For a couple of years, terms like Crypto Currency, NFTs, Tokens, & Decentralization have taken the world by storm. Many people are talking about them, betting on them as the future of the Internet & technology.
But what most people need to talk about is the underlying technology that’s powering up Cryptos, NFTs & Decentralization. Yes, you guessed right, I am talking about “Blockchain” technology. If you are a tech aficionado, I am sure you have heard about it too.
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Blockchain technology is frequently referred to as a “radical revolution” in the field of information and technology. Its proponents claim it will disrupt almost every business vertical and transform it entirely as we see it today.
But what is Blockchain technology? How will it impact the people? What will it change? Does Blockchain technology offer something concrete, or is it just another tech gimmick?
You will find all your answers in this detailed guide to what Blockchain technology is! I have been getting tons of emails & messages from my readers asking me to create an informative piece on Blockchain technology. They want to know more about it & how they can benefit from it.
So get ready to take a plunge into the world of Blockchain technology with me!
What exactly is Blockchain technology?
Blockchain technology is the system to store transactional information so that it’s safe from cyber attacks, hacks, & undesired alterations. The information could be about any transactions, including Cryptos, NFTs, mobile records, property records, & much more.
Each transaction or entry is stored in a block called a ledger to keep this information. Other users, connected via a peer-to-peer network, verify these transactions or “blocks” by solving complex mathematical problems. Thousands of such users constantly show millions of transactions taking place around the globe.
The information stored in the blocks after verification is entirely safe as they distributed it across a vast network of servers & computers. For added security, the user digitally signs each information block and verifies the information stored in it.
All these blocks collectively form a chain, & that’s why the term “Block Chain.” Blockchain users constantly monitor each block in this chain, ensuring it stays safe.
In simpler terms, Blockchain is like a Google Doc that is accessible from multiple computers but has “view only” permission. So everyone can see the information in it, but only the creator can alter it.
Instead of storing the information on a centralized server at a specific place, it’s stored in a decentralized manner across multiple systems. This decentralization of data makes Blockchain technology popular.
The core goal of Blockchain technology is to give control of all the transactions in the hands of users instead of some centralized intermediary. Such decentralization can power up global transactions & make business more conveniently.
Now let’s look at the history of Blockchain technology & how it evolved.
How has it begun?
It all began with a person (real or fake, nobody knows) calling himself Satoshi Nakamoto in 2008. This guy (or a team) conceptualized the first Blockchain for a Crypto Currency called bitcoin. For this, Satoshi Nakamoto introduced a HashCash-like method.
This method eliminated the need for time-stamping & signing by a trusted third party, removing a mediator. This was just the beginning. After being introduced to such a decentralized peer-to-peer connection, the world adopted Blockchain technology, albeit slowly.
As the Blockchain software was open-source, the Blockchain users started creating an alternate version of bitcoin. Examples include Litecoin & thousands more.
The trend continued until another revolution in the year 2013. This was the year when a company named Ethereum launched its version of Blockchain technology. They explained to the world how to create new blockchains instead of depending on bitcoin’s code.
This was a remarkable advancement in the field. On top of it, Ethereum launched a new platform that pushed the boundaries of Blockchain technology beyond cryptocurrencies.
Today, thousands of organizations are exploring & using the ways they can use Blockchain technology in multiple sectors. The potential is limitless. I see a vast opportunity awaiting me in the fields of energy, supply chain management, Education, politics, & almost everything you can imagine.
Now, let’s try to contemplate how Blockchain technology works.
How does Blockchain technology work?
Understanding how Blockchain technology works may daunt if you are new to the digital world. But if you are used to it, understanding it is super easy.
Blockchain technology incorporates 3 Revolutionary technologies to work:
- Cryptographic Keys: Each user on the Blockchain holds two keys: private and public. Using these keys, a user creates a unique identity to perform transactions. Also known as “Digital Signatures,” these keys are the backbone of any Blockchain transaction.
