Hype around Blockchain

Blockchain

03/01/2023

Blockchain technology has generated a lot of hype lately. From cryptocurrencies like Bitcoin to trending non-fungible tokens (NFTs), it has spawned new categories of digital marketplaces.

While this innovation is promising, it also has its challenges. For example, some blockchain projects are not ready for use in a business setting.

Lets have some of the key topics required to understand Blockchain.

An Overview of Blockchain

First, let us discuss around what a blockchain is, how it operates, and the fundamental properties like decentralization, transparency, and immutability that make it so appealing.

  • Blockchain: A blockchain is a shared distributed database or ledger between computer network nodes.

A blockchain serves as an electronic database for storing data in digital form. The most well-known use of blockchain technology is for preserving a secure and decentralized record of transactions in cryptocurrency systems like Bitcoin. The innovation of a blockchain is that it fosters confidence without the necessity for a reliable third party by ensuring the fidelity and security of a record of data.

  • How it Operates? Blockchain is a combination of three leading technologies:

    • Cryptographic keys: Two keys make up a cryptography key: a private key and a public key. These secrets aid in the execution of successful transactions involving two parties. These two keys are unique to each person and are used to create a secure digital identity reference.The most significant component of Blockchain technology is this protected identification.

    • A peer-to-peer network containing a shared ledger: Cryptography keys are used by blockchain users to conduct various kinds of digital transactions across the peer-to-peer network.

    • A means of computing, to store the transactions and records of the network.

  • Blockchain Decentralization: What a blockchain does is enable the distribution of the data stored in that database across multiple network nodes located in different places. This not only adds redundancy but also preserves the accuracy of the data stored there; for example, if someone tries to change a record at one database instance, the other nodes won't be changed, preventing a bad actor from doing so. All other nodes would cross-reference one another and be able to quickly identify the node that altered the transaction record if one user tampered with it. This approach aids in establishing a precise and clear sequence of events. This prevents any one node from changing the data stored within the network.

  • Transparency: Due to the decentralized structure of the Bitcoin blockchain, all transactions may be transparently observed by utilizing blockchain explorers, which enable anybody to examine transactions as they happen in real time, or by owning a personal node. As new blocks are added and confirmed, each node's copy of the chain is updated. This implies that you might follow Bitcoin wherever it went if you so desired.

  • Immutability: Implementing a blockchain may instill a previously unheard-of level of trust in the data that businesses rely on every day. Immutability ensures integrity both in its technical and primary definition. By using blockchain, we can both demonstrate to our stakeholders that the data we provide and utilize has not been tampered with and upgrade the auditing process into a time- and money-saving technique.

Applications in the Real World

Applications for blockchain go well beyond cryptocurrencies like bitcoin. The technology is affecting many different industries in ways that range from how contracts are enforced to making government run more effectively. It can increase openness and justice while also saving businesses time and money.

  • Blockchain in Money Transfer: Transfer apps for cryptocurrencies are now experiencing an explosion in popularity, led by Bitcoin. Due to the time and money that blockchain may save financial institutions of all kinds, it is particularly well-liked in the industry. Blockchain can save the biggest banks a tonne of money by decreasing third-party fees, getting rid of bureaucratic red tape, and making ledger systems real-time. These businesses efficiently move money using blockchain technology.

  • Blockchain Smart Contracts: Smart contracts are like regular contracts except the rules of the contract are enforced in real-time on a blockchain, which eliminates the middleman and adds levels of accountability for all parties involved in a way not possible with traditional agreements. This saves businesses time and money, while also ensuring compliance from everyone involved.

  • Blockchain and IoT: The next logical explosion in blockchain applications is the Internet of Things (IoT). IoT offers a wide range of uses and several security issues, and as the number of IoT products rises, hackers will have more opportunities to steal your data via devices ranging from Amazon Alexa to smart thermostats. Blockchain-infused ,Through the use of technology's transparency and theoretical incorruptibility to keep things "smart," IoT adds an additional layer of security to avoid data breaches.

