All around the world, people are talking about Bitcoin and other cryptocurrencies. But while they’re a headline-grabbing topic, many of the discussions aren’t grounded in any hard facts. If you’ve been hearing assertions that seem unbelievable or have trouble understanding what all the fuss is about, read on for an explanation of how blockchain works and why it has such huge potential to transform everything from finance to voting systems to cyber security.
The first thing to understand about how blockchains work is that they’re actually decentralized databases made up of blocks that hold information about transactions between parties. The data cannot be changed unless a majority of the network agrees to amend it. This makes it a fundamentally different way of keeping track of information as compared to traditional databases.
From the perspective of someone sending a transaction, everything that happens on the blockchain is viewable publically, which means anyone can see who sent what to whom, and everyone can see every transaction that’s been made. In contrast, when information is held by a centralized database, transactions aren’t necessarily viewable publicly and information about them isn’t accessible in a systematic or easy-to-use way until you go through an arduous process like finding their records in person or seeking out an outside expert to help you figure out what they say.
Blockchains are also able to function without the need for a third party to approve or confirm transactions. This is because the rules of a blockchain network are open-source and decentralized. This means that every user of the network gets to set their own rules about how it should operate and what they should be allowed to do with it.
Although blockchains work differently in different ways, the two most common types of them are public (think Bitcoin) and private (think Hyperledger). While public blockchains like Bitcoin might not have an innate use right now, it’s important to understand how they work because they laid the foundation for other systems which have been built broadly on that model ever since. Private blockchains, like Hyperledger, are more likely to end up being the first mainstream applications of the technology because they don’t rely on open-sourcing their rules for everyone to see .
So how can you know if a blockchain is public or private? If it involves a trusted third party, like banks or exchanges, it’s probably private. If you have some kind of membership in the network, like an investor in a start-up or someone who has elected to become part of the distributed voting system for global governance , it’s probably public.
The reason that private blockchains may end up being more widely adopted than public ones is that, if you’re an organization like a bank, the information you share with your clients can’t be altered without everyone coming to an agreement about it. What this means is that banks won’t have to worry about the blockchain being compromised by bad actors or hackers. This trust will lower costs for banks, insurance companies and other financial institutions as well as their clients.
Now let’s take a look at how blockchains can apply to other industries. Hyperledger bills itself as a collaborative effort that’s bringing multiple worlds together, including the finance, manufacturing, IoT and healthcare sectors.
The differences between public and private blockchains make clear differences in how they could affect each of these different contexts. As a general rule, a public blockchain enables anyone to join it and participate in its governance. A private blockchain has fewer members but what all members have access to is significantly more limited than what’s available on the public model. Public blockchains might allow for voting on business decisions or as part of a decision-making process within an organization while private ones might not necessarily enable this.
Here are some examples of how blockchains could potentially affect key sectors:
Blockchain technology promises to enable more direct and efficient financial transactions. This may mean that banks and other financial institutions won’t have to worry as much about their customers’ personal information being stolen, making it easier for them to connect with people who need loans or the services they provide. As a result, this could lower costs among banks by reducing fees that they pay each other in the current system. At the same time, it might make housing and car-buying more affordable as people are able to conduct their transactions without going through an agent or a middleman who charges fees.
Blockchain technology could make it possible for manufacturers to track the origins of their products much more easily, from raw materials to which parts are mined or manufactured and what the components are made of. This might also help with product recalls if there’s a problem with even one component because the tracking process would be much simpler.
Blockchain technology could help reduce fraud and improve efficiency in healthcare by making it easier for patients to keep track of their medications or making electronic medical records fully secure. It might also help enable more efficient insurance settlements in personal injury cases, which will benefit both patients and providers.
In some ways, blockchain technology opens up new opportunities for everything involved in the supply chain as well, which means that manufacturers might be able to track customers who have purchased their products through blockchain tracking tools and follow up with them if there’s a recall or if they need repairs at a later date. (hit a like button if u made it so far❤️)
As you can see, there are a lot of possibilities when it comes to how blockchains could be used in different sectors and industries. This means that the future of blockchain technology is still very much up in the air and very much dependent on the type of blockchain system that’s being developed.
Blockchain’s value isn’t solely based on its practical applications in financial transactions and supply chains. Its true potential is yet to be realized, however. Here are five other areas where blockchain will likely make a huge impact in the years ahead:
Technology could help consumers stay in control of their digital identity. For example, keeping your medical records on a blockchain can keep other organizations from having access to them without your permission. This will protect both patients and their providers from identity theft and privacy issues that arise with the current system.
A new generation of businesses will spring up to provide services from consumer loyalty programs to data storage for everything from cars to homes. These companies will be able to keep their data secure, even from competitors, and they’ll be able to provide effective customer service as well.
Blockchain technology could help keep information about the products that people are manufacturing or selling fair and without being stolen by competitors. This will make it easier for companies to comply with regulations in countries like the European Union that require them to keep track of their products by placing a QR code on all their packaging.
Blockchain technology could help create more energy-efficient processes for things like manufacturing and electricity generation, which will help power the planet as we know it.
In conclusion, the future of blockchain technology is bright. It will continue to make a positive impact on many different areas of the world, including everything from supply chains to investing. It’s still difficult to predict what exactly it will be used for in the long run, but the possibilities are many.
In the next article we we speak about future of the internet. Hit like button and subscribe.👍