- A peer-to-peer network: The users of the Blockchain are connected via a peer-to-peer network. Such a connection is vital to ensure every user is on the same page & can view the whole ledge with absolute transparency.
- A powerful Hardware: Each deal on Blockchain is authorized by a certificate. For this authorization, a user will have to solve a specific math problem & to do so; they will need powerful hardware.
Now let’s understand how transactions take place in Blockchain networks.
Let’s say two individuals want to perform a certain financial transaction. Both will need a Public & a Private Key, as mentioned above.
Step 1: The first party will attach the transaction information to the Public Key of the second party. The network creates a block that holds all this information, including Digital Signature, transaction details & Timestamp.
Step 2: It then transmitted this block across the network. The transaction is complete when the second party matches the league with their private key.
How simple, yet how game-changing!
You don’t need a third party to vet the sender or receiver, and you can still enjoy absolute security.
What are the critical Blockchain principles that make it popular?
According to Harvard Business Review, each Blockchain technology must have the following five principles in common to be called a Blockchain:
A Distributed Database:
The whole database of the Blockchain should be available to all the users in the Blockchain. They must have access to all the present & past transaction information. The idea behind such a distributed database is to eliminate the need for a centralized authority to perform any transaction.
As there is a lack of centralized authority, each user on the Blockchain must be able to store & share transaction data with every other user.
Blockchain is all about transparency in the transactions & Anonymity amongst the users. To ensure this, they awarded each user a unique, 30+ character-long alphanumeric pass-code. They can use this pass-code to create or authorize “blocks.” In this way, their identity is protected & the transaction is transparent.
Automation using algorithm
Blockchain is based on a digital ledger. So each user must be able to automate the transactions using an algorithm. E.g., you want to sell a used laptop on the Blockchain. You can create a specific algorithm that meets certain criteria like the selling price, location of the buyer, & payment mode.
Once a buyer matches the Algorithm, it will be automatically sold without the interference of any third party.
Once a user creates a transaction record in the Blockchain, it will stay there forever. This record is shared with all the users on the Blockchain. One more interesting thing here is that when one transaction is verified, some part of that transaction is used to create the next puzzle or a math problem.
In this way, each block is connected with the previous one & the upcoming one to create a chain.
In a nutshell, blockchains work on the principle of shared data to ensure decentralized transactions.
What are the different types of blockchains?
As you might have already guessed, blockchains are of over one type. They can be classified into four categories:
1. Public Blockchains:
Bitcoin is the best example of a Public Blockchain. It’s all about Distributed Ledger technology. Public Blockchain is the one that’s open to all, meaning anyone can join the network as a user. Under Public Blockchain, it distributed the data across all the peer networks.
The core idea behind Public Blockchain is to eliminate security issues & centralized authority.
2. Private Blockchains
These types of blockchains operate on the same principles as Public Blockchains. The only difference is that an organization or a specific group of people customized for utilization them.
Such a Blockchain is managed by a single authority & is tailored as per the security needs & accessibility preferences decided by the organization.
3. Permissioned Blockchains
These Blockchains are a fusion of Public & Private Blockchain. Organizations created & managed these blockchains to leverage the benefits of the above blockchains.
These Blockchains allow authorized users outside the organization to join the network. This is done to expand the boundaries of the network while ensuring a robust security structure.
4. Consortium Blockchains
Multiple organizations created consortium blockchains by collaborating. Such Blockchains have identical features, just like the permissioned blockchains. The only difference is, instead of one organization, the data & network are distributed among multiple organizations. This ensures enhanced security & more decentralization.
Organizations adapt any of the above Blockchain types depending on the need to create robust networks.
I hope you have clearly understood how a Blockchain works. Now let’s know what the significant applications of Blockchain technology are.
What Industries will Blockchain technology revolutionize?
Blockchain technology has the immense potential to transform various industry verticals. Here I am listing a few of them where Blockchain technology is getting ready to disrupt the established norms.
I am sure you are well aware of this application; almost everyone is! FinTech is all set to experience the massive disruption (& benefits, too) of Blockchain technology. Blockchain will transform the FinTech world today.