  • Blockchain in Healthcare: Despite its early usage, blockchain in healthcare is already showing some potential. Early blockchain systems have really demonstrated the ability to lower healthcare expenses, increase stakeholder access to information, and simplify business procedures. To ensure that an already bloated sector can reduce extravagant expenses, an innovative system for gathering and sharing private information may be exactly what the doctor ordered.

  • Blockchain Logistics: According to the paper, supply chain management and logistics are plagued by a number of issues that can be resolved by blockchain technology. According to the study, blockchain creates data transparency by making a single source of truth visible. Blockchain can increase trust in the sector by recognizing data sources. Technology has the potential to save the logistics sector billions of dollars annually by streamlining and automating the process. Blockchain is a safe and affordable alternative for the logistics sector.

  • Blockchain in Government: Blockchain technology may have some of the most unexpected uses in bettering government. As was previously said, certain state governments, such as Illinois, are already utilizing the technology to secure official records; but, blockchain technology may also increase bureaucratic efficiency, accountability, and lessen astronomical budgetary burdens. The electoral process may be revolutionized by blockchain. Voting on mobile devices is made possible by the security and incorruptibility offered by blockchain-based voting, which could increase civic involvement.

Blockchain and Cryptocurrencies:

A protocol for a peer-to-peer electronic cash system was likely designed by Satoshi Nakamoto in response to the 2008 global financial industry meltdown. This protocol served as the basis for the distributed ledger technology known as blockchains. Blockchain functions somewhat like a global ledger or spreadsheet. It operates on computers given by volunteers all around the world and lacks a central database. Because a blockchain exists on the network rather than within a single organization, anyone can examine it at any moment. A blockchain employs public and private keys to preserve some level of virtual security and is encrypted. Without using a bank or other financial institution, a person can send money to another person securely using a blockchain.

Bitcoin

  • Bitcoin is a digital currency that runs without any kind of centralized management, bank supervision, or government regulation.
  • Instead it relies on peer-to-peer software and cryptography.
  • Every transaction is shared across nodes and broadcast to the network in a public manner.
  • These transactions are gathered by miners into a collection called a block, which is added permanently to the blockchain, about every 10 minutes. This is the official bitcoin account book.
  • Bitcoin was developed as a means of online money transfer.
  • The goal of the digital currency was to offer a different form of payment that would function without centralized management but otherwise function similarly to traditional currencies.
  • The US National Security Agency's SHA-256 algorithm serves as the foundation for the cryptography used by bitcoin.
  • Bitcoin uses the energy-intensive proof-of-work consensus, which requires miners to compete for rewards.
  • Bitcoin was designed strictly as a payment method.
  • The Bitcoin blockchain was created only to support the bitcoin cryptocurrency.
  • Since there are more potential private keys that would need to be checked than there are atoms in the universe, it is practically impossible to crack this.

Ethereum

  • At its core, Ethereum is a decentralized global software platform powered by blockchain technology. It is most commonly known for its native cryptocurrency, ether (ETH).
  • Ethereum can be used by anyone to create any secured digital technology. It has a token designed to pay for work done supporting the blockchain, but participants can also use it to pay for tangible goods and services if accepted.
  • Scalable, programmable, secure, and decentralised are all features of Ethereum.
  • It is the blockchain of choice for programmers and businesses building technology atop it to transform numerous sectors and how we go about our daily lives.
  • Ethereum is described by founders and developers as “the world’s programmable blockchain,” positioning itself as an electronic, programmable network with many applications.
  • The Ethereum platform was founded with broad ambitions to leverage blockchain technology for many diverse applications.
  • Ethereum’s transition to the proof-of-stake protocol, which enables users to validate transactions and mint new ETH based on their ether holdings, is part of a significant upgrade to the Ethereum platform.
  • Ethereum, uses a proof-of-stake consensus mechanism.
  • Ethereum is also being implemented into gaming and virtual reality.
  • Ethereum is not a centralized organization that makes money. Validators who participate in the Ethereum network earn ETH rewards for their contributions.

Technology Limitations

There is a lot of discussion about blockchain, but people do not know the true value of blockchain and how they could implement it in different situations.

  • Limited technical talent available: These days, it's easy to find developers who have a wide range of skills across many industries. However, there aren't as many developers with specific knowledge in blockchain technology as there are in other fields. Therefore, it is difficult to construct anything on the blockchain due to a dearth of developers.

  • Scalability: Similar to bitcoin, blockchains have consensus mechanisms that mandate that each participating node confirm the transaction. The amount of transactions a blockchain network can process is constrained by this. As a result, Bitcoin was not created to handle the massive numbers of transactions that many other organizations perform. The current maximum transaction rate for bitcoin is seven per second. Hence proving that blockchain is not scalable.

  • Privacy: Recently passed data privacy regulations and frameworks don't seem to have given legislators much thought in terms of blockchain technology and its distinctive features. Utilizing encryption and ensuring data integrity are two elements of blockchain technology that can assist alleviate or address privacy concerns. However, the dispersed peer-to-peer network architecture of blockchain technology frequently puts it at conflict with the conventional idea of centralised controller-based data processing that underpins the GDPR and CCPA. Due to this discrepancy, it may be challenging to combine current data protection rules with blockchain's other fundamental characteristics, such as decentralised administration, immutability, and indefinite data storage. The success or failure of a business initiative, particularly those that use blockchain technology, is increasingly influenced by how data privacy issues are handled and how rules like the GDPR and CCPA are applied.

Before implementation or release, circumstances may call for or benefit from undertaking a privacy impact assessment (PIA) or data protection impact assessment (DPIA).

  • Security: Many people are right when they believe blockchain is inherently secure. Blockchain is unquestionably beneficial to organizations, but it has significant drawbacks due to specific security issues.
    • 51% Attacks: A single person or group (evil hackers) can take over more than half of the hash rate and take over the entire system in a 51% attack, which can be fatal. Transactions can be altered in order, and they can also be stopped from being confirmed, by hackers. They are even capable of undoing already finished transactions, which leads to double spending.
    • Phishing Attacks: Blockchain networks are increasingly the target of phishing assaults, which is problematic. Phishing attempts commonly target people or workers for businesses. The purpose of a phishing attack is for the hacker to obtain the user's login information. To the owner of the wallet key, they can send emails that appear to be real. The user must enter their login information into a false hyperlink that is attached. A user's credentials and other sensitive information may be compromised, which may cause harm to both the individual and the blockchain network. Additionally, they are susceptible to follow-up attacks.
    • Routing Attacks: Because data transfer and operations continue as usual in the face of a routing attack, participants in the blockchain are typically oblivious of the danger. The danger is that these attacks could regularly reveal private information or steal money without the user's knowledge.
    • Blockchain Endpoint Vulnerabilities: Users interact with the blockchain through electronic devices like computers and mobile phones, which serve as the endpoint of the blockchain network. Hackers can target devices and monitor user activity to steal the user's key. One of the most obvious blockchain security problems is this one.

Different Types of blockchain

Blockchain is the technology which has increased its speed in the direction of success and growing day by day and is adopted by almost every industry. For different industries there are different types of blockchain networks used on the basis of the requirements.

Private blockchain: Private blockchain is restricted in nature, that is a network which is built for the internal process of the company which wants to introduce this network. It presents some of the cryptographic auditing and known identities to the internal processes. But there are some downsides of this particular network. The first and the most important to address is centralization. Thus, with the private blockchain the central idea and the beauty of Decentralization and open source is lost. In general, companies have a small and restrictive network and they are deployed for voting, supply chain management, digital identity, asset ownership, and more. Hyperledger Fabric, Quorum and Corda are some specimens of the private blockchain. Another issue which is most important to look after is security. With fewer nodes, it is easier for malicious hackers to gain control of the network. Thus, compared to the public blockchain, a private blockchain is far more at risk of being hacked or having data manipulated.

Public Blockchain: The most secure and trustworthy blockchain network is named as public blockchain network. The whole system is viewed as open source as it is transparent and open to all. The nodes’ identity in the public blockchain network remains anonymous and it is kept private. Public blockchain integrates economic incentives and encrypted digit verification through methods such as POW mechanism or POS mechanism. Public blockchain maintains the beauty of decentralization. It allows anybody to participate in the network and be a node and in the consensus procedures therein. Another critical point to remember is that these types of Blockchain are more transparent and secure than permissioned blockchains because there are many nodes to validate transactions. Thus, it would be difficult for bad actors to collude on the network. Also, it is not possible to modify or alter the data once it has been validated on the Blockchain. The only downside of the public blockchain is that the transaction speed is slower than the private blockchain network.

Consortium Blockchain: The third type of blockchain network in the list is Consortium Blockchain. In Consortium Blockchain, some nodes control the consensus process, and some other nodes may be allowed to participate in the transactions. Unlike private blockchain, more than one entity is present on the network. Since there is no single authority governing the control, it maintains decentralized nature.They are a bit more decentralized than private blockchains making it more secure. However, this is not easy to set up as it requires cooperation between the organizations. Consortium is the blend of both public and private networks. It is private because the node that can have access to the network is restricted; on the other hand it is public because the blockchain network is shared among different nodes .Hence this network possesses the quality of other blockchain networks.

Interoperability Realization

Generally, interoperability may be defined as execution of several operations among the same kinds.With this we define Blockchain interoperability as the process of operations between two or more blockchains. In technical terms, blockchain interoperability speaks about the ability to see, access, and share information across different blockchains or blockchain networks.

The objective of interoperability is to design blockchains more compatible with one another and to allow their integration into existing systems.The idea of interoperability enables many new applications to be built on top of existing frameworks, allowing users to access data from multiple blockchains within a single application.

The layer one blockchain protocol lacks the blockchain interoperability. There are stacks of operations such as recording, transactions, and storing data. However, the automation process lags if interoperability in the blockchain isn’t there.

Security is Crucial

The decentralised network, or distributed ledger, of blockchain is its main selling feature. Since there isn't an one entity in charge of the entire network, there is a higher level of trust and information is accessible to all designated nodes or members, who can store, transmit, and read encrypted transactional data on their blockchain. Another is the blockchain's immutability, which increases security because it prevents changes to the data included in the blocks.

Blockchain instead of having the various positive sides which make it popular among the crowd but it also has some downsides also, which targets its most important factor of popularity: security. Yes, Blockchain is the most trustworthy and secure one , still it has some vulnerabilities and here we can say “Blockchain isn't perfect!”. There are ways that cyber criminals can manipulate blockchain’s vulnerabilities and cause severe damage.

Common attacks which cybercriminals practice to attempt the malicious activities are : 51% attack, double spending attack , Routing attacks, phishing attacks and many more.

Necessary precautions to be taken to prevent such activities over blockchain:

  • The use of Proof of Stake rather than Proof of Work can assist shields against 51% attacks. Because users who already own the majority of the coins will make the decision.
  • Several algorithms exist to thwart Sybil assaults. The majority of cryptocurrencies use one of these, termed Proof of Work.
  • It's crucial to keep an eye on your blockchain's mining pools. Ensure that some of the miners in any pool that exceeds a 40% cap are transferred to other pools.
  • Routing attacks on the blockchain can be averted with the adoption of secure routing protocols (such as one with certificates).
  • Before use, smart contacts must be rigorously tested by professionals for bugs.
  • Create a strong network of blockchain users and keep them informed about secure private key storage procedures via emails, newsletters, etc.

Blockchain's Impact on the Future

Blockchain advocates contend that the technology will transform all businesses by facilitating safer, more reliable, and easier data and information sharing. There are other industries that could still use this technology to upend the status quo. Here are a few industries that blockchain technology will significantly alter in the future.

  • Banking and Payments: Many banks are currently implementing blockchain technology to enhance their transactions, in addition to enabling faster, more secure, and more ease and convenience exchanges (see the bitcoin currency).

  • Cybersecurity: Using cutting-edge encryption, all data is validated and encrypted in blockchain technology, making it impervious to unauthorized modifications and hacks. A centralized server's vulnerability to data loss, corruption, human mistake, and hacking can be very high. Just consider the numerous intrusions that Target, Verizon, Deloitte, and Equifax have experienced during the previous few years.

  • Money Transfer: The blockchain technology's original use still has a lot of potential. Compared to using current money transfer services, adopting blockchain for money transactions may be cheaper and faster. This is especially true for international transactions, which are sometimes expensive and delayed.

  • Internet of Things: Today, the Internet of Things (IoT) comprises objects such as refrigerators, cars, buildings, doorbells, and even door knobs that have sensors, network connectivity, and software built in. Hackers can, however, access your home or the automobile you're driving because these gadgets work from a centralized hub that manages communications.

  • Insurance: Customers and insurance companies may benefit from more transparency if smart contracts are used on a blockchain. Customers would be discouraged from filing duplicate claims for the same occurrence if all claims were recorded on a blockchain. Smart contracts can also expedite the payment-receipt procedure for claimants.

  • Government: You're not the only one who has trouble with dishonest politicians and lengthy DMV queues. We might streamline government processes while enhancing security, effectiveness, and transparency via blockchain. Votes could be tabulated and their legality confirmed, and welfare and unemployment payments could be given and validated more easily.

  • Voting: We are one step away from being able to vote using blockchain technology if personal identifying information is stored on a blockchain. It will be possible to prevent voting fraud and ensure that no one can vote more than once. Additionally, it can broaden participation by making voting as easy as hitting a few buttons on a smartphone. Additionally, the expense of holding an election would significantly drop.

  • Gambling: Blockchain technology can help the gambling sector provide its customers various advantages. The transparency that a blockchain-based casino offers prospective players is among its biggest advantages. Bettors can verify that the games are fair and the casino pays out because every transaction is logged on the blockchain.

It’s a technology

One of the biggest buzzwords in the tech world right now is blockchain technology. While there is much debate about its merits, it’s an important technology that could change the way we do business as we know it.

The concept is pretty simple: Instead of storing information in a single database, like you would see in a cloud computing solution, blockchain stores data on a chain of linked blocks. Each link on the chain is a bit of information, such as a transaction. The information is then shared among a network of computers around the world, making it a decentralized database that can’t be compromised.

This technology has some real-world applications, including legal contracts and property sales, as well as medical records. It can also help companies monitor supply chains in real time, track items from manufacturer to retailer and find inefficiencies in a product’s lifecycle.

It’s also a useful tool for digital IDs, allowing people to control their own identity without having to trust companies to do it for them. But it’s not just about security — it can also help businesses save money, speed up transactions and deliver a better customer experience.

The best part about blockchain is that it’s transparent and secure — you don’t have to rely on a central authority for verification. That’s why it has the ability to make a major impact in the financial industry, as well as other industries, notably e-commerce.

In fact, research from the McKinsey Technology Council suggests that by 2027, up to 10 percent of global GDP could be associated with transactions that are recorded on a blockchain. Despite the hype surrounding the technology, there are still a few kinks to be ironed out. For starters, blockchain has a hard time scaling with high transaction rates. Similarly, it can be expensive to power a distributed network of computers.

However, it’s a technology that has the potential to change our lives for the better — from the financial sector, to business processes and even our digital identities. Ultimately, though, it will be up to those who implement it to use it wisely.

It’s a business model

Whether you are an executive or a technology student, you probably have heard about the hype around blockchain. It is an innovative technology that has the potential to completely overhaul the digital economy.

However, before you get excited about this technology, you should understand how it works. The blockchain is a decentralized ledger that keeps a record of all transactions. It uses a consensus algorithm and an immutable database that cannot be changed without approval from other members of the network.

The blockchain is also a platform that allows companies to launch their own tokens and develop smart contracts. These systems can be used to trace the flow of goods and services through a supply chain or to create an online marketplace.

One example is a blockchain-based online game, where players earn tokens and exchange them for real money. These tokens can be used to buy virtual items and currency in the game, which gives the player a sense of control over their in-game progress.

These types of business models are popular among blockchain-based companies, including gaming platforms, e-commerce sites, and cryptocurrencies. Some of them even include features like user-to-user revenue sharing or a rewards system that provides users with bonuses for peer-to-peer transactions.

The utility token model is another popular type of blockchain business model that uses a token-based economic structure to facilitate monetization. These tokens are distributed across a network to allow clients to access services from providers and share their revenues with them.

Unlike most business models, this type of model does not require a physical product, but instead utilizes smart contracts to enable a streamlined payment process. It can also provide a more convenient, safer way for customers to engage with their favorite products and services.

This business model can be scalable and adapted to meet the needs of companies. It can be a good alternative to traditional marketing strategies for smaller businesses that have less capital to invest.

In addition, this business model can be a great way to attract new investors and build a brand in the crypto world.It also allows a company to test its blockchain technology before investing large amounts of money.

It’s a community

Blockchain is a technology that is being used to revolutionize a wide range of industries. It is expected to completely overhaul the digital economy by transforming how transactions are carried out on a global scale.

Using a blockchain, users can store and transfer data securely and with a high level of privacy. It also prevents intermediaries - those who act as middlemen between people and the services they use - from taking control of their information.

A decentralized network of computers, known as nodes, is used to store and verify the blockchain. Typically, nodes are run by volunteers to replace the servers and cloud systems owned by major internet providers and services.

The main use case for a blockchain is value exchange, but there are many other applications that can be built on top of it. These include programmable tokens, smart contracts, and non-fungible tokens (NFTs).

Ethereum is an open-source platform that powers the world’s second-largest cryptocurrency by market capitalization, ether (ETH), as well as decentralized applications and smart contracts. The blockchain is a public and decentralized ledger of transactions that cannot be altered or hacked.

It is based on a consensus mechanism, which means that no single person can make changes to the ledger without support from all other nodes. This ensures that a user’s money or other valuables are safe and secure, as no one party can take control of the system.

In this way, it can help to eliminate censorship and protect users from scams and fraud. It can also allow users to have more control over their data, such as by allowing them to revoke their consent to a service or to stop their data from being shared with an external service.

But this control isn’t always easy to achieve, and it can be abused by intermediaries. Some of them have been accused of censoring users’ content or accidentally leaking sensitive user data in hacks.

For this reason, a number of activists and inventors have sought to hand more control over internet third parties back to their users. They have used a variety of tools, including Ethereum, to achieve this goal.

It’s a solution

Blockchain technology is a real-world solution to the world’s most pressing problems. It shaves transaction times from days to minutes and eliminates costly verification by a central authority. The technology is also more secure than its predecessors due to the fact that it’s shared and reconciled by thousands of computers instead of a single entity. This is the technology that could save the world from a financial meltdown.

The hype surrounding the tech has slowed down but it doesn’t mean that it isn’t still making waves in the enterprise. As the flurry of interest dies down, businesses are starting to take notice and implementing their own blockchain solutions for a variety of uses including supply chain management and smart contracts which are sure to be the next big thing in the world of fintech.

Having a clearer idea of the technology is the best way to reap the rewards. Getting on board with blockchain may require some upfront investments and time consuming deployment processes but it will pay off handsomely in the long run and provide a wealth of new capabilities that can be used to increase productivity, enhance customer satisfaction, reduce costs, improve efficiencies and generate revenue.

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