Blockchain technology is not just another buzzword — it is a force that will change the way companies work together to tackle significant global challenges.
While belief in this emerging tech is on the rise, there is still some confusion about what blockchain is and how businesses use it. So, if you are ready to up your tech knowledge with an explanation of blockchain, read on.
What Is Blockchain Technology – The Basics & Fundamentals?
The blockchain is a peer-to-peer network, where each node (computer) in the network stores and processes its copy of the ledger. This means that no single computer is responsible for all the information stored on the blockchain. Instead, it is spread out across thousands or even millions of different computers connected worldwide.
This decentralization makes it nearly impossible to hack or corrupt because there isn’t one central server or point of failure that hackers can target. The decentralized nature also means there’s no central authority deciding how data is handled and what transactions are valid. Instead, everyone has their copy of the ledger and must agree on changes before they can be made permanent on the network.
The most popular application of blockchain technology is cryptocurrency because it eliminates the need for centralized banking institutions or intermediaries that act as middlemen between buyer and seller. Instead, transactions are recorded on a digital ledger that anyone can view, but no one can alter without permission from others in their network.
Key Benefits of Blockchain Technology
Here are three potential benefits of blockchain technology:
Blockchain is an open-source technology, which means anyone can view it publicly. This transparency helps ensure no fraudulent transactions taking place on the blockchain network.
Because every transaction is recorded on the blockchain network, it creates an immutable record of events that cannot be altered or deleted once they are added to the ledger. This means that hackers cannot break into your account and steal your information or money.
The blockchain ledger cannot be changed once someone has added new data to it since all users can verify each other’s transactions and prevent any changes from being made without their approval first.
Downsides of Blockchain Technology
Blockchain is a powerful technology that has the potential to transform businesses and industries. But some limitations have prevented it from being adopted at scale, such as:
1. Cost-ineffectiveness, Instability, Complexity & Scalability
The most significant limitations of blockchain are its cost-ineffectiveness, instability, complexity and scalability. Mining on the blockchain is costly due to layers of intermediaries and high energy consumption. This among others, lead to price instability.
Blockchain also lacks necessary user and merchant facing tools and aren’t very scalable because they can only handle a limited number of transactions per second (TPS). Blockchain networks can handle only a few thousand transactions per second.
In comparison, Visa, the largest payment network in the world, handles around 24,000 TPS on average. However, crypto projects like COTI have evolved to solve blockchain’s cost-ineffectiveness, instability, complexity, and lack of scalability through own proprietary Trustchain.
COTI’s trustchain infrastructure cuts out unnecessary intermediaries and eliminates the need for costly mining thus significantly lowering cost. It also ramps up stability, can processes over 100,000 transactions per second (TPS) and is seamless and extremely easy to use.
Governance is another big challenge for blockchains. Blockchain protocols are open-source and decentralized by design, making it hard to enforce governance rules such as voting or decision making. This leads to issues like centralization of power and lack of transparency in decision-making processes.
For example, Ethereum has faced governance problems and other issues with scaling over time due to its open-source nature and lack of formal governance structure at its inception stage.
Blockchain Technology Applications
The blockchain was initially developed as the accounting method for the virtual currency Bitcoin. Still, it is now being applied to many other uses such as property titles, supply chain management and health records.
Blockchain technology can be implemented across industries to improve business processes such as procurement, supply chain management and contract management. Here are some examples:
- Supply chain management – Blockchain can be used along with RFID tags to track shipments through multiple origin and destination points. This will reduce inaccuracies in order fulfilment, delivery scheduling and invoicing errors.
- Procurement – The procurement process can be automated using smart contracts, which allow buyers and suppliers to transact without go-betweens or intermediaries. This eliminates delays caused by manual processes like approvals from multiple parties involved in the transaction. It also reduces costs because there are fewer people involved in each transaction.
Getting Started with Blockchain
1. Learn the Basics
Blockchain is one of those technologies that seems simple at first but becomes more complex as you dig into its inner workings. Before you decide to adopt it in your organization, it is essential to understand what blockchain is and what it is not.
One of the best resource for learning about blockchain is Moralis Academy with courses designed to take you from beginner, intermediate and advanced level within 6 – 12 months depending on your time commitment of as low as 1 hour daily.
With their money-back guarantee, they are so confident in the process that if you don’t fall in love with the Academy within first 14-days, you can get all your money back. No Questions Asked.
2. Learn About Bitcoin and Cryptocurrencies
Bitcoin is the first use case for blockchain technology. It is unnecessary to understand all the technical details of bitcoin or other cryptocurrencies before diving into blockchains. Still, it helps to have a basic understanding of how they work. That way, you will be able to apply similar concepts when learning about other types of blockchains.
A great source for structured, step-by-step learning about blockchain whether as an individual or business is Moralis Academy
3. Find Partners Who Are Already Using Blockchain
Blockchain is still a relatively new technology, and adoption is still low, so finding partners who have already implemented blockchain technology in their business might be difficult. If you can find someone who has already been successful with implementing blockchain into their system, they should be able to help guide you along your journey.
Moralis Academy offers one of the largest members-only community of blockchain experts in the world to network and partner with along your journey.
The concept of using some distributed ledger system to secure and verify transactions has been around ever since the emergence of the internet. Blockchain is just one more step in that direction – it emerged as a response to the perceived weaknesses in current data management methods.
And it is still very much in its infancy; several companies are already experimenting with blockchain technology, but we will have to wait and see how these efforts mature and evolve.