Definition

Blockchain technology is an advanced database mechanism that allows easy transfer and sharing of information in a vast network.

Description

Blockchain is gaining air because every knowledge sharing is based on data and that data cannot be deleted without anyone’s permission in the network. This allows you to create unalterable ledgers for easy tracking of orders, payments and all kinds of transactions. 

Blockchain helped building trust between the two parties as it could validate transactions. There is absolutely no data breach or compromise. The technology helps to keep the data decentralization for both the parties involved in a transaction. 

For example if party A sells its land to party B, they both will record the transaction but either of them can claim that for the non-receipt of the payment. This brings in a matter of distrust because the information can be tampered with. And this is why blockchain technology assisted to keep data intact and avoid legal implications.

Importance of blockchain technology 

These are the reasons which make blockchain technology important:

1. Decentralized Trust: Blockchain allows transactions to be recorded securely and decentralized, reducing the need for trust in a central authority, like a bank or government.
2. Transparency and Security: It provides a transparent and tamper-resistant record of transactions, enhancing security and reducing the risk of fraud.
3. Efficiency and Speed: Blockchain enables faster and more efficient transactions by removing intermediaries and streamlining processes, especially in cross-border payments.
4. Smart Contracts: It supports smart contracts, self-executing contracts with the terms of the agreement directly written into code, automating and ensuring the enforcement of contractual agreements.
5. Financial Inclusion: Blockchain has the potential to bring financial services to the unbanked or underbanked populations by providing a more accessible and inclusive economic infrastructure.

How does blockchain work?

These are the steps which will help you understand how does blockchain work:

Step 1: Record the transaction:

In the first step, blockchain shows the movement of digital assets from one party to another. It is recorded in small data blocks which contains information about the parties involved in the transaction, time spot when the transaction occurred, why did the transaction happen, pre-conditions that were set, and how much was the asset exchanged digitally.

Step 2: Get Validation:

After the transaction is recorded, a consensus from the members in the network is asked to validate the occurrence of the transaction.

Step 3: Link the blocks:

Right after the validation of the transaction, a block is created like a page in the ledger. A cryptographic hash is connected with the block to enable convenient identification. These hash connects the blocks like a chain. It is like connecting blocks to build a tower. With each additional block, the verification is strengthened.

Step 4: Share the ledger

All the participants in the blockchain receive a copy of the ledger for their update.

Trends that can affect Blockchain network

These are the trends that can affect Blockchain network:

Regulatory Developments:

Blockchain networks are subject to significant impacts from government policies and regulations modifications. Changing legal environments impact how blockchain technology is adopted and used, affecting how businesses and individuals use blockchain-based applications.

Scalability Solutions:

As blockchain networks grow and handle increased transaction volumes, scalability becomes critical. Emerging trends in scalability solutions, such as layer 2 solutions (e.g., sidechains, state channels) and improvements in consensus algorithms, can impact the performance and efficiency of blockchain networks.

Interoperability Standards:

Interoperability, the ability of different blockchain networks to communicate and share information seamlessly, is a crucial trend. Developing standards for interoperability can facilitate the integration of other blockchain platforms, promoting collaboration and expanding the overall utility of blockchain technology.

Environmental Sustainability:

The environmental impact of blockchain networks, especially those using proof-of-work consensus mechanisms, is a growing concern. Trends towards more eco-friendly consensus algorithms (e.g., proof-of-stake) and sustainable blockchain practices may influence the adoption and acceptance of blockchain technology in various industries.

Example

One prominent brand example of blockchain technology is IBM's Food Trust. IBM Food Trust utilises blockchain to enhance transparency and traceability in the food supply chain. It allows participants in the food ecosystem, including growers, processors, distributors, and retailers, to share and access data about food products' origin, processing, and distribution.

Through IBM Food Trust, consumers can scan a QR code on a product to trace its journey from the farm to the store. This application of blockchain technology helps reduce food fraud, ensures food safety, and provides consumers with detailed information about the products they purchase. Using blockchain in this context enhances trust among stakeholders and strengthens the overall integrity of the food supply chain.

FAQ

What is Cryptocurrency (Crypto)?

Cryptocurrency, often called crypto, is a digital or virtual currency that uses cryptography for security. Unlike traditional currencies governments issue, cryptocurrencies operate on decentralized networks based on blockchain technology.

What is Blockchain Development?

Blockchain development involves creating and maintaining blockchain networks. It encompasses designing the structure of the blockchain, developing intelligent contracts (self-executing code), and implementing consensus mechanisms. Blockchain development aims to build secure, transparent, and tamper-resistant systems for various applications.

What is a Blockchain Network?

A blockchain network is a decentralized and distributed ledger system that records transactions across a network of computers. Each transaction is verified by multiple nodes using consensus mechanisms, and once validated, it is added to a chain of blocks. This network structure ensures transparency, security, and immutability in record-keeping across various industries.