Although blockchain technologies are not all that fresh, a lot of buzz and chatter has been created in the cryptocurrency and blockchain space over the past year. The blistering investment demand for cryptocurrencies has given rise to much of the popular interest in blockchain technology. In December 2017, Bitcoin reached a record price of almost $20000 (before declining substantially just days later).
The decline in crypto-currency markets did not lead to a decrease in technological growth. In the first quarter of 2018 alone, funding for initial coin offerings (ICOs) hit $6.3 billion. Despite the fall in public interest, technological progress has continued.
This article will address four of the key concepts behind blockchain technology, whether you are interested in investing in cryptocurrencies or just want to understand how blockchains function. In order to be useful to most individuals, without being too detailed in terms of individual cryptocurrencies or technical information, we will provide a general overview.
Between bitcoin and blockchain, which are connected yet very distinct concepts, it is essential to differentiate. Bitcoin is just one of several blockchain technology-based cryptocurrencies, although it is the cryptocurrency that has gained the most mainstream exposure and investment by far. Blockchain is a distributed ledger that makes and records transactions. Independent from any cryptocurrencies that use it we will address blockchain.
1. Distributed database
Blockchain technology relies at its heart on the development of peer-to-peer distributed networks, which do not require transaction facilitation by a central authority. Network members, known as "peers," are able to connect and communicate directly with each other.
On a continuous ledger, all of the transactions between peers are registered. - participant in the network retains its own separate and identical copy of this ledger. This means that the more redundant and more stable the ledger becomes the larger the number of peers participating in the network.
Peer-to-peer distributed networks, with no central server or authority, are decentralized by nature. Blockchain records exist nowhere and all at once, indicating that they do not have a single flaw or vulnerability common in conventional databases.
2. Transaction speed
Suppose you want to move money between your Wells Fargo and Bank of America bank accounts. This is far from an instantaneous operation, although the banks create the illusion. In order for the transaction to occur, it must be resolved and checked by all separate systems before it can go through.
Usually, banks put temporary holds (visible and invisible) on your funds when making a transaction. In addition, the act of processing a transaction has an intrinsic expense because banks are for-profit companies, which can or may not be visibly passed on to the consumer in the form of a transaction fee.
The decentralized design of the blockchain, on the other hand, provides a transparent ecosystem inside a single framework through which transactions can be processed without the need for third-party authority. In real time, peers can directly send transactions to other network peers, significantly increase processing speeds and reduce the risk of fraud.
3. Security and immutability
Security is important due to the fact that blockchain ledgers are distributed among several different peers. Fortunately, with protection and consensus in mind, most blockchain networks have been developed from the ground up.
While various blockchains address the issue of protection in various ways, the same general formula is used for most networks. In order to be connected to the current chain, the most recent transactions are packed into a 'block' that must be checked and approved by the network. When added, they are the basis for all subsequent blocks.
Two key characteristics derive from the reliability of blockchain ledgers. First the stringent requirements and standards defined by the network can not be violated by new blocks. Second, it is difficult to alter or adjust previously agreed blocks, since this would break the consensus algorithms of the network and invalidate all subsequent blocks.
In other terms in order to be resolved on the blockchain and accepted by the network, transactions need to be legitimate. Transactions are immutable and irreversible if present on the blockchain.
4. Trustlessness
In order to accept it the cashier must have three levels of confidence when you write a bank check and use it at a store:
Next the cashier must trust that you are not using a bogus check and that your checking account has enough funds.
Second, the cashier must trust that the funds will be transferred as promised by the financial institution which issues the check.
Third, the cashier must trust the government that issues the currency in which the check is written, trusting that it is worth the funds and that they can be spent.
Because it has inherent fraud protection, the blockchain removes the need for peers on the network to trust each other. When the network finds that there are not enough funds to complete them, transactions cannot be made and reversed later on. Since the network knows each peer's balance in advance, it will not process or approve unsubstantiated transactions.
Blockchains are "trustless" as a result. Participants need to have faith in the blockchain and its immutability, but trust between peers themselves does not actually need to exist in order for the network to operate.
Blockchain technology is made possible by these four significant concepts. While these concepts make the blockchain highly appropriate for applications such as cryptocurrencies, they also offer a stable framework for a range of other cases of business usage.
We assume that blockchain technology is incredibly exciting: it not only has the ability to simplify current systems, but also to generate new possibilities and inventions. As the frenzy around the cryptocurrency market subsides, we predict that companies in industries such as real estate, banking, healthcare and manufacturing will pay more attention to blockchain technology applications and capabilities.