The best example is Crypto Currency. Cryptocurrencies have become synonymous with Blockchain technology. And for the right reasons. They are decentralized, not controlled by any institution & offer maximum privacy to the users.
Bitcoin has become a preferred way of payment, even outside the digital realm. Now there are stores & shops & restaurants coming up that accept payments as cryptocurrencies. And mark my words; We will use this mode of payment in the future.
Apart from bitcoin, other cryptos like Litecoin & Ripple are also taking the FinTech world by storm. Even banks are now accepting payment options, like Ripple, experimentally. So you can imagine how rapidly the ground is changing.
The world is slowly but steadily moving towards a cryptocurrency & Blockchain has a vital role to play.
Another popular application that will become the norm with Blockchain technology is Smart Contract. But what are Smart Contracts?
Assume you are a digital artist who sold one of your works for $9 to an individual online. Now, that individual up-sales your art to a bidder at an extremely high price. Let’s say $300. With the traditional sales contract, you are entitled to nothing, no matter how much your art is sold.
But Smart Contracts, powered by Blockchain technology, rapidly change this system. Smart Contracts identify the parties involved in the initial contract. So when a digital asset like online art, music, or video is resold, it set the creator to get a specific portion every time.
Blockchain ensures these rules are embedded in the Smart Contract & hence, they stand true until the asset exists. Imagine the revolution this application can bring to the world of online content creators!
And that’s why a lot of organizations & start-ups are betting big on Blockchain.
Global trade depends on efficient supply chain management. But the existing trade documentation & administration process is exceptionally cumbersome & inefficient. There is also the constant risk of losing or damaging this paperwork, resulting in further delay. On top of it, the cost of old-school paperwork makes up to 1/5th of the physical transportation cost.
Such an outdated system needs a replacement & Blockchain technology has a solution. Blockchain technology can eliminate this paperwork. All the paperwork stored on the Blockchain can be easily accessed by anyone involved in the process.
This can save a lot of time & operation costs, resulting in improved Supply Chains across the globe. Blockchain technology can help boost transparency & reduce fraud.
Supply Chain is one of the key industries that will witness a paradigm shift; thanks to Blockchain technology, the best part is that as the Blockchain offers absolute security, there is no risk of alteration or forging of the documents.
Web 3.0 & Blockchain are the two leading technologies that are all set to transform the world in 2023 & beyond. The exciting thing about both is that they are interlinked & Web 3.0 relies a lot on Blockchain.
People often misunderstand Blockchain with cryptocurrency. But as I mentioned, Crypto is just a part of wide-ranging Blockchain applications. And Web 3.0 is one of them. Multiple surveys suggest big organizations are slowly adopting Web 3.0 & Blockchain technology to enhance their productivity.
Web 1.0 was when users could access content produced by big organizations & governments. The core idea behind creating Web 1.0 was to offer information to users.
Gradually, things changed. Some users became creators. With the inception of Web 2.0, many users became creators. They created content as blogs, websites & social media content. Nevertheless, the users have to rely on big organizations like Facebook, Instagram & WordPress to share their content.
That’s where Web 3.0 comes in. As it’s based on Blockchain technology, it’s decentralized and uncontrolled & offers better freedom to the creators. Instead of accessing content through big platforms, users can themselves create & control certain sections of the Internet.
So with Web 3.0, decentralization will take over & users will own their data in the true sense.
Blockchain & Web 3.0 can help organizations simplify customer acquisition & deliver quality services at lower costs. With Crypto-based payments & easy ownership transfers, Web 3.0 is transforming the way any data is shared.
This will help content creators get rewarded rightly for their content on multiple social media equivalent platforms, boosting user participation. The idea behind the Internet has always been to connect people. With web 3.0 & Blockchain technology, this idea will soon be appropriately realized.
Healthcare frauds are costing patients millions of dollars every year. The primary reason for such fraud is the lack of efficient paperwork. Such paperwork puts a lot of stress on the patients, especially those alone.
