VakaFX invites readers to learn what is Blockchain technology? Applications, challenges, and types of Blockchains (Public, Private)? What makes the Blockchain special?
Blockchain – the world has become a sort of a fad, quite similar to what ‘internet’ was in the ‘90s; everybody knew the term even if they had nothing to do with it. We, as an organization that looks forward to taking the understanding of the blockchain to everyone, have simplified it for you.
What exactly is Blockchain?
There are some words that seem self-explanatory on the surface, and blockchain is one of them. The blockchain is, simply put, a ‘chain’ of ‘blocks’. What makes the blockchain special is the nature of these ‘blocks’ and ‘chains’. The ‘blocks’ are similar to record-keeping ledgers or a set of data on a group of transactions that contain the details of every transaction and can be accessed only with specific credentials. The ‘chain’ represents the interconnected nature of the blocks. The ‘chain’ ensures that no change can happen in any of the blocks without consensus from all the interconnected blocks, making the blockchain resistive to any data-modification.
This presents three major advantages:
+ The transparency ensures that the eligible members of the blockchain can view the data on the block.
+ The immutability takes care to create a permanent record of a transaction until agreed by all the parties to change that data.
+ The decentralization – a synchronized copy of the entire blockchain existing in multiple systems – deters any possibility of data and security compromise because of a single point-of-attack by hackers with malicious intent.
Our understanding of the blockchain has to be condensed into simple and easily understandable examples, we believe. The blockchain can be compared to the collaborative internet that we have today, and we can take Google Docs as an example. If we have to use the traditional way of documenting, we would compose something on a word processor, difficult Microsoft Word, and send it across to someone who can verify the information. Until that person verifies the information, there is no way that we can make changes. If the person misses pointing some concern, in the beginning, the entire cycle has to repeat.
It is not only about the delay but also about multiple people ending up with multiple copies of the same document without knowing which one of these would be the final. With the advent of Google Docs, any change that is made to the document is reflected in realtime, and what is even more appealing is that any person with the right access can revert the changes and it is also immediately affected in the document.
The blockchain can be considered analogous to Google Documents with a massive difference in terms of security, access, computing power and above everything, achieving a balance between transparency and immutability.
What Makes the Blockchain special?
The blockchain is considered to be a massive revolution in the way the Internet itself functions! Invented by an anonymous user known as Satoshi Nakamoto, essentially to power Bitcoin transactions, the blockchain has come a long way in finding multifaceted utility in different domains.
The blockchain stoles blocks of information across the entire network and cannot be controlled by a single entity. This translates into an amazing advantage that no single point of compromise will result in the blockchain getting compromised in its entirety. Although it might be possible in theory to corrupt the blockchain, it requires massive computing power to override the network.
The Awesomeness of Decentralization
The blockchain is considered to be a decentralized technology. Anything that happens on the blockchain is not a function of a single system or a single point but the entire network. This creates a new way to verify transactions that might rental obsolete, the traditional elements of Commerce. Keeping records of land registry, stock market trading and a lot of other commerce-related aspects could become quite transparent and immediate with blockchain.
It is this lack of centralization that obliterates the points of vulnerability which the computer hackers can capitalize on. Today, we rely on a username-and-password combination to protect our identity where blockchain uses encryption methods. It would mean that we need specific keys to access information on the blockchain.
The Bitcoin serves as a proof of concept for the possibilities of the blockchain. the Bitcoin was invented in 2008 and whatever problems that Bitcoin have faced has only been due to hacking or mismanagement, or basically, bad intention and human error. The underlying concepts that govern the Bitcoin have been found not to have any loss in practicality. The fact that there are more than 1600 cryptocurrencies similar to Bitcoin is a resounding testimony of the potential and the possibilities of the blockchain.
The Applications of Blockchain
The advantages of blockchain put it before a plethora of applications. However, the strongest use case for blockchain lies in the domain of finance. The smart contract, the self-fulfilling piece of code, eliminates the need for all the middlemen and the proportional costs involved. However, the current blockchain system has not been made interactive and intuitive. This gap can be bridged by using wallet-applications.
➤ What is the difference between a coin and a token in cryptocurrency?
The Challenge in the Blockchain
We have already seen that the blockchain uses encryption. The basis of the encryption is a combination of keys. There is the public key which is similar to your username that points to a specific address on the blockchain. There is also a private key that is similar to your password and it gives access to the assets that you on the blockchain.
While this combination can give you the utmost security, it is important not to forget to misplace the Private key. losing the private key with me that you use to access to the effect that is stored in the blockchain. One of the greatest challenges in implementing the blockchain is ensuring the protection of the private key.
The Different Types of Blockchains
Given the variety of applications, it will make more sense that we now look at the different types of blockchains.
Public Blockchain
This is figuratively and literally the most common type of blockchain. It is accessible by anyone on the planet, and anyone can be a participator or a validator. It is the perfect epitome of decentralization as there is no one who has complete control over the network. This property ensures top-notch data security and focuses on immutability as there is no single person who can manipulate the entire blockchain.
As an offshoot of decentralization, the authority on the blockchain is equally divided among every node in the network making the blockchain fully distributed. Bitcoin and Ethereum can be stated as good examples of public blockchains.
Private Blockchain
The private blockchain can also be called as permission blockchain as it imposes restrictions on who can access, participate, transact, and validate. The entities that will have specific powers on the blockchain are chosen by the organization at the time of development. Just in case new participants need to be added and existing members need to have their permissions revoked, a network administrator can take care of it.
Private blockchains are increasingly adopted by many organizations to store their sensitive data. Since the blockchain is available only to certain people in the company, the security offered by the blockchain only gets multiplied!
Consortium Blockchain
The consortium blockchain is a hybrid model where some nodes can control the consensus evaluation and others are allowed to participate in transactions. It is a perfect cocktail of the public and private blockchain.
Given its hybrid nature, there are two types of users — 1) those who can control the access to the blockchain, and 2) those who can access the blockchain. HyperLedger Fabric and Quorum have demonstrated the utilities of this blockchain category.
This type of blockchain finds its application in businesses that are ready to internally share the blockchain but would like to keep it away from the axis of the public.
Choosing the Right One
Blockchain technology is still in its nascent stages but it would not be an exaggeration to say that a lot of industries have recognized and acknowledged the ingenuity of this new technology. Companies like VakaFX will not only help you choose the right kind of blockchain from different types of blockchains for your business. Transcending a level, the company also helps in creating an exclusive one for you or if need be, capitalize on an existing blockchain and create your smart contract or tokens on it!