry system used across the world. The idea most likely gained roots because of Bitcoin, which is supported using one registry. The different forms of Blockchain get united by the fact they are data registries. From there, they separate into more individual entities that get created for specific uses. Good examples of the different registry types are the public, private, and consortium blockchains. Real-life examples that exist are Etherium, Corda, and Ripple.
Smart Contracts are Trigger Software Codes
While the name “Smart Contract” can make you think of a legal document, nothing is related to it. A smart contract is a code written onto a digital registry to trigger an event preceding another event to complete a cycle. A good example involves the automated payment of delivery personnel who have delivered goods to a company. The smart contract gets triggered when the delivery gets done and automatically triggers monies’ deployment to the delivery company’s account. Such a system gets rid of manual procedures that are both time-consuming and expensive.
Blockchain is in Constant Development
Blockchain gets regularly mentioned in different circles, and it may get mistaken for a nifty buzzword. This digital registry technology is, however, continuously under development. Different companies have invested heavily in their development so they may absorb it into their business circles. Such companies include banks and capital markets companies.
Accelerated efficiency is the primary motivator for institutions to embrace Blockchain technology. The estimated savings on business operations can get to 70%, while those savings related to compliance may increase to 50%. Investment in Blockchain development startups was at $1.8 billion globally in 2016 alone, with about 50% of European financial institutions working to augment Blockchain solutions in their operations in the current day. Blockchain is here to stay and can only get better.