These days we are increasingly moving towards automation in every aspect of our lives. We’ve come far from the days when we would know the phone numbers of our friends by heart. Thanks to our phone contact books, we need not fret over remembering those 10 odd digits long mobile phone numbers. Enter the digits on your phonebook once and you’re set for life, at least the life of the particular handset.
Or think of those to-do lists, painstakingly written and highlighted of paper strips and placed conspicuously to avoid being forgotten! However, with the bounty of reminder and organizing apps on all our phones, who would care about handwritten lists, when all you need is to checklist the items on your apps? Indeed technology has evolved and with it, our methods of storing data have, too. In that domain, one of the most disruptive and revolutionary technologies available is blockchain.
Simply put, blockchain is one of the innovative methods of storing data online. Blockchain entails an ingenious technique of recording user data within a network of computers without any single entity owning it all. What makes it all the more unique is that the data is stored within watertight security systems and the data remains immutable for generations. Learn more about blockchain applications in real world.
This has tremendous potential to transform the e-commerce sectors all across the world and given that blockchain technology is so closely intertwined with cryptocurrencies, if and when it becomes mainstream, the blockchain-cryptocurrency pair is likely to overhaul our entire monetary system.
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What is blockchain technology?
Let’s start with an example. We as consumers frequently display behaviours that can be mapped on similar patterns. Have you ever noticed how when ordering a particular item on Amazon.com, you are constantly nudged by ads that say “items you may also like”? The artificial intelligence that modern technology is endowed with is adept at storing and analyzing your inputs and generating results that fit within your typical consumption patterns.
Similarly, when you save your GPS location on rental apps like Uber, you need not feed in your regular pick up location every time. This provides service providers like Amazon and Uber with valuable user data and by nudging you to make iterative purchases, they are able to make successive profits. Blockchain disrupts this mechanism of storing data by eliminating the job of intermediaries like Amazon and Uber.
Instead, it enables the users to store information that can be directly accessed by the relevant service provider without any hidden commissions or middle persons. Blockchain technology democratizes the process of data sharing and data access across every nook and corner of the world.
Blockchain, therefore, may be imagined as a chain of blocks which in turn are repositories of information. In the blockchain technology, the users feed in information which gets securely locked inside a block, any new information gets updated into the block in the form of nodes. The salient feature of blockchain technology is the fact that the information on one block gets verified by a cluster of computers and only then this verified block of information gets attached to a chain.
This chain provides a direct nexus between the user and the service provider. Not only is your data secure and unique but also the transactions are free, unlike the current system where transactions are routed through intermediaries like Amazon and Uber. This boosts transparency and reduces the overall costs. Learn more about blockchain technology.
How does the blockchain work?
Blockchain is basically a network of commonly owned databases. This is comparable to spreadsheets. Now imagine a spreadsheet that is commonly managed and accessed by multiple authorized networks. Instead, you have to share the spreadsheet with the desired recipient, this spreadsheet is commonly owned by the relevant stakeholder.
Further, the changes you make will have to be verified by the other parties in the network to be included on the spreadsheet. So the threat of unnecessary tampering and loss of data is mitigated across all channels. This is what drives blockchain technology.
With blockchain technology, the database is hosted by millions of computers on a network. This promotes decentralization, transparency as well as immutability. Using peer to peer networks, the blocks of data are chained together to facilitate direct client-server access.
While the user inputs the information through a computer, the nodes of the blockchain first secure the data within a block using “hashes” and thereon divides the information and the task related to it between the different networks. This promotes collective ownership between the blocks in the network.
To demonstrate how blockchain technology actually works, let’s take another example. Traditional money transfers entailed going to the bank, filling up the requisite forms and having the bank transfer the said amount from your account to that of the recipient. In our contemporary times, that is replaced with payment portals like PayTM, Google Pay and others.
With the advent of blockchain technology, you need not route your payments through any of these banks or portals but directly transfer the amount to the recipient. Of course, the promulgation of cryptocurrency would be a parallel requisite in that case. Learn more about blockchain project ideas.
What are the future prospects of blockchain technology?
Economists and market analysts state that the future belongs to the blockchain. Let’s look at some statistics and market predictions.
By 2023, up to 30% of world news and video content will be authenticated as real by blockchain technologies.
By 2025, 50% of people that own a smartphone, but do not have access to a traditional bank account, will use a mobile-accessible cryptocurrency account.
By 2023, multiple blockchain technical standards will enable mainstream decentralized application and smart contract development and deployment.
By 2023, costs will exceed returns for 30% of smart contracts.
Through 2022, major cryptocurrency exchanges using multiparty computation (MPC) for signoff and private key protection will rise from 1% to 50%.
From the supply chain to the Internet of Things, from governance to stock trading, blockchain is likely to make sustained interventions in almost all facets of lives and transform them for the better in the near future.
According to Gartner, the world is witnessing many developments in blockchain technology that will change the current pattern, so that in 2023, common blockchain platforms will interoperate, scale, be easy to use and access, and will readily support trusted private transactions with the data confidentiality enterprises require.
At first public blockchains will be introduced with these steps. Eventually, permission blockchains will integrate with public blockchains so that they can take advantage of these technology improvements while supporting the membership, governance and operating model requirements of permission blockchains.
Learn more: What is Blockchain Mining in 2020?
Why isn’t blockchain being used widely in the current times?
Although the market predictions bode that within the next five years, blockchain technology will be used to power use cases with tremendous social value, including helping stop the spread of fake news and video content, and opening e-commerce and financial markets to the world’s unbanked population, currently the trends look unlikely to reach the forecast figures.
This is because, in order to attain that level of market visibility and utility, blockchain technology must mature so that it can support these transformational use cases.
For one or the other reason, blockchain technologies have not lived up to market expectations of driving new societal and business models, and most enterprise blockchain projects are stuck in experimentation mode. Experts term this phase as “trough of disillusionment”.
However, this doesn’t call for a reason to despair. There are several Gartner reports which state that this “trough” can be overcome by 2023, as the technology advances and pragmatic use cases uniquely supported by blockchain continue to roll out. Learn more about blockchain applications in real world.
What can users expect from blockchain technology in the future?
In addition to the vast array of benefits that blockchain technology promises to usher with regards to transparency and immutability of data, decentralization of information and speed and cost efficiency, blockchain is likely to pioneer a whole new way of economic transactions and contribute to the global economic development immensely.
With time, we can expect common blockchain platforms to interoperate, scale, become easy to use and access, and be able to readily support trusted private transactions with the data confidentiality that enterprises require.
For blockchain to become mainstream — and capable of supporting both transformational and more mundane use cases — users need not worry about selecting the correct platform, the right system interfaces, the right smart contract language or the appropriate consensus algorithms. Neither will the users be concerned with how they will interoperate with partners that use different blockchain platforms for their projects.
To put it simply, the blockchain back end shouldn’t matter to users — just like the internet’s DNS or TCP/IP protocols don’t matter to web users. All web users care about is their web-based applications. All blockchain users need to care about is their decentralized applications and smart contracts.
While the days of seamless blockchain use and cross-functionality of cryptocurrency are yet to become widespread, there are some tangible positive developments already taking place all over the world. If market predictions are to be believed, by 2022, Facebook, Uber, Airbnb, eBay, PayPal, and other digital e-commerce companies will provide and support mobile-enabled cryptocurrency wallet services and platforms to over 750 million customers. This in itself will pave the way for large scale use of blockchain. Learn more about the future scope of blockchain in India.
There is a rise in careers in blockchain technology and blockchain has tremendously changed the very face of the technology industry forever. If you’re interested to become a blockchain developer and build smart contracts and chain codes, checkout IIIT-B & upGrad’s Advanced certificate program in blockchain technology.
How can blockchain technology be used to improve business processes?
To begin, blockchain technology can enhance data security and accuracy. Businesses can, for example, build a tamper-proof record of transactions that can be validated by all participants using blockchain technology. This can assist ensure data accuracy while also lowering the danger of fraud. Second, it may be utilized to make corporate operations more efficient. Businesses, for example, can use blockchain technology to build a shared ledger of transactions that all parties can access. This may decrease the need for third-party intermediaries while also speeding up the transaction process. Finally, it can disrupt established sectors and develop new business models. Blockchain technology, for example, can be used to select a new type of decentralized internet that is immune to censorship and tampering. This might destabilize the existing internet infrastructure and enable new enterprises to arise.
What motivates people to use blockchain technology?
People use blockchain technology for various purposes, including the creation of digital currencies, the secure and transparent storage and transmission of information, the reduction of the risk of fraud and corruption, the automation of business processes, and the creation of new types of businesses and applications. Each of these incentives has its own set of advantages, and when combined, they make blockchain a very powerful tool for both enterprises and individuals.
What challenges does blockchain technology present to businesses?
Businesses face several hurdles due to blockchain technology, including the need for a new business model, new skills, new collaborations, and new processes. The way firms work, and the traditional business paradigm is challenged by blockchain technology. Businesses will have to develop new methods to make money and deliver value to their customers. It requires new skills, such as cryptography and coding. Companies will have to invest in employee training to learn how to use and understand it. Companies, customers, and suppliers will need to form new partnerships due to blockchain technology. Finally, recent data management and storage systems are required. To reap the benefits of blockchain technology, companies will need to invest in new systems.