Enter Blockchain technology. Blockchain simplifies the paperwork handling & maintaining medical records. With the documents stored on a decentralized Blockchain, all the parties involved in the process can view the medical paperwork.
Whether it is your doctor, medical examiners, nurses, or insurance agents, they can access your medical records & offer you better care. Moreover, all these records are stored securely & hence cannot be tempered.
With the entry of Blockchain into the healthcare sector, there will probably be far-reaching impacts (positive ones, of course!).
These are some of the top industries set to be revolutionized by adopting Blockchain.
Today, global trade suffers from many complexities like exchange fees, commissions & erroneous transactions. By introducing Blockchain technology, it will eliminate all this. Businesses, organizations & even individuals will take part in global trade with no hassle.
If a person in the United States wants to sell something in Europe, they must undergo a complex process. On top of it, there are always issues like high exchange fees & government taxes.
But with Blockchain technology, we can eliminate all these issues, boosting global trade & simplifying it. Many organizations are running pilot projects on Blockchain right now to understand how it can help improve their trades. And once Blockchain becomes the norm, it will revolutionize global trade.
Besides, many other industries will also benefit from Blockchain’s decentralization.
After understanding what industries Blockchain technology will revolutionize, let’s look at some of its primary applications.
What are the applications of Blockchain technology?
1. Simplified Cross-border payments
At some point in our lives, we have all transferred or received cross-border payments. And we all know how complex & expensive the whole process is. You have to provide specific identifications, pay fees & wait far too long for cross-border transactions.
But with Blockchain-based Cryptos, you can efficiently perform transactions with end-to-end remittance with no hassle or fees. As there are no intermediaries, your transactions are free, secure & anonymous.
2. Global Asset Management
Asset Management is one of the most promising applications of Blockchain technology. Right now, we utilize age-old methods to manage our assets like properties, equities, shares, mutual funds & bonds.
Trading these assets via old methods is risky, expensive, & inefficient. But thanks to Blockchain technology, this issue is about to be solved.
With a decentralized system with no intermediary, you can save a lot of commissions for trading these assets.
3. Simplified Identity Verification
For each online financial transaction, verify your identity. This process takes a lot of time & is often time-consuming. In the age where every second matters, we cannot afford to lose time on such petty issues.
With a Blockchain-based identity verification process, this issue can be easily tackled. You must verify your identity once with a standard identity verification across the network. Later, you can use the same verification method for all future transactions.
4. Transparent Voting
As mentioned above, Blockchain technology can establish a person’s identity. This can be extremely helpful in elections. Individuals can cast their vote only once, without fraud, as all their details are available on the Blockchain network.
This can help conduct a fair & accessible election that ensures freedom of choosing one’s leader.
I don’t have to tell you much about this application. Almost every one of us has heard about Cryptocurrencies, thanks to the phenomenal rise (& recent fall!) of Bitcoin. Cryptocurrencies offer a simplified payment option to global users with no intermediately. Although Cryptos are volatile & must be handled carefully, there is no doubt that they are the future currency across the globe.
6. Copyright & Royalty
Art forms like music & Films have suffered a lot after the rapid growth of the Internet. Almost every creator has, at some level, faced plagiarism & piracy. So even if the content of any creator is viral, they might earn little from it.
But with Blockchain-based intelligent contracts, these issues can be resolved. Blockchain’s data is always safe & it can provide detailed information on the ledger of any artist’s right over any piece of art.
7. Blockchain-based IoT devices
IoT devices have now become an integral part of our lives. The best example is a Smart Home, where you can control all the gadgets & electronic devices from a single spot.
But the issue with these IoT devices is the lack of security. As all the equipment is connected to each other, all the hacker needs is a single entry point. Any unsecured device can be that entry point.
Thanks to Blockchain-based IoT devices, they can store all your personal data in a decentralized network, ensuring robust security.
What are the benefits of Blockchain technology?
All this is good for understanding the basics. But what’s the benefit of it? Why should people transact using Blockchain technology?
Let’s understand some benefits of Blockchain technology.
