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What is blockchain technology

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4 views

What is blockchain technology

Uploaded by

mehdiabbas.najwani
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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What is blockchain technology?

A blockchain is a distributed database or ledger shared among a computer


network's nodes. They are best known for their crucial role in cryptocurrency
systems for maintaining a secure and decentralized record of transactions,
but they are not limited to cryptocurrency uses. Blockchains can be used to
make data in any industry immutable—the term used to describe the
inability to be altered.

Since Bitcoin's introduction in 2009, blockchain uses have exploded via the
creation of various cryptocurrencies.

Why is blockchain important?


Traditional database technologies present several challenges for recording
financial transactions. For instance, consider the sale of a property. Once the
money is exchanged, ownership of the property is transferred to the buyer.
Individually, both the buyer and the seller can record the monetary
transactions, but neither source can be trusted. The seller can easily claim
they have not received the money even though they have, and the buyer
can equally argue that they have paid the money even if they haven’t.

To avoid potential legal issues, a trusted third party has to supervise and
validate transactions. The presence of this central authority not only
complicates the transaction but also creates a single point of vulnerability. If
the central database was compromised, both parties could suffer.

How do different industries use blockchain?


blockchain is an emerging technology that is being adopted in innovative
manner by various industries.

Energy
Energy companies use blockchain technology to create peer-to-peer energy
trading platforms and streamline access to renewable energy.

Finance
Traditional financial systems, like banks and stock exchanges, use blockchain
services to manage online payments, accounts, and market trading. For
example, Singapore Exchange Limited, an investment holding company that
provides financial trading services throughout Asia, uses blockchain
technology to build a more efficient interbank payment account. By adopting
blockchain, they solved several challenges, including batch processing and
manual reconciliation of several thousand financial transactions.

Media and entertainment


Companies in media and entertainment use blockchain systems to manage
copyright data. Copyright verification is critical for the fair compensation of
artists. It takes multiple transactions to record the sale or transfer of
copyright content. Sony Music Entertainment Japan uses blockchain services
to make digital rights management more efficient. They have successfully
used blockchain strategy to improve productivity and reduce costs in
copyright processing.

Retail
Retail companies use blockchain to track the movement of goods between
suppliers and buyers. For example, Amazon retail has filed a patent for a
distributed ledger technology system that will use blockchain technology to
verify that all goods sold on the platform are authentic. Amazon sellers can
map their global supply chains by allowing participants such as
manufacturers, couriers, distributors, end users, and secondary users to add
events to the ledger after registering with a certificate authority.

What are the features of blockchain technology?


Decentralization
Decentralization in blockchain refers to transferring control and decision
making from a centralized entity (individual, organization, or group) to a
distributed network. Decentralized blockchain networks use transparency to
reduce the need for trust among participants. These networks also deter
participants from exerting authority or control over one another in ways that
degrade the functionality of the network.

Immutability
Immutability means something cannot be changed or altered. No participant
can tamper with a transaction once someone has recorded it to the shared
ledger. If a transaction record includes an error, you must add a new
transaction to reverse the mistake, and both transactions are visible to the
network.
Consensus
A blockchain system establishes rules about participant consent for recording
transactions. You can record new transactions only when the majority of
participants in the network give their consent.

Advantages
More Security

Blockchain systems ensure that only authorized users are able to


unlock information meant for them, and that the data stored on the
blockchain cannot be manipulated in any form.

Improved Accuracy

By providing a fully transparent, single-source-of-truth ledger,


where transactions are recorded in a chronological and immutable
manner, the potential for error or discrepancy drops when compared
to centralized databases or manual record-keeping processes.
Transactions are objectively authorized by a consensus algorithm
and, unless a blockchain is made private, all transactions can be
independently verified by users.

Higher Efficiency

Aside from saving paper, blockchain enables reliable cross-team


communication, reduces errors in operations. By eliminating
automating verification processes — done via smart contracts —
blockchain enjoys reduced transaction costs, fast processing times
and optimized data integrity.

Disadvantages
Transaction Limitations

As blockchain networks grow in popularity and usage, they face


bottlenecks in processing transactions quickly and cost-effectively.
This limitation hampers the widespread adoption of blockchain for
mainstream applications, as networks struggle to handle high
throughput volumes, leading to congestion and increased
transaction fees.

Energy Consumption

The computational power required for certain functions —


like Bitcoin’s proof-of-work consensus mechanism — consumes vast
amounts of electricity, raising concerns around environmental
impact and high operating costs. Addressing this challenge requires
exploring alternative consensus mechanisms, such as proof of
stake, which consume significantly less energy while maintaining
network security and decentralization.

Anonymity

Anonymity is the main selling point of blockchain technology. People may not
be able to track your real identity but think on this matter from the money
laundering perspective. A person with an anonymous identity can send
money to any part of the world, and no one will have a trace of those
transactions except for the wallet addresses. Investigations have often found
that cybercriminals were using blockchains as money laundering platforms.

With many practical applications for the technology already being


implemented and explored, blockchain is finally making a name for itself in
no small part because of Bitcoin and cryptocurrency. As a buzzword on the
tongue of every investor in the nation, blockchain stands to make business
and government operations more accurate, efficient, secure, and cheap, with
fewer intermediaries.

Blockchain technology is destined to revolutionize the way the digital world


handles data and does business and it has the potential to bring changes
around the world.

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