The ledger technology, Blockchain, came to the world with the potential to change everything. Blockchain technology saves a lot of money, doesn’t need a vast amount of record keeping, and changes the IT section in a whole different way.
Cryptocurrencies are based on this ledger system. One of the hyped ones is bitcoin, which is pretty much taking over the whole world now. If you are just a beginner about this technology and is curious about the entire blockchain façade, then you’ve come to the right place.
I’ll be talking about all there is to know about the blockchain technology. So, let’s see what this beginners guide will cover on the blockchain.
Table of Contents
Now let’s get started on the main topic, shall we?
Chapter 1: What is Blockchain Technology?
The blockchain is another revolutionary technology that can change the ways of the internet just like open sourced software did. Just like them, blockchain will take up some time to cool off and get reasonably priced for everyone to use in modern developments.
It could take years to reach the real potential that lies within. As blockchain is a distributed P2P ledger system, anyone can see other users’ entries, but undoubtedly no one can alter it.
It increases a higher level of transparency in the whole system.
However, it’s unlikely to take over the traditional centralized database network that Governments use; rather it can structure a new system within the global enterprises.
With new technology being introduced each year, we are on the verge to see a new era.
You can only update blockchain using consensus algorithm. So, when a new set of information gets uploaded on the system, no one can alter it. The blockchain will contain accurate and reliable information on the ledger.
To put it simply, you can only write it once and then it can’t get altered. It’s not a single tech, but rather it’s a different type of architectural system that allows users to make transactions differently. Do you think blockchain is for dummies only? Why don’t you find out.
What Can Blockchain Technology do?
The network can connect to users and make direct transactions between them. The time stamps and ledgers are maintained automatically by the system. This means you won’t need any third party official figures in the system.
However, all the users of the blockchain technology are the administrators. You can also use smart contracts on the blockchain technology. As the network uses consensus algorithms, you can quickly create a project with certain conditions.
So, after all of them are fulfilled accordingly, every member of the project will get a fair distribution of their payment. This eliminates the prioritizing or favoring in case of any teamwork.
A great example would be the real estate market. If certain conditions aren’t met in deals, then the transaction never happens. Usually, in the blockchain, the users use the networks very own specified currency to pay up as the token money.
Blockchain Technology Explained: How Does It Work?
Now, let’s talk about how it works. But first, let’s see some important features of the whole system.
- Blockchain will keep score of all type of data exchanges. This is called a ledger system, and the data exchanges are called ‘transactions.’ After verification, every transaction gets to add up to the ledger as a block.
- It uses a different kind of distributed network to ensure that every transaction is on the point between P2P nodes.
- After a block gets added and verified, no one can alter its information.
Blockchain ensures security in this network by using the concept of ‘Key.’ If you use a set of encrypted keys, you’ll get a unique identification that no one can break. You’ll get a private and public key, using this combination you’ll get a unique identity.
Others will use your public key to find you on the network. With the help of your private key, you’ll be able to sign any action or authorize transactions associated with your public key.
If you think about cryptocurrencies, then the public key will get used as your wallet address, and you’ll use the private key to withdraw, send or buy digital money. That’s why it’s essential for you to keep this key safe.
If someone gets their hands on your private key, then he/she could access all your digital assets and misuse it.
So, every time you send something over the network, you’ll authorize it. It might be something like “Todd is sending Jamie 2 BTC”, this will include the public key of Jamie to locate him and Todd’s public and private key to encrypt the transaction.
After the transaction, the system nodes will verify it, and it’ll get added to the ledger with the help of a unique id and time frame.
In short, every transaction will have the same features, a public key, digital signature, unique ID and the timestamp.
But how do they make sure you are completely anonymous?
Well, the public keys don’t have any recognizable sequence, you won’t be putting your name there. It will consist of random letters and numbers. That’s why no one can trace it back to you or vice versa.
You’ll also get to generate as much as keywords as you want and come up with new key pairs along the process.
How Secure is The Blockchain Technology?
No system is ‘unhackable’ on the internet. But blockchain makes sure that it’s one of the most secured ones so far. Many industrial farms verified this statement including the Northwest Passage Ventures.
It doesn’t work like traditional means like banks, so to hack it you have to hack all the computer using it. The process is utterly tricky, and that’s why it’s considered extremely secured.
To compute all the resources, hackers have to face many challenges, because of the vast number of computers.
Just like any other technology, blockchain has a long way to go. However, if we compare Blockchain Vs Centralized platforms, blockchain will surely win.
Chapter 2: Different Types of Blockchains
2.1- Public Blockchains
Well, there are different kinds of blockchain technology you can use. One of them is public blockchain. The name lets you know everything. Such a blockchain network is entirely open for everyone. No one needs any permission to participate in the public blockchain or query about it. Any transaction process through this kind of blockchain is validated for all.
Everyone has the full right to download the code and run any public node on their own device. Anyone can even check their current status and also decide to add any blocks to the chain.
Other than that you can easily join the network without any hesitation, and the most attractive part is that they don’t need any kind of validation permission from anyone. Such characteristics attract more people to be a part of the blockchain technology explained as public.
The system or servers don’t require any maintenance. That’s why the decentralized applications don’t cost too much to create and run them.
One of the leading blockchain networks is Bitcoin. Ethereum, Dash, Dogecoin, Litecoin, Monero are also different public blockchain networks. All these blockchain networks have the access for anyone to join them as participants, use their codes and also send any transaction or even read them.
2.2- Federated Blockchains
Another blockchain technology is the federated blockchain. It’s also called Consortium Blockchains. It’s kind of opposite to the public blockchain network. That’s because people don’t get access to the ledger and any kind of transaction verification process. Everyone doesn’t have the right to read this blockchain.
A group of leaders operates the Federated Blockchains. That’s the main reason behind the name of this blockchain. The privacy of transaction is better in this system. They handle it with great care. Even their scalability is higher than public ones.
The group of its leaders controls all its consensus processes. It’s extremely fast. Generally, the banking sectors use the Federated blockchains, or you can say the Consortium blockchains.
With this blockchain network, no one has the right to join and participate in the system without any permission. You’ll need proper permission before taking part in any process of this network.
Federated, also known as Consortium blockchain substitutes legacy systems. It eliminates data redundancies. It makes people directly handle the documents. There are no semimanual compliance mechanisms. The transaction cost is also less in Federated blockchain network.
B3i (Insurance), R3 (Banks), Corda, EWF (Energy); these are some of the Federated or Consortium blockchains.
2.3- Private Blockchains
In some cases, you can say that the main difference between the private and the federated blockchain is that except a group of organizations only a single one controls the process of private blockchain network.
Usually, people don’t have access to the blockchain network such as auditing and database managing. Individual companies can get the access with proper permission and process. They will be able to access in transaction verification internally. But there are cases where the public can get the chance to audit.
Private Blockchain technology is opposite to the public one in some cases. It’s a centralized system. With the private blockchains the security break risk increases.
The transaction cost is less with the private blockchain network. They change the inheritance systems. Handling documents is way simpler with this blockchain network. Multichain, MONAX are two private blockchain networks.
Check Out More: Private vs Public Blockchain: Which is the Better?
Chapter 3: Blockchain For Dummies: Different Generations of Blockchain Technology
To this date, blockchain technology came in front of us as different versions, each having specific upgrades and new features.
Let’s see what they are, shall we?
3.1- 1st Generation Blockchain Technology
To get a better understanding of the first generation, you’ll have to take a closer look at Bitcoin’s technology. Bitcoin was the first ever to introduce this new technology, so every feature of that network is counted as the first generation.
With the help of the blockchain technology bitcoin caught everyone’s attention right from the start. This first generation blockchain has a fixed policy that no one can alter.
You’ll get to mine only 21 million bitcoins and once the threshold is reached no one would be able to mine or get their hands on them unless they buy it.
The policy also includes that a user can only spend his/her bitcoins once. After their transaction, they would not be able to get their hands on those again.
How did they achieve such a huge thing?
Well, they did it using the 1st generation blockchain technology. Usually on centralized systems that use fiat money doesn’t connect with other private ledgers. This is why they lack communication.
Let me clear it up using an example.
Alice works as a waitress, and one day she receives $300 in tips. She then takes that money and deposits on her Bank X. Bank X updates their ledger accordingly. On the way back, she remembered to buy some groceries. Unfortunately, the only withdrawal option is the nearest Bank Y.
However, Bank Y didn’t update their ledger, and for that, she had to go all the back to Bank A.
Well, this might not be the case always but things like these happen, and it’s one of the weak points of the system. You’ll also have to trust your bank for your money blindly. If someone hacks it and alters the ledger, you’ll undoubtedly lose your money.
3.1.1- How This One is Different
The blockchain updates the ledger of all participants and makes it fully decentralized process. So, instead of just recording the data in one node, it’ll be logged in everyone’s ledgers as well.
So, only tampering one node won’t be enough to hack you out of your money.
Well, think of yourself and your friends as the nodes. Everytime a transaction helps you guys meet up and share the details of the transaction. After sharing and getting all information right, you’ll update that in your notebook and record the payments.
After recording them down, you and your friends will compare them to see if all of you have the same results.
If the results are same, then you’ll sign on the page to ensure no one can change it. The same thing goes between all the nodes. So, you see it’s not easily hackable.
3.1.2- What are the Benefits of 1st Generation Blockchain Applications?
Well, there are so many benefits of this type of the first-generation blockchain. Let’s take a look at them one by one.
- No one will be at a loss due to losing a single node. The data will get stored in every other node too.
- If someone tries to hack it or tamper the records, the process would be too much evident. If there are only nine other ledgers that the hacker has to break in and install a similar looking ledger on the system, it could be a piece of cake.
But imagine what happens when there are 2 thousand or million people with the ledger. The sessions are also refreshed every 10 minutes, so it’s practically near to impossible to hack it.
- You won’t have to trust any party blindly. Every transaction is automatically verified and signed by each member.
The first generation blockchain technology was one of the revolutions of the digital world. This was the root of every other cryptocurrency and latest versions of blockchain technology.
3.2- 2nd Generation Blockchain Technology
Ethereum is the basis of the second generation blockchain technology. Let’s take a closer look at this system to get a better understanding of the system. Ethereum is often paired up with bitcoin. It introduces a new feature called “Smart contracts,” and you can send money using their currency Ether.
3.2.1- Smart Contracts: Blockchain Technology Explained
A smart contract is a coded project that gets uploaded on the network. After executing all the contracts, it gets automatically updated on the ledger.
You could think of it as a coded version of ‘If-Then’ situation. The contracts have specific requirements, and after completing them, the project would be over. This ensures total transparency as no one can tamper with the data.
Also, everyone will get the fair share of the payment, and no one would be left out. Let me give you an example to clear up the matter further.
3.2.2- The Online Shopping Scenario
Imagine you want to buy something online from a vendor. You’ll have to pay him beforehand, and the product will then get shipped to you within the next three days. However, it’s only after the vendor receives the money.
There are many issues with this system.
First of all, there’s no trust between you and the vendor, as you don’t know him/her from somewhere before.
Second of all, the vendor will claim the money beforehand, as you might also not pay him after receiving the product.
Lastly, the shipping company somehow loses the product, and you give a bad review to the Vendor.
All of these issues get solved easily right after using smart contracts.
The contract will automatically get paid once the delivery is confirmed. No party has to trust each other blindly; the process becomes really transparent. The shipping company will contact the vendor if they lose or damage the product. You’ll also get notified of the situation.
Every part of this process doesn’t need any central authorization. You won’t have to fill out any papers or pay up additional fees for the product. All you need to do or the vendor needs to do is to create the smart contract on the blockchain network.
The second generation blockchain technology explained adds up a new feature to the whole digital currency situation. So, now it can also be utilized other than just a currency tool.
3.3- 3rd Generation Blockchain Technology
The third generation adds an extra layer of effectiveness to the whole network. Just take Apple and Android operating system as examples. They both have a different set of codes for their applications.
So, an Android app won’t run on Apple’s iOS and vice versa. If you want to run the exact application on Apple, you’ll need to code it in Swift.
The react native actually solved this problem. It allows anyone to code any application for both of them. This structure is what the third generation introduces. Ethereum is a great platform, but it lacks flexibility.
Every decentralized application build on Ethereum only runs on their EVM (Ethereum Virtual Machine). So, if you want it to move to another platform, say Lisk, you’ll have to alter the coding.
The third generation allows the flexibility to interchange platforms and uses blockchain application on any network.
There are lots of examples for that. Take a look at some of them below.
It’s a rather exciting platform. It currently runs on their Qtum Virtual Machine. This VM is a modified form of EVM. The best part about this system is that there is Account Abstract Layer (AAL). This different layer will allow you to add any smart contracts from another platform without any hassles.
You can integrate any smart contracts on the network; it’s effortless.
Ripple is another third generation blockchain technology. It will allow you to transact within different ledger system. So, you’ll be able to negotiate between private to private and to traditional payment systems.
Their Interceder protocol allows them to accomplish this strategy. So, you could think of it as a link between different blockchain platforms.
IOTA gets rid of the poor quality microtransactions. The volume was extremely low in the previous generations. However, IOTA ensures super-fast and a high volume transaction every second. You’ll have to pay up a certain amount of fee for every transaction.
How do they do it?
Well, they pretty much bundle them as blocks, and they get verified by all the miners. IOTA uses a new technology called ‘Tangle,’ where every block on the network is checked by itself.
The model has earned a fair share of demands from many industries, and it ultimately increases scalability.
Hacking the Blockchain
Hacking a blockchain is extremely tough but not ‘impossible.’ Perhaps a great example would be the DAO. DAO was hacked out of $70 million Ethereum due to a system glitch. The hacker somehow tricked the network and got the $70 million into his/her account.
However, there aren’t many examples of this scenario. If the blockchain technology has some kind of loop, then one can take advantage of that. Otherwise, the system is full proof.
As of today, some experts doubt the motive behind this new technology, but they also think that making it this much easy to access can be considered as a gift. Well, it surely needs much more appreciation then it actually gets.
Some people even doubt their full potential even with all the features.
Chapter 4: The Blockchain Technology Stack
The blockchain contains different layers. Take a look at the layers from below:
4.1- The Internet Layer: Introduction to Web3
This layer is the root of the whole stack. It’s the combination of all the networks such as IoT devices, smartphones, computers, etc. They all rely on the Internet Protocol Suite. This layer determines how the information should be transmitted, addressed, packetize, etc.
The initial version of the internet known as Web Version 1 or World Wide Web (WWW), was introduced back in 1989. It used the IoI (Internet of Information). It defined a specific framework and the URLs to other resources.
After more than ten years, the technology saw another upgrade, and it became Web version 2. This version started to use the Internet of Interactions, mostly used on social media and e-commerce websites.
With this new version, the Pear to Pear connection grew more in time, and many large groups acted as the medium for that.
These organization profited by using advertisements or other subscription resources.
This new popularity gave the birth of the latest web version 3. Most of the people count this as the Internet of Value or Web. Blockchain technology is one of the significant initializers of this new upgradation. Started out with the bitcoin and slowly making its way to the top markets.
This same technology can replace social Media or ride-sharing apps. It can indeed make the web a decentralized place after all.
4.2- Blockchain Protocol Layer
The layer operates similarly as any other blockchain network does. The nodes will execute protocols, add up data on the ledger, and ensure transparent transactions.
The protocol introduces an open, trusted and shared ledger system. The protocol offers a sufficient amount of feedback to the user.
4.3- The Application Layer
The bitcoin network was the frontier of many other blockchain technologies. However, it increased the number of forks. The application layer of the system consists of any other features outside simple cryptocurrencies.
Smart contracts and decentralized application are in this layer. The layer allows the development of decentralized applications that works beyond the consensus algorithm.
The smart contracts can provide more complex uses. The tokens are absolutely critical to the network and for the development of the dApps themselves.
4.4- User Experience (UX) Layer
This layer gives access to the whole network and different blockchain applications. It’s the front liner of the entire stack.
Chapter 5: 10 Real Life Scenarios: How Blockchain Technology Will Affect Your Daily Life?
5.1- Internet of Things (IoT)
The word is widespread in the crypto niche – Internet of Things (IoT). But what is it? Think of all the devices that have the ability to connect to the internet. It could be your refrigerator, your home assistant, even maybe your smart TV. The basic concept is – no matter whatever the “thing” is, if it can connect to the internet, it’s in the IoT club.
Generally, the smart home appliances get considered as the entities of the Internet of Things. Every dot that connects to the web is a great asset to the technology network. What’s the best part of this technology, it’s energy efficient. Cryptocurrencies generally consume insane amount to generate. The IoT can do a lot save a massive amount of electrical power.
5.2- Blockchain Healthcare
One of the unique features of the blockchain technology is all the data is encrypted. It never violates personal privacy. It’s a great weapon against data breach and other virtual crimes. So, we think this technology can highly benefit the healthcare sector. Blockchain could encrypt all the user data and keep it safe for specific eyes only. All the documentation like surgery data could be encoded and kept private.
So, undoubtedly, healthcare could be a vast field that can get the utmost benefit from the tech.
5.3- Cross-Broder Payments Made Easy: Say Goodbye to Settlement Disputes
Sending and receiving money from abroad has always been an issue of hassle. First of all, not every payment method is available in every country. Almost every state has a governing eye that maintains the overall process. Second of all, it takes about 4-5 days to transact money from a state to another.
Something had to be done! We are talking about a lot of money. About 150 trillion dollars have transacted from country to country only in the years 2015. Still, the process is very complicated, opaque and questionable. Blockchain can be a lifesaver in this case.
You could just say goodbye to annoying waiting time. What’s the best part? No one would look at your money like vultures lurking over its feasts!
Cross-border payments is now a matter of a click with this tech. Moreover, there is scope for laundering money and other related crimes. There will undoubtedly be fewer disputes and life will be much easier for people supporting families from abroad.
5.4- E-Voting: Not Just a Myth!
Voting is one of the fundamental civil rights of all the citizens. But the evilness has made things harsh or honesty and clarity. The process could get immense of help from the blockchain technology. There are two primary reasons to support the e-voting system – anonymous and secured.
People always doubt such a system. And it is quite reasonable. The competing parties could feel that an election is getting rigged. But 2016 US election and 2014 election of Denmark gave a definite reply to the doubters.
The technology is becoming more and more trustworthy and accepted by people and politicians all over the world gradually. Admittedly, it will take a while before everyone, and every government leaders could realize the benefit.
5.5- Enhanced Digital Security
Cybercriminals are now a massive threat to governments and big companies. The cybersecurity industry is worth at least $18 billion annually according to various reports. Distil Networks has published a statement regarding the matter, and it made a lot of tech gurus rethink the issue.
When we see popular, and tech giants like Facebook got tricked by cybercriminals, our faith starts to crumble. Who knows if advertising agencies buy your personal data or not. There is a dire need for transparency. Otherwise, you are nothing but products to the corporate world.
You could say blockchains the heroes without capes. The technology is as robust as it gets. Your data could be much safe (almost uncrackable), and your privacy will get easily maintained.
5.6- Your Car is Getting Smarter
Car stealing is a common crime in most of the countries in the world. Losing such a great asset to the thieves is a matter of great grief. But the good thing is that your car is getting smarter! Now a lot of new model cars can be unlocked using a smartphone. But what if hackers could hack the passwords and steal your car even easier.
This is where blockchain comes to the scene. Blockchain provides a more secured and cryptographic way to manage and handle the data. So, we could easily assume that smart cars would be even more secured with the magical touch of the technology. All hail the mighty blockchain ledger!
5.7- Travelling Made Easy
Do you have a thing for a nomadic life? Maybe you love to roam around and not settle down. A human mind is undoubtedly an adventurous fellow. But while traveling, you will have to face a typical scenario – money. Every country has different currencies.
What if you had a universal wallet that is fast, secure and maintains the account is real time? Your traveling life will thank you for such kind of easy method. Well, with blockchain you could easily have a taste of such life.
5.8- The Pirate Killer!
Piracy has always been an industry killer, especially in the entertainment sector. For example, with digital formats of music and sharing, it has been a significant challenge to establish it as a profitable industry.
We have seen numerous musicians and artists fail to shine because of piracy. With blockchain technology, music can again be a non-scarce digital asset.
Musicians could get their deserving royalties and establish the industry again in the previous robust form. It would pay homage to the artists and musicians and filmmakers.
5.9- Regulation Made Easy
Corruption resides inside every human soul. No matter how much strict authority and government is, corruption finds a way in! With the open and public ledger, we could put an end to money laundering and other financial crimes.
It would drastically improve the effectiveness of anti-money laundering authorities. The crime rings will take a massive blow, and we could put a stop against the vicious crime and the crime rings involved.
5.10- Ride-Sharing Gets an Upvote
With the popularity of Uber, Lyft and many other ride-sharing companies, we are assuming that the industry will grow even more. Already various local brands are ruling the streets along the global market leaders.
Blockchain technology might open up the possibility of ride-sharing 2.0. Such option will entirely omit the existence of the middle-man. If so, the rides will become even cheaper and more affordable. Well, it’s already affordable, but the price will also come down more.
A Possibility Opens Up for Money Lending Scenario
Lending money is a concept that has been going on since the dawn of civic societies. The basic rule is you get to get money for lenders, and you will pay back the original amount plus the interest both parties have agreed on this.
But life is unpredictable. You could fall victim to any sort of accident. If so, you will fail to pay the money. Thus, uncountable people fall victim to bankruptcy. They lose their precious assets. Some people even lose their every last belonging even their homes.
How could blockchain help be such cases? In blockchain tech, you will not have to pay that extra interest rate. But how? Well, you don’t need a bank or other financial organizations to transact using the blockchain. So, you could save tons of money.
Why is Blockchain Technology a Better Tech?
The blockchain is the solution of this era. It can even change the very way we have been maintaining our financial life. Well, it influences a lot of industries. Four major strength points make the technology stand out in the crowd –
The first difference with the current model is that it has centralized servers and vast data centers. So, if such a data center fails or gets hacked, all your precious data could be lost. It will even mark the death on countless websites.
A blockchain technology gets distributed. Rather than having a centralized server, the network is distributed. The copy of the ledger is spread to all the users and all the nodes. So, everyone has the same authority over the system. Even IoTs can be members of the blockchain network.
Moreover, it’s practically unhackable. Hackers and the cyber attackers will have to take down the whole network all the users nodes. The task is nothing short of being impossible.
Trust is a big word! In a digital transaction, two parties connect to transact. But these two parties don’t have a mutual trust towards each other. So, that’s why the technology is often called the trustless technology. So, how do they act normally? Well, they have to follow a common consensus algorithm that will verify every transaction and store it one the common ledger.
Moreover, everyone can see the all the transactions made. And if any transaction violates this consensus algorithm, the transaction itself gets violated. So, even if the parties don’t trust each other, it doesn’t matter. The system is designed to ensure safety and common trust among the users.
You will find it very hard to undo a transaction that got shared across the network for verification. Over time, the process of recovery and undoing gets tougher. So, in that sense, the technology can be said to be immutable.
It’s a good and bad thing at the very same time. If you are a freelancer, once the client sends you the payment, he cannot take it back. At the same time, if you by mistake send someone the money, it will be nearly impossible to get it back.
Such a feature makes the tech more robust and sustainable and more trustworthy among the users.
It’s been too long since the government and the banks have kept you shackled and played monopoly with you. What do these central governments do? They take a percentage of your money or asset to verify that you own that particular asset.
Being decentralized makes the blockchain technology even more appealing to the crowd. It makes the little Robin Hood inside all of us cheer.
There are many positive sides of being decentralized. No one can take down the whole network; no third party could look into your private spending. So, if you take the middleman out of every scenario, you will save a lot of money. The precious hard-earned money will always belong to you only if you use the blockchain network.
Is Blockchain Still Immature?
Is blockchain for dummies only? Well, blockchain technology has a lot of room to grow out. The technology is ten years old. Satoshi Nakamoto, the mysterious inventor, brought the concept for public eyes in 2008. So, it is pretty easy to guess that there will number of flaws of the blockchain network. Some of the crucial ones are as follows –
- Power consuming
- Higher network cost
- Block size variation
- Market Specialization
- Immutable smart contracts
1- Power Consuming
Running the consensus algorithm is indeed a daunting task for the processors. PoW entirely depends on the raw processing powers of the nodes. Sadly, without spending much processing power and electrical power, you cannot mine enough coins. Moreover, the whole copy of the overall system is stored to all the members within the network. Having the data in all the nodes might make you think how much data it consumes.
The good news is almost all the big names in the industry is trying hard to make the process less power consuming and less wasteful.
2- Higher Network Cost
A blockchain consists of nodes. But some blockchain ecosystems have a limited number of nodes. If the total number of the users surpass the number of nodes, the whole network may crumble. Such scenarios raise two major problems –
- Higher costs
- Slower transaction rate
Sooner there might be the introduction to the incentive nodes. Thus, there is a significant possibility of creating a new digital caste system which entirely against the underlying ideology of the technology itself.
3- Block Size variation
The blocks can contain various types of data. Containing such big data could require “bigger” chunks. These more massive blocks oppose two kinds of threats.
- Creation of smaller ledgers which will harm the immutability and the consensus algorithm.
- A more centralized rather than distributed network.
None of these conditions are desirable as it changes the very appealing nature of the technology that everyone wishes for.
4- Market Specialization
The blockchain technology just started growing. One of the primary reasons why people are afraid of is because of the volatility, and there are just too many blockchains on the market. Which blockchain should you choose and which cryptocurrency you should even invest on.
The market is too much speculative. For example, Bitcoin has reached a unit value of $20,000, but it doesn’t mean it will always maintain its peak value. The price might drop down any time. Or maybe some other currencies do exceptionally well. No one what will happen to make the scene more complicated than ever.
So, is blockchain for dummies only? Well, this might make you think that.
Plus, it will put an impact on your blood pressure!
5- Immutable Smart Contracts
A smart contract is a contract between two individuals that have an absolute time limit and conditions. Once these conditions are met, the deal becomes self-validating. Ethereum first introduced the smart contracts.
A significant characteristic of such smart contracts is they are immutable. Meaning, once you have made the deal with the conditions to fulfill become unchangeable. The hackers could use this very feature to attack us. Again, if they can crack the code to creating such contracts disasters will follow by.
Chapter 6: 6 Leading Blockchain Platforms You Should Know About
Ethereum, the game-changing blockchain platform is a miracle by a 22-year-old Russian-Canadian. His name is Vitalik Buterin. You could call them the most innovative blockchain ecosystem.
What makes Ethereum stand out? Well, Ethereum introduced the Smart Contracts, dApps, and DAO. Having such unique features made the system appealing to the ordinary users. Maybe that’s why they have the most significant number of use cases. They even have a friendly and helpful online support community which focuses on frequent product updates and user support.
It currently has the older proof of work consensus algorithm in their system. But Ethereum is planning to adopt the updated proof of stake consensus algorithm instead.
6.2- Hyperledger Fabric
Linux, the world famous open source platform is backing Hyperledger. They aim to create and serve industry level ledger frameworks. They have already collaborated with big enterprises coming from various industries such as fiancé, banking, supply chain, manufacturing companies and IoTs, etc.
Hyperledger is one of the best blockchain frameworks out there. It goes perfectly with enterprise solutions. The blockchain will allow you to start right away and with the help of their consensus protocol.
They also recently announced that they’d be launching a newer version of Hyperledger Fabric.
6.3- R3 Corda
R3 is another revolutionary significant financial institutions that have created an open-source distributed ledger platform called Corda. There is no built-in token or cryptocurrency for Corda, and it is a permission blockchain type.
Well, it will restrict any person who doesn’t meet up with blockchain protocols. So, if you are only explicitly attached to the network, you won’t get access to certain parts.
Ripple is one of the interesting ones so far. Their RippleNet aims to link every banks and payment methods or provide in one place. The transaction fees offered by Ripple is next to free.
Their digital currency is called “Ripples or XRP,” and they have become one of the most popular ones right after Bitcoin and Ethereum. XRP is more scalable and faster than other cryptocurrencies.
EOS is new on the market and already has created a great impression in the market. People are getting hyped about it. Well, there are mainly three reasons behind it – scalability, flexibility, and usability.
You could say it is free of all the major flaws that Bitcoin currently has. Only time can tell how far EOS go as the competition is at the peak point.
The newborn NEO has already entered the market with a bang! It changes the whole scenario with their vast capability of handling transactions per second. While blockchains like Bitcoin can handle 6-7 transactions per second, NEO can process 10,000 operations per second.
Moreover, NEO has challenged the monster – Ethereum. NEO is everything that Ethereum is but younger, smarter and faster.
Chapter 7: Examples of Decentralized Blockchain Applications
Now that you know how you can build decentralized apps based on different platforms let’s see few of the models to understand the process further.
Usually, there are three types of decentralized apps nowadays. They are:
Type-I: This dApp has its very own blockchain network.
Type-II: This decentralized app runs on the blockchain network of Type I dApp. They also use other protocols to utilize their very own token system.
Type-III: This dApp uses some protocols of Type II dApps and then use their very own protocols to issue tokens.
Let’s see few of their examples now.
Augur is a type II dApp. It’s a unique application. It uses a decentralizing network along with financial market predictions to create logical and powerful forecasting of the market.
However, the predictions aren’t limited to only financial markets.
Golem utilizes one of the biggest marketplaces in the world, computing power. It means that it’s a supercomputer that you can access any time. If you have unused computing power, utilize it on the network.
As a reward, you’ll get other users buying your computing power from the supercomputer.
You’ll have to buy the power using their very own tokens. So, you’ll get Golem Network Tokens whenever someone buys your power.
It’s a great way to invest in blockchain technology.
Golem is another example of Type II dApp.
Aragon is one of the few decentralized management platforms that provide value to prominent organizations. The project is built on the Ethereum platform. The sole aim is to break all the boundaries and promote a structured organizational system to help you out.
Aragon wants to make it easy for developers to create new Decentralized Autonomous Organizations. That’s why it includes a lot of things such as token management, arbitration, role assignments, etc.
Aragon is also an example of Type II dApp.
Sia works with the unused hard drive capacity around the world. With this, they established a ground based on blockchains and ensured a unique storage system. The platform utilized those empty spaces as cloud storage.
They are also incredibly cheap. So, if you have some available hard drive, then you can lend that space using Sia. You can also buy the storage if you are running low on fuel.
It’s a Type I dApp.
7.5- Safe Network
Safe Network is responsible for a safer peer to peer communication. It utilizes the blockchain technology, and the word SAFE means Secure Access for Everyone. You can use their platform to enter into a secured network and then share computing powers with someone else.
They aim to protect their users from centralized authorities such as the government, criminals, banks, etc.
It’s a Type III dApp.
Chapter 8: Different Types of Blockchain Consensus Protocols
Every blockchain technology is different. They all use different consensus algorithms to make their platform better than one another.
So, they have vital importance in the network.
8.1- Proof-Of-Work (PoW)
It was the first one to be introduced to the world, that’s why it’s so much popular than other consensus protocols.
In this one, when a user initiates a transaction ‘miners’ or supercomputers try to solve a problem or puzzle.
This allows them to add blocks to the whole network. As a reward for working, they get a small transaction fee and a percentage of blockchain tokens.
However, it has some drawbacks.
The miners waste a lot of energy for solving the puzzles. They leave their computers on for an extended period and then increase the global energy consumption.
Even though it’s one of the popular ones, it’s susceptible to the hackers. The system is old and needs upgrading the protocols.
Ethereum used PoW initially, but as of 2018, it has moved on to Proof-Of-Stake.
8.2- Proof–Of-Stake (PoS)
This protocol was designed to overcome the drawbacks of the PoW, practically the energy consumption. The contract is also designed for public blockchains just like PoW.
This doesn’t mine new coins but rather encourages users to spend their money on the coins. The more they spend, the more chances they’ll get to be a Validators. With this, they can participate in the creation of the block.
But, there’s a twist, the validators are selected randomly.
Their main drawback is that they are vulnerable like PoW. If we compare PoW Vs. PoS, we’ll surely be in a pickle.
8.3- Delegated Proof-Of-Stake(DPoS)
They are similar to proof-of-stake, but with a twist! Users with more coins will get to vote and elect Witnesses. So, the only difference is the democratic view of the whole situation.
If you participate in this voting system, you’ll get reward points. It’s the best way to get your hands on cryptocurrencies.
8.4- Leased Proof-Of-Stake (LPoS)
Waves developed this POS system. With this, you’ll be able to make customized tokens and use it on your farm. The aim is to offer more security than the PoS system. The name “Leased” came to be because of the nature of the investments. You can lease out your coin to the network and then get reward points.
8.5- Proof Of Elapsed Time (PoET)
PoET is similar to PoW. The difference is that it focuses more on power consumption. However, it needs special hardware equipment to run freely.
8.6- Practical Byzantine Fault Tolerance (PBFT)
One of the leading platforms currently utilize PBFT. Byzantine used a particular sequence to keep the rouge users at bay. It’s entirely normal to have a few havoc users on any blockchain platform. Better to be safe right.
Blockchain Technology Explained: Other Consensus Algorithms
These were the major ones. Now let’s see how other algorithms are doing.
- 1- Proof-of-Activity: It’s a hybrid protocol system. It uses both PoS and PoW to ensure the reward points are on time. When they solve a puzzle, they’ll use PoW, after that it’s all about PoS.
- 2- Proof-of-Importance: NEM developed this one. They wanted to create a protocol that will also reward based on network activity not only transactions. This means users that frequently send and receive transactions will get paid for that.
- 3- Proof-of-Capacity: Using this protocol you can utilize the capacity or storage space of your hard drive. The more storage you have, the more blocks you’ll be able to mine and then get rewarded.
- 4- Proof-of-Burn: Burn your coins and get rewarded. This is a rather odd one. Any user that send the coins back into their wallet that they can’t recover from will get rewards based on the amount.
Which Industries Can Use This Technology?
You may be thinking where the blockchain technology is used. Well, it’s basically used in some industries like healthcare, shipping, energy, and Fintech. You can also say that these industries are using them as a medium to exchange carbon credits.
Blockchain in Shipping
In shipping industries, for cargo shipments, landing inspectors and receivers have to sign-off multiple times before any delivery. It was all a traditional paperwork. Later, with the digital electronic system, there was also a lot of time-consuming signature process.
Finally, Maersk, the biggest container shipment operator in the world, was trying to modernize the whole cargo shipment landing process and make it much more comfortable.
In March 2017, it came out that it’s using a ledger based on blockchain technology that digitalizes the supply chain. Thus, it could be able to handle huge paperwork digitally, and the shipment became way more accessible.
Maersk is now working on a new electronic blockchain based shipping platform together with IBM. There are expectations of the new electronic blockchain technology.
The blockchain ledger contains the whole data of the shipments including the status of the goods, lading bills, documents of customs and all other information about the shipments. One can view all of the data and knowledge of the load if he or she is the member of the shipping supply chain.
But the members won’t be able to change, edit or delete any data from the record. Even they can’t add up anyone on the network without any agreement or proper process. The whole data system is an unchangeable record system. Basically, blockchain is such a technology which is connecting the entire world.
The main fantastic feature of the blockchain technology is the financial transaction. You can transact efficiently within a very short time and also without any interruption of any third person or third party. There is no need for any government or bank support for the transaction process. Thus, you don’t need to pay any extra charge.
So, isn’t it evident that the blockchain applications are ruling the financial technology! It’s actually doing so. It’s eliminating the transaction time and cost as well. Even one can quickly check the blockchain entries and the transaction status without any problem. That’s a massive contribution to the fintech world.
A report on blockchain is that it could be able to reduce the infrastructure cost by around 30% on average for some biggest investment banks. They could save a significant amount of money annually using the blockchain technology.
In the case of transaction across the borders, it can take a few days for the payment and other processing. There are a lot of processes for the clearance, settlement, and payment while transacting across the borders. There are a lot of communication processes. Although all of them are via electronic messages, it would be very natural to take the minimum of two days for the settlement process.
But with blockchain network, it won’t even take that much time for the whole transaction, communication, and settlement process. This technology makes all the operations more manageable and less time-consuming.
Blockchain in Energy
There are blockchain applications in energy industries too. Blockchain ledger can be used to save energy data. Recently, some companies are using blockchain cryptographic technology or blockchain ledger to save energy data.
You might be thinking whether this technique is costly or fake. It may seem an expensive and false process, but it’s not. Moreover, it’s economical, original and not dangerous at all.
You’re going to need set up solar panels according to the quantity of the energy you want to preserve. There must be a microgrid blockchain ledger connected to the panel. The microgrid contains lithium-ion battery storage, network control system, smart electric meters, and converters.
The Microgrid blockchain database is a bookkeeping system based on the web. It will handle the load balancing, monitoring the grid and addressing issues. Using the blockchain ledger technology a huge amount of energy can be saved and used while there will be a power cut or any other disaster occurs.
Many companies and residents are using this method to save energy and using them whenever they need inexpensively. And many companies are planning to use the blockchain ledger technology.
This blockchain ledger system requires a computer or node to share and validate all the information all over the microgrid. The blockchain will balance the entire energy system efficiently.
All the researches and studies on blockchain technology explained that it’s going to be a very potential in the energy industry. It’s going to manage the entire energy saving grid system more efficiently without any issue.
Career as a Blockchain Developer
Blockchain technology is making a massive place in the industries day by day. With the upcoming days, the demand of the blockchain applications will be increased. Thus, there’s going to be a huge opportunity in blockchain career.
Blockchain developers already have an excellent demand. With this job skill, they possess the second-ranking among the most demanding job skills. Job opportunities are increasing nowadays.
Blockchain developers possess not only the permanent full-time job field but also the freelancing world. They are demanding a massive amount for their service, and the most wondering part is companies are hiring them with their high demand.
Different institutes are planning to train engineers, programmers, and developers on blockchain applications programming and developing. If you can grow your skills with blockchain applications, there will be lots of opportunities to build your career in the blockchain technology. The scope for blockchain developers is rising higher than ever!
Chapter 9: Blockchain For Dummies: The Future of Blockchain
Blockchain made us look at the world in an entirely new way. If you think about it, our whole world and how we handle data is going to change. We could finally imagine a world that is wholly free of technological overlords. But it’s not going to happen overnight. People will need quite an amount of time to grasp the whole technology. It goes without saying that, blockchain technology is going to change the very way internet works. The human mind tends to reject the changes.
For example, if you consider the TCP/IP technology, you will notice that it took about 30 years for people to grasp the tech. As blockchain to going to remove the necessity of banks and other government-controlled financial systems, we think it might take even longer this time.
But who could predict the future? Video calling was such a sci-fi back in the 1970s or 1980s. But even kids these days use FaceTime to connect with friends and family.
So, how blockchain technology is going to change the world? How is it going to affect our daily life? Which are the scenarios that will change drastically?
Such questions are pretty common to come to our minds. Don’t worry mate! We will answer all the problems that have been bugging your mind regarding the issue.
Blockchain technology is the name of the new revolution that started to make its way into everything. That day is not far away when we’ll be able to merge our digital and real life industries fully.
It’s just the start. You’ll keep witnessing new and improved blockchain application, making our day to day life much more comfortable.