1. Ultimate Security
Security is one of the most important benefits of using Blockchain technology to store data. As the data is stored across thousands of nodes, it’s quite challenging to hack into the Blockchain database.
Let’s understand this with a simple example. Suppose you store your Business-critical data on a laptop. That laptop can be stolen or hacked easily once hackers find a hole in its security. And once the laptop is hacked, all your data is compromised.
That’s not the case with Blockchain technology. When you store your data in any blockchain, all your data is distributed across all the nodes or users. So if a hacker wants to breach the security, they have to break- in into more than 50% of nodes.
This is extremely difficult as the hackers will need enormous computing power to achieve this feat. The larger the network, the more difficult it becomes to hack it. The reason is more users make it more difficult for hackers to verify any alteration & your data is more decentralized.
Additionally, it’s very easy to detect if a hacker tries to break into any information block. As all blocks are connected internally, any attempt to tamper with even a single block will raise a red flag.
Although Blockchain is all about transparency, all users can enjoy absolute anonymity with their personal information. That’s the beauty of Blockchain technology. Users do not have to use personal information like their name, email id, phone number, or address to verify any transaction.
Instead, it uses a public & private key allotted to a user for verification. A public key of any user is created by applying a specific mathematical formula to the private key.
So ultimately, the public key is derived from a private key.
And if you are worried about someone reversing the formula to generate any user’s private key based on the public key, please don’t! It’s 256-bit encryption. And each private key is 78 digits long, making it practically impossible to crack.
Blockchain is all about decentralization, so that has to be one of its primary benefits. As per the proponents of Blockchain technology, centralization is against fundamental freedom. They vehemently oppose centralized control over things like currency & baking.
For e.g, The Federal Bank is a central authority for all transactions in the United States.
So the Federal Reserve Bank can keep track of every single cent spent. And this is what the supporters of Blockchain are against.
But with Blockchain technology, there is no need for such a centralized authority. The whole network authorizes the transactions after following a specific set of rules. This decentralization offers much-needed anonymity to the users.
Additionally, decentralization also ensures the safety of any critical data of the users. This is an excellent benefit, especially for those who love to stay anonymous.
A decentralized system where all the data is easily accessible can exponentially raise the efficacy of any business. Moreover, manual data entries significantly increase the possibility of errors & hence, impact efficiency.
But a Blockchain automates each & every process here. All the data is stored & processed in real time as they generated it.
Moreover, Blockchain eliminates the need for any third party or middleman to verify any transaction. As all the information is available on the network, it can be verified automatically, saving a lot of time in processing any transaction.
Let’s say you buy a property. But with the current system, you will have to undergo a complex verification process. Your papers will be manually checked & verified. But with Blockchain, there is no need for such a slow verification process. All the data about the seller & buyer is available right away, making the verification process efficient & fast.
What are the limitations of Blockchain technology?
Just like every technology out there, Blockchain has some limitations. Here is a list of some limitations that you need to know:
While confirming any transaction, all the nodes attached to the network must work simultaneously. This takes up a lot of electricity, increasing carbon-emissions. This makes Blockchain technology more expensive & harmful to the environment.
This has led some organizations to part from Blockchain technology, citing the adverse effect on the global environment.
Blockchain-based assets are currently stored in a digital format using a cryptographic key. This key is critical to ensuring the safety of the assets. If the owner loses this key, all of their assets are gone. And there have been many instances where people have lost their keys & assets.
As of now, there is no method available to recover the key. So, with losing a legend, the asset is gone forever.
Uses in Criminal activities
Privacy & Anonymity, the most significant advantages of Blockchain, can sometimes act as its biggest limitations. Criminals can take advantage of these two features to perform illicit transactions across the globe.
Given the robust privacy, global security agencies cannot track the payments, giving freedom to criminals.
There was no superior technology ever & there won’t be any. All technologies will have advantages & limitations & Blockchain is no exception.
But given its immense potential, Blockchain technology is all set to revolutionize all the industry & bring in the new dawn in the Digital World.
Who are the key players in the Blockchain Ecosystem?
There are hundreds of organizations that are leveraging the rapid growth of Blockchain technology. Here is a list of some key players in the Blockchain Ecosystem that are constantly working with the technology.
If you are into cryptocurrency, you might have heard about Coinbase. It offers multiple crypto-related financial infrastructures & services based on Blockchain technology. With a coin base, you can invest, trade & save cryptos securely.
Coinbase also offers a lot of liquidity to institutional investors & big sharks for crypto-based trades. It’s one of the leading players in the Crypto world & its popularity is all set to grow with the expansion of Blockchain technology.
2. Monex Group Inc.
This Japan-based online financial institution is a player in Japan, China, the USA, & Australia. It works as an online retail brokerage firm. It offers services like investment education, blockchain-based asset management, Forex trading, and Merger & acquisitions to the industry giants.
All of its services are based on Blockchain technology, offering it an edge over its competitors.
3. SOS Ltd.
This China-based technology company is into services like Big Data, Digital asset management, & trading. It boasts an AI-based Blockchain that powers its operations across the globe.
Apart from its core services, it offers solutions for emergency rescue services, insurance, finance, medical care & health.
This Canadian Crypto mining company is 100% powered by Green-energy. It uses the latest solutions based on Blockchain to mine different cryptos like Ethereum & Bitcoin. HIVE’s operations are spread across Iceland, Canada & Sweden.
It’s a parent company of Silvergate Bank. It offers financial infrastructure solutions to businesses, helping them take part in the Crypto industry.
Using its innovative Blockchain platform, it develops financial solutions for some of the United States’ most prominent digital currency exchanges.
How to invest in Blockchain technology?
Blockchain technology is a multi-purpose tool that can derive different solutions. As it’s rapidly becoming the norm, you might have considered investing in Blockchain.
But there is no direct way to invest in Blockchain technology. There is a way you can invest indirectly in the technology.
You can invest in organizations & Businesses that are leveraging the potential of Blockchain technology. You can invest in the companies that I mentioned above. But all this can be complex.
There is a much simpler way to invest in Blockchain technology. All you have to do is buy cryptos like Bitcoin and Ethereum & Non-fungible tokens powered by Blockchain technology. We have all witnessed the phenomenal rise of various cryptocurrencies, Bitcoin & Ethereum.
So these cryptos can be good investment options if you want to invest in Blockchain technology.
Cryptocurrencies are highly volatile & risky. They are high-risk, high-reward investment options. You might lose all your money invested in it. So please invest only after taking advice from your financial advisor.
Blockchain technology: A Thought to ponder
Phew! That was a long conversation. I understand if you have the urge to read this piece once again. Blockchain technology can feel daunting sometimes. But mark my words, it’s the future & if you want your business to grow, leverage the power of Blockchain somehow.
With its promising future, Blockchain holds the potential to transform the digital world as we see it today. And that’s why many industry big shots are quickly adapting to the rise of Blockchain to ensure sufficient growth of their businesses.
So why should you be left out?
This detailed Blockchain technology guide has offered much-needed insight into the niche. I plan to come up with even more informative blogs related to the Blockchain soon. So stay tuned & keep learning.
Meanwhile, you can access my other articles on my website here.
What is Blockchain technology?
It’s storing your data in different systems for different users and securing them by creating blocks based on mathematical problems.
Can I invest in Blockchain technology?
There is no direct way to invest in Blockchain technology. But you can invest in the companies that use Blockchain technology, or you can invest in the cryptocurrencies that are powered by Blockchain technology.
Is Blockchain safe?
Blockchain is highly safe & redundant. As the data is spread across many nodes, it’s practically impossible to hack it.
Should I invest in Blockchain-based cryptos?
You can invest a particular portion of your total investment in Blockchain. As these cryptos are too volatile & risky, do not over-invest.
Will Blockchain technology ever become mainstream?
Right now, Blockchain technology is a niche technology. However, with increasing acceptance, it will undoubtedly become mainstream.