Into a Blockchain-ed Digital World
Blockchain. Cryptocurrencies. Bitcoin. Ethereum. NFTs. These terms have become the base words of the vernacular of digital earth. You can’t go 3 people into your social circle without these words coming up — that’s how ground-breaking digital technology has become. The core concept of it all — Blockchain is the lifeblood of these applications.
Blockchain — Layman’s Terms
In the simplest terms, Blockchain is a chain of blocks that consist of information. It’s a digital, distributed and decentralized database that’s fully open to anyone, and accessible to anyone with a robust internet connection. Unlike a traditional database, Blockchain bundles information in blocks that are chained together, with each block containing a data piece of the previous block. Once data has been recorded inside a blockchain, it becomes near-impossible to change it. The earliest occurrence of the concept goes back to 1991, when researchers wanted to timestamp digital documents to make them difficult to backdate. Modern Blockchain was revolutionized through the cryptocurrency ‘Bitcoin’ by developers under the pseudonym ‘Satoshi Nakamoto’. The first public ledger/database for Bitcoin transactions was made by this group.
How does a Blockchain Network work?
Blockchains work through what’s called DLT (Distributed Ledger Technology). First, let’s zoom in on the blocks — each block contains the below components:
- Data — Any kind of information like transactions, numbers, amounts, records, etc. form the contents of single blocks. The data stored inside a block depends on the type of blockchain. For example, an Ethereum blockchain comprises blocks that contain details of transactions like amount of ether coins, sender and receiver.
- Hash — This is the identity of a block and all its contents. A hash is like a fingerprint or the serial number that you find on printed currency notes — it’s always unique to a specific block. Once a block gets created, its hash is calculated through the blockchain’s algorithm. If any data inside the block is changed/manipulated, the hash of that block changes. In other words, if the hash of a block changes, the block is not the same anymore.
- Hash of Previous Block — The 3rd element of a block. Effectively the security guard of blockchains, the hash of a previous block ensures the traceable continuity of a chain. Example: from the below infographic, Block 3 has the hash 7CH3 and also contains a code of Block 2’s hash — 4KR5, basically pointing to the previous block in the chain.
Any tampering of data in Block 2 will cause its hash to change, which in turn will change the previous hash details in Block 3. This block is now rendered invalid since it no longer stores a valid hash of the previous block. Subsequently, the rest of the blocks in the chain after №3 will also have hash changes, and the enitre blockchain is sabotaged.
Transactions & DLT
Whether it’s mining for the steamrolling Bitcoin or verifying the authenticity of property contracts, transactions in the Blockchain bastion have a very specific, secure and smart flow. Let’s take it step-by-step:
This is all possible owing to DLT — Distributed Ledger Technology. Since the blockchain database is managed by multiple participants from different parts of the world, it’s called a distributed ledger. Some of the benefits of having such a technology are:
- Distributed — All members on the P2P network each have a copy of the ledger, giving total transparency.
- Anonymous — The identity of members on the network are either anonymous or pseudonymous.
- Unchangeable — If a record is validated, then it can’t be changed. It’s a herculean task to manipulate hashes on any block in the chain without alerting members on the network.
- Time-Stamped — All blocks have a timestamp on their datapoint, and since the data is associated with the hash of the block, it’s easily traceable.
- Unanimous — Only after all participants in the network agree to the transaction validity, it gets passed on the block stage.
Proof-of-Work — a.k.a. Transparency & Security
In reality, hashes are not enough to bulletproof blockchains. This is where Proof-of-Work (PoW) comes in. When new blocks need to be introduced into a blockchain, there are umpteen users on the network who compete with each other to take the responsibility of adding that block. Each member is given an equation (mathematical/logical), depending on the type of blockchain, to solve. The first one to solve this, gets to add the block into the chain and is rewarded (eg. Bitcoins!) in turn for this job. This is called ‘Proof-of-Work’.
Now if you get cocky and still want to manipulate the chain by recalculating the hash of a block and all its subsequent blocks, you will have to calculate the PoW of each block, costing you an incredible amount of time and an insane amount of computing power. Beyond this, you’d even have to tamper with the records of other members of the P2P network to take control of the blockchain. See why blockchains are so transparent and secure? In fact, the security is so tight that a recent report revealed only 0.34% of crypto transactions are criminal, compared to 5% in cash transactions in banks.
It’s true that cryptocurrencies have boomed in the past decade, but many Blockchain proponents believe that cryptos have overshadowed its other applications. Here are some areas where you’d be surprised to encounter Blockchain:
- Cryptocurrency: All currencies that you may have heard of — Bitcoin, Ethereum, Cardano, Litecoin, etc. — are only at the tip of a 10,115-thick iceberg. This was the number of cryptocurrencies in circulation as of May 2021. Although central banks and governments across the globe are hushing up and pushing away digital currencies, these cryptos are fast-gaining recognition as methods of payment among several major brands.
- Smart Contracts: Based on Blockchain technology, these are contracts that can be partially or fully carried out with minimal human interaction. These contracts don’t require a 3rd party to play the intermediary role between two contracting parties, the blockchain network into which the contracts are fed into can execute them itself.
- Supply Chain: This tech is being used for product traceability in retail. For example — In 2018, IBM and Walmart combined efforts using Blockchains to monitor the supply chain of lettuce and spinach.
- Financial Services: There are numerous banks eyeing up the incorporation of Blockchain into their processes, as it increases transaction efficiency and reduces costs. Of course they would only implement their own private blockchains, but the tech would still revolutionize their operations.
- NFTs: Non-Fungible Tokens are digital assets that represent real-world objects like art, music, videos, etc. Usually they’re bought and sold online, along with cryptos and encoded with the same underlying software as many cryptos. NFTs have become notoriously popular for buying and selling digital artwork these days.
Benefits of Blockchain in Business
Blockchain is capable of creating shockwaves in the business world. As a use-case, if two companies are looking to transfer assets, the transactions might be slow, inefficient, expensive and worst of all — susceptible to manipulation. Both parties would have their own ledgers with transaction details that may not reflect exact data, values and proposals. This can lead to disputes, delayed settlements and discord between the transacting parties. But if they were to use Blockchain, all checkboxes would be ticked — saving time, dropping costs, mitigated risks and increased transparency.
The consensus mechanism in Blockchains provides a consistent dataset with minimal errors to companies that use them, while providing the flexibility of any of their employees/associates to act as participants in their Blockchain P2P network.
Immutability of data on the Blockchain can put big smiles on the faces of auditors, regulators and compliance watchdogs, irrespective of which sector the business is in. It doesn’t come as a surprise that throngs of companies are using this technology to upscale their business.
Beyond the Cryptocurrency Hype
Cryptos only became a buzzword in the digital world because they were Blockchain’s first popular application. And let’s be honest here — who wouldn’t like to make some extra dough for spending a few extra hours on the computer and splurge a little extra on electricity bills? But there’s a whole world beyond crypto-trading.
Non-fungible Tokens have surged ahead in the last year or so. They can be regarded as certificates of ownership for virtual or physical assets like art (digital and otherwise), paintings, music, precious gems, collectables, JPEGs, and many more. Stuff like comics, video games and digital art can all be easily meddled with; which is where NFTs are a boon — they ‘tokenize’ the digital asset to the owner/creator so that it can be bought/sold. NFTs can also include smart contracts for the artist in case he/she demands a cut for future sales of the original or copies.
Current trends in Blockchain
- Stable Coins in Cryptos: Most cryptocurrencies are highly volatile and keep swinging wildly with speculation. But there are ‘Stablecoins’ that are seeing their ships sailing steady over the next few years, because of widespread adoption and backing.
- Blockchain as a Service (BaaS): This is a cloud-based service that helps users to develop their proprietary digital products. These products can be anything from smart contracts to regular data apps that work without the requirement of a complete blockchain infrastructure setup. Companies like Microsoft and Amazon are in the race for BaaS.
- Hybrid Blockchain: Although only a nascent concept, hybrid blockchain takes the best parts of public and private blockchains to operate in a closed ecosystem and provide lower cost transactions.
Not too sure about those dynamite cryptos, but Blockchains are here to stay. They have an unmatched ability to stay secure and transparent, giving more industries reason to adopt the technology and reap the benefits. It’s true that the computing power and electricity required for keeping up and improving blockchains are tremendous, but with the boom of renewable energy round the corner, we can expect a good upswing in usage of this wondrous digital tech.
bitsCrunch is one of the top 4 AI companies in Munich, Germany that excels in Blockchain technology. We are providing AI enabled securing services that protects the blockchain ecosystem integrity, with a cross-functional team of experts backed by the leaders in the industry.
Our mission is to create impactful insights from intricate data sources, by harnessing predictive analytical systems which is empowering organizations with actionable intelligence.
- AI-Enhanced Safety Feature (SCOUR), An AI agent that acts as a watchdog to flag the spoofing transactions that manipulates both volume and price of the assets in the NFT ecosystem.
- Digital Asset Forgery Detection System (Crunch Davinci), An AI model that flags forgeries, copycats and bootleg digital art contents thereby protecting the artists and their creations.
- Fair Price value estimation for an Asset(Liquify), A fair value estimation & analytics for Digital Assets (NFTs) using AI to empower the community to embrace and value their assets in real-time.
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