Blockchain Technology: Benefits, Challenges and the Future!
📌What is Blockchain technology?
Blockchain technology is a technology that leads to a chain of blocks, containing digital information stored in a public database. It is a distributed database existing on multiple computers at the same time, which constantly grows as new sets of recordings or blocks are added to it.
📌How Does Blockchain Work?
Blockchain consists of three important concepts: blocks, nodes and miners.
Every chain consists of multiple blocks and each block has three basic elements:
The data in the block. A 32-bit whole number called a nonce. The nonce is randomly generated when a block is created, which then generates a block header hash.
The hash is a 256-bit number wedded to the nonce. It must start with a huge number of zeroes (i.e., be extremely small).
When the first block of a chain is created, a nonce generates the cryptographic hash. The data in the block is considered signed and forever tied to the nonce and hash unless it is mined.
Miners create new blocks on the chain through a process called mining.
In a blockchain every block has its own unique nonce and hash, but also references the hash of the previous block in the chain, so mining a block isn't easy, especially on large chains.
Miners use special software to solve the incredibly complex math problem of finding a nonce that generates an accepted hash. Because the nonce is only 32 bits and the hash is 256, there are roughly four billion possible nonce-hash combinations that must be mined before the right one is found. When that happens miners are said to have found the "golden nonce" and their block is added to the chain.
Making a change to any block earlier in the chain requires re-mining not just the block with the change, but all of the blocks that come after. This is why it's extremely difficult to manipulate blockchain technology. Think of it as "safety in math" since finding golden nonces requires an enormous amount of time and computing power.
When a block is successfully mined, the change is accepted by all of the nodes on the network and the miner is rewarded financially.
One of the most important concepts in blockchain technology is decentralization. No one computer or organization can own the chain. Instead, it is a distributed ledger via the nodes connected to the chain. Nodes can be any kind of electronic device that maintains copies of the blockchain and keeps the network functioning.
Every node has its own copy of the blockchain and the network must algorithmically approve any newly mined block for the chain to be updated, trusted and verified. Since blockchains are transparent, every action in the ledger can be easily checked and viewed. Each participant is given a unique alphanumeric identification number that shows their transactions.
📌Benefits of using Blockchain Technology:
✅Immutability: In Blockchain, there is no possibility of changing the data or altering the data; the data present inside the Blockchain is permanent; one cannot delete or undo it.
✅Transparency: By utilizing blockchain technology, organizations and enterprises can go for a complete decentralized network where there is no need for any centralized authority, thus improving the transparency of the entire system.
✅High Availability: Unlike centralized systems, Blockchain is a decentralized system of P2P network which is highly available due to its decentralized nature. Since in the Blockchain network, everyone is on a P2P network, and everyone has a computer running, therefore, even if one peer goes down, the other peers still work.
✅High Security: This is another major benefit that Blockchain offers. Technology is assumed to offer high security as all the transactions of Blockchain are cryptographically secure and provide integrity. Thus instead of relying on third-party, you need to put your trust in cryptographic algorithms.
Applications of Blockchain Technology:
✅Industry: A few companies that have integrated blockchain in their functioning are Walmart, Pfizer, AIG, Siemens, Unilever, etc. Blockchain has made its way into many industries due to its host of benefits and ease of use and accessibility.
✅Healthcare: In healthcare, blockchain can be used to store the medical records of patients. The data is immutable, so tampering with it is not even a possibility. Confidential data can be encoded and stored in a private key to limit access by various individuals.
✅Agriculture: According to Forbes, blockchain is making a hero entry in the food industry as it makes it easy to track the path and safety of food, right from its journey from the farm to the buyer/user. IBM’s Food Trust blockchain is one of the most successful implementations of blockchain in the food industry.
✅Banking: The banking industry has benefitted the most by integrating blockchain into their business. It has increased their efficiency, reduced transaction time and fees, helped them store customer data, and much more. In 2016, a report from Capgemini stated that consumers could save up to $16 billion in banking and insurance fees each year through blockchain-based applications.
✅Governance: Blockchain technology can help in ensuring good governance. It ensures transparency of the public records through the usage of a digital form platform and allows auditing of government documents. Moreover it allows to maintain the authenticity of the document and clearly reduces the processing time.
📌Potential Challenges to Blockchain technology:
✅Infrastructure and Cross Domain Applications
✅Scalability and Transaction Speed (achieving a higher number of transactions per second)
✅Data Security and Privacy
Standardization and Interoperability (cross-platform and cross-chain protocols)
✅Applying AI & Data Analytics
✅Ecosystem and supporting framework
✅Skilled Manpower (Talent)
Blockchain technology has proven itself robust and secure. It ensures integrity of the data and reduces incidents of fraud. But we need a serious look at its vulnerabilities and commerciality. Before introducing blockchain into the public sector data-handling system, we need a robust and informative data repository. So there is a need for Proper regulations for the use of blockchain technology in the country.