Want to know how Blockchain Technology works? You have landed at the right place. This blog will clear your muddled head, and you’ll have a better understanding of the Blockchain.
Heads up before I begin!!
Ever imagined a system so secure & robust that could transform our economy, governance systems, business functions and might transform our conceptual sense of trade, ownership, and trust. Well, such a technology already exists and is called Blockchain.
Seems fascinating? Let’s unravel this mystery together…
Blockchain enterprise platforms that have the capability of overcoming pitfalls have the potential to change forever the way we operate business globally (as well as B2B) as much as the internet, cloud, or artificial intelligence have all been doing across industries.
Defining Blockchain Technology
Blockchain is a backlinked, decentralized, and distributed database of encrypted records.
Okay, if those words seem bemusing, let me break it down for you: It’s a data structure where each block is linked to another block in a time-stamped chronological order. It’s an append-only transactional database, not a replacement to the conventional databases
- Every node keeps a copy of all the transactions that happened in the past, which are secured cryptographically
- All information once stored on the ledger is verifiable and auditable but not editable
- Highly fault-tolerant as there is no Single-point-of-failure
Main capabilities of blockchain technology: the triad
This section will focus on the main three enterprise blockchain capabilities, marking blockchain technology as a unique asset in the enterprise architecture landscape.
In essence, blockchain technology is a transaction record mechanism.
As a very first approximation, the ledger is the ‘database’ of blockchain architecture – its repository of the records.
Unique characteristics of the ledger:
- Immutability: Every record of the ledger cannot be changed or deleted. Database CRUD (Create, Read, Update and Delete) is not fully supported; blockchain supports ‘read’ and ‘write’ operations with no ‘update’ or ‘delete’ atomic operations like in an ordinary database.
- Distributed: Every member (or organization, in the case of enterprise blockchain) owns its copy of the ledger versus the classic client-server database architecture. Ledger distribution prevents central authorities (for example, DBA – Database Administrator) from maliciously or benevolently – the real data. If an inconsistency happens, blockchain technology will identify and correct the unreliable records (technically, this is achieved through ‘consensus mechanisms’ embedded into the distributed architecture). This characteristic fosters the disintermediation between the members of the blockchain network.
- Every record in the ledger is authenticated, verifiable, and hashed. Authentication, Authorization, and Audit, as well as Non-Repudiation (providing proof of the origin and integrity of the data), are fundamental assets of blockchain technology.
- Cryptography makes the verification and integrity of data practically impossible to tamper with.
- Transactions are secured through digital signatures assigned to any network member, preventing records that can be altered.
This term, coined in the 1990s by the cryptographer Nick Szabo, refers to “a set of promises, specified in digital form, including protocols within which the parties perform on these promises.”
In simpler terms, Smart Contract is a computer program stored on a blockchain, automatically executing, validating, and taking actions according to agreements between members belonging to the blockchain network.
Smart contracts can interact with external sources to validate rules coded in smart contracts.
All the characteristics above: ledger, security, and Smart Contract bring trust between the parties. This trust is not related to any so-called “man-in-the-middle” or central authority and governance but instead delegated to the underlying technology and code execution.
Top Emerging Blockchain Technology Trends to follow in 2021
- An Expected Rise of Federated Blockchains
Federated Blockchain is, in fact, one of the best blockchain trends in the industry today. It is nothing but only an upgraded form of the basic blockchain model, which makes it perfect for many specific use cases. The federated blockchain functions under different authorities instead of following a single secure, trusted node.
Experts are of the opinion that in 2021 there will be an increase in the usage of federated Blockchain as it provides private Blockchain – a more customizable outlook. Conceptually federated Blockchain is quite similar to private Blockchain, with a few added features.
Unlike private Blockchain, which one organization controls, multiple authorities can control the pre-selected nodes of federated Blockchain. This selected group from various nodes can validate the block to process the transactions further.
- Microsoft and Amazon Using Blockchain as a Service (BaaS)
Another emerging blockchain trend is BaaS or Blockchain As A Service. BaaS is a new blockchain trend that is currently integrated with many enterprises and startups.
BaaS is a cloud-based service that enables users to develop their digital products by working with Blockchain. Most of these digital products are smart contracts or applications that can work without any complete blockchain-based infrastructure setup requirements. However, Microsoft and Amazon are few known companies developing blockchain applications that provide BaaS service.
- Blockchain is Expected to Transform Social Networking
Social networking has become an integral part of our daily lives. According to Statista, it was estimated that in 2019, there would be more than 2.77 billion social media users worldwide.
The introduction of Blockchain in social media will solve inherent problems related to privacy violations, notorious scandals, data control, and content relevance. Hence the blending of Blockchain in the social media domain is another emerging technology trend.
Implementation of Blockchain in social media will ensure that all the published data in the social media domain remain untraceable and cannot be duplicated, even after its deletion. Moreover, users will get to store data more securely and maintain their ownership. Blockchain technology ensures that the power of content relevance lies in the hands of those who created it instead of the platform owners – thus making users feel more secure.
- Global blockchain market size will exponentially grow
What was not forecasted is that blockchain technology exploded in popularity this year. Businesses from many industries showed a growing interest in adopting this technology to enhance their business processes. In addition, the COVID-19 pandemic accelerated the digital transformation drive in many areas, primarily via the use of Blockchain or distributed ledger technology.
As a result, the global blockchain market size is expected to expand from USD 3.0 billion in 2020 to USD 39.7 billion by 2025, at an effective Compound Annual Growth Rate (CAGR) of 67.3% during 2020–2025.
- The banking and financial sector further dominates the market
Amongst all the industries affected by the COVID-19 pandemic, the financial sector is one area that has been hit particularly hard. Falling profits and tightening margins have forced banks to adapt and increasingly meet their customer’s needs in a growing digital world. The adoption of fintech and blockchain technology enables them to streamline their operations and modernize their operations. This may lead to firm growth in contactless transactions and redesigned financial services. The banking and financial sector is expected to show exponential growth in blockchain adoption in the coming years. As a result, this sector will hold the largest market size in the global blockchain market during the coming years.
- Hybrid Blockchains
Hybrid blockchain is still a new concept in the blockchain space. As the name implies, it attempts to fuss both public and private blockchain to create a hybrid. Its purpose is to merge the benefits of both public and private blockchain to create a solution. However, despite the inclusion of public blockchain in the union, they still operate in a remote ecosystem to ensure security.
The cost of setting up and running a hybrid blockchain is lower. In addition, it is quick and straightforward to verify transactions because of its influential nodes. Another benefit is that it is secured, so expect minor hacking.
The Road Ahead
Blockchains, smart contracts, and token inventive mechanisms have a great potential to facilitate a more sustainable world. However, change does not happen by itself. Technology is just a tool, