Blockchain – What Is It?
The buzz surrounding blockchain has moved to become a reality in a really quick time. The distributed ledger is what the entire concept of blockchain is based on. A centralized database is one where a central server contains all the data stored and it is equipped with access restrictions. In comparison, the blockchain network is one in which the storage of data is in a decentralized store and this in turn allows the data to be available to all the parties within the network.
An example – Take an example of you owning a small weather station in your garden. There may be many of your neighbors who may benefit from access to this information that your weather station may provide. These may be your customers who may pay for this information. What would be the differentiating factor that would make them want to buy this information from you? Only if they knew that the information was accurate and had not been tampered or altered with in any way. This is exactly what the blockchain delivers.
Imagine if this data could be provided by you – trusted as it has been verified on the blockchain over time to a third party for them to create their own API or for you to create your own API independently. This data would be consumed immediately by companies in the transportation industry, by factories that are automated and decide how many hot weather clothes and cold weather clothes to produce, or by hundreds of other potential customers looking for blockchain solutions spread across various industries.
A traditional database model relies on one central server or a cluster of servers with the aim of storing and retrieving data. When it comes to access, it is controlled only by a select few who have entire access to the database i.e., Database Admins. When it comes to a distributed ledger system, replication of the data is done amongst all the participants within the network. Additionally, there is no control over access with respect to data accessibility and availability. One major differentiator here is that in the case of a central server, there is potentially one point of failure whereas, in the case of a distributed system, even if 1 node goes down, the data is available on the other nodes.
Satoshi Nakomoto takes credit for the first implementation of Blockchain in 2009. This was done through bitcoin which also happens to be the first crypto currency to be based on the Distributed Ledger Technology. Ever since the launch of Bitcoin, the boom in cryptocurrencies has been evident for us to see with more and more cryptocurrencies springing up.
Why Blockchain?
Having a look at the characteristics and features of what blockchain can deliver will help us understand the question – Why Blockchain?
The main advantage of a blockchain is that every transaction that happens is visible to everyone on the network and therefore guarantees transparency and immutability amongst other advantages.
- Security:
The blocks on the chain that store all the data are encrypted by secure hash mechanisms. The data is stored in the distributed nodes of the network. - Transparency:
In a centralized database, tampering with the data entered is possible. When it comes to the distributed ledger technology, the data written in the blocks are replicated to each node within the network. This makes it extremely difficult to tamper with. - Immutability:
Immutability means that the blocks in a blockchain cannot be edited or altered. Each block contains the hash of the previous block. If any changes are made in the data of a blog, it will result in the changing of the hash. Blockchain has dominated headlines all of last year. Right from the cryptocurrency price volatility to the biggest corporations adopting blockchain technology, we have seen stories on everything that blockchain has influenced. In the future, blockchain promises to be no different. After carefully analyzing the signals which ranged from to market strength to industry adoption, here are 15 blockchain trends to watch out for in the future. - Identity Management:
Internet giants have assumed the role of digital identity brokers, and this has caught a lot of flak. Blockchain enthusiasts counter this by proposing that the technology could allow users to control their own digital identity. The trend to watch out for is how blockchain lends its application to identity management in the coming years. - DLT in Supply Chain:
Complexity and inefficiency have plagued supply chains for quite a while now. Corporates today are turning to distributed ledger technology to reduce time and costs incurred in the supply chain. As many firms are employing DLT in supply chains, many others are monitoring their progress to see if blockchain is a success in supply chains or not. We will see distributed ledgers being increasingly used in supply chains to cut costs in the future. - Custody:
The challenge of ‘custody’ needs to be tackled by financial institutions to enter the crypto space fully. The ability to hold crypto on behalf of clients whose trade is known as custody. Large-scale investment in the crypto space has been hampered due to the lack of custodial solutions. Crypto’s seeking mainstream adoption, and this may force large blue-chip players to explore and stamp their approval on custodial tools. - Smart Contract Platforms:
A code that is placed on a blockchain that enforces the performance of a contract digitally is what a smart contract is. Agreement automation has enormous potential across industries. However, adoption by consumers remains limited. Ethereum is easily the most well-known smart contract platform that we know today. Competitors have invested large sums of money in competing with Ethereum. Even this year will see better competition in the smart contract space. Bear in mind that only a limited number of developers will make decentralized applications. They will do this until they have a broadly adopted smart contract platform to run on. - Consortia:
The blockchain consortia bring about collaboration within competitors. To date, two things have prevented broader adoption – one being, challenges with fostering cooperation and the second being integration into existing IT stacks. Consortia may develop use cases in blockchain and play around with structural problems. - Stable Coins:
Here is a thought, could stability be the answer to mainstream cryptocurrency adoption? The answer to this may be Stablecoins. Stablecoins are crypto’s optimized for durability. Stablecoins may solve Bitcoin’s volatility issue. Watch out for the new use cases of stablecoins, and you may see broader adoption of it as well. - Data Marketplace:
AI creates a massive demand for user data; however, obtaining quality data is still a challenge. Blockchain start-ups today are proposing ‘data marketplaces’. This would allow individuals to access, control, and sell their personal data in an environment that is secure. This may also trigger more data sharing between companies. - Non-Fungal Tokens:
Unique tokens that are digitally scarce were found to be of use in gaming. The thought then arises as to whether additional applications exist. A significant blockchain trend to watch out for in the future is the performance of the blockchain-based tokens which are non-transferrable and unique. If the value of these tokens is proven, the model will successfully be replicated in other areas. - Security Tokens:
Assets that have been digitally represented or tokenized, on a blockchain are known as security tokens. Bringing real-world assets on the blockchain could democratize access. However, successful migration and stakeholder satisfaction remain a challenge. Regulatory compliance is something that security tokens are actively seeking. Security tokens may appear a little more promising than their counterpart utility tokens. However, security tokens may face the same issues as blockchain consortia. - DECENTRALIZED AUTONOMOUS ORGANIZATIONS (DAOS):
The possibility of a company without an owner can be made possible with blockchain technology. This concept was on the cusp of coming to life, thanks to DAO. This was cut short when a hacker exposed a bug in its code. However, this year, based on improvements in code, projects may be built on decentralized computing and storage services. - FIAT-Crypto Exchanges:
Investors can trade fiat currencies like the Euro or dollar for crypto thanks to Fiat-Crypto Exchanges. However, as we see a fall in crypto prices and the entry of various financial services incumbents, exchanges are on the lookout for more revenue streams as competition from larger financial services players is increasing. - DLT in Clearance:
One of the first industries to experiment with blockchain adoption was the financial services industry. Reducing clearing and settlement inefficiencies using blockchain is something financial services companies are still looking to do after years of experimentation. It seems to be that; in the future, we will see Distributed Ledger Technology projects find new applications in the industry.
Conclusion
The sharing economy has been researched and written about extensively by scholars and enthusiasts – Uber, Airbnb, eBay, and the likes. However, in recent years, the excitement surrounding the disruptive possibilities of companies entering the market has faded and has been replaced by fears about poor working conditions and monopolies.
A true sharing economy in the ideal world is one in which – Empowered by technology, individuals and companies share their data if they wish and receive payment in return for it. How can this be made possible? The Blockchain of course!
Providing the blockchain infrastructure for this to happen is the huge growth area for technology in this day and age. The companies which will be able to provide solutions along the blockchain will be the ones who will stay ahead of the competition and will be able to thrive and survive. Just like how the world embraced big data, AI and other technologies, the adoption of blockchain looks to be imminent if survival and growth is priority. All the big players in the market have adopted this technology and are making use of the blockchain technology to profit immensely.
