The advent of the internet is a blessing to mankind and has become an integral part of our lives. The internet is required in everything that we do, whether it is education, traveling, shopping, health, etc. Several applications of the internet are implemented in different sectors, and their use reduces workloads and simplifies work. One key example, Blockchain technology, is among the most discussed topics at present on different forums around the world, and has also emerged because of the advent of the internet. This technology came to light after the discovery of the cryptocurrency known as Bitcoin.
Blockchain, in simple terms, is regarded as a record-keeping technology, linked also with banking and investment firms. But how does it work?
The information regarding different transactions and details of credit and debit are noted by us and termed as records. Such records are maintained manually, and these manual renderings are stated as the ledger. Thus, the process of maintaining the record of information and data in the form of databases that are stored electronically on a computer system is called Blockchain, a type of digital ledger technology (DLT). Blockchain is the system of recording and storing information in such a way that it cannot be edited or hacked.
Blockchain advantages and disadvantages
Most Blockchains are designed as a decentralized database that functions as a distributed digital ledger. Data is recorded and stored in blocks, which are linked by cryptographic proofs and arranged chronologically. Blockchain technology provides increased security in trustless environments, extending benefits to a variety of industries. In addition to such advantages, however, this technology can also bring some disadvantages.
- Distribution: Both the system and the data in Blockchain are highly resilient to technical failures and malicious attacks because they are stored on thousands of devices on a distributed network. Each network node is able to replicate and store a copy of the database, and because of this, there is no single point of failure; a single node going offline does not affect the availability or security of the network.
- Stability: Confirmed blocks are very unlikely to be reversed, meaning that once data has been registered into the Blockchain, it is extremely difficult to remove or change. This makes Blockchain a great technology for storing financial records or any other data where an audit trail is required, because here, every change is tracked and permanently recorded on a distributed and public ledger.
- Trustless system: The use of Blockchain technology helps in the removal of third-party involvement in transaction and record-keeping processes, with no extra charge incurred for the transactions by Blockchain technology. For this reason, Blockchain is often referred to as a “trustless system”.
- Data modification: Once data has been added to the Blockchain, it is very difficult to modify it. While stability is one of Blockchain’s advantages, it is not always good. Changing Blockchain data or code is usually very demanding and often requires a hard fork, where one chain is abandoned, and a new one is taken up.
- Private keys: Blockchain uses public-key cryptography to give users ownership over their cryptocurrency units, and each Blockchain address has a corresponding private key. While the address can be shared, the private key should be kept secret. Users need their private key to access their funds, meaning that they act as their own bank of sorts. If a user loses their private key, the money is effectively lost, and there is little they can do about it.
- Storage: Another downside of Blockchain systems is that Blockchain ledgers can grow very large over time. For instance, as of now, the Bitcoin Blockchain requires around 200 GB of storage. Currently, Blockchain size is outpacing hard drive growth, and if the ledger becomes too large for individuals to download and store, the network may lose nodes.
Currently, there are at least four types of Blockchain networks, which are as follows:
- Public Blockchain: A public Blockchain has absolutely no access restrictions; any user in the network needs no permission to access the history of the Blockchain or carry out any kind of transaction. The information can easily be transferred and accessed by people all around the world on this type of Blockchain network without any prior permissions.
- Private Blockchain: A private Blockchain is permissioned to access information; One cannot join it unless invited by the network administrators. This type of network is usually managed by different organizations and enterprises.
- Hybrid Blockchain: Blockchain networks of this kind combine centralized and decentralized attributes. The working of the hybrid Blockchain depends upon the percentage of said centralization and decentralization.
- Sidechains: A sidechain is a network of Blockchain running parallel to the primary chain, but independently.
Smartphone adoption growing
The Blockchain is expected to evolve into general-purpose technologies and encompass a wide spectrum of areas, especially within business. With mobile becoming increasingly understood as a platform for innovation throughout Africa, the GSMA estimates that smartphone penetration will reach over 900 million people by 2025, and Blockchain solutions may find fertile ground to flourish. Yet, technological capacity does not equal feasibility, and the authorities remain a solid obstacle against disruptive solutions and change.
Fast forwarding to the present, Blockchain has been embraced at the level of civil society and is being addressed in political discourse. In addition to the Blockchain, the decentralization of decision-making and the crowding out of expensive middlemen are both tangible and beneficial outcomes of rapid technological advancement, such as mPesa and Uber. Surely, technology alone cannot bear the weight of the ongoing digital transformation, especially across emerging markets. Here, startups can play an essential role in speeding up the process by putting pressure on corporations and governments, forcing them to dismantle obsolete frameworks.
Despite the downsides, Blockchain technology presents some unique advantages, and it is definitely here to stay. Blockchain systems still have a long way to go before they become mainstream, but many industries are starting to contemplate their advantages and disadvantages. Businesses and governments will likely experiment with Blockchain technology in the next few years to see where it can add value to their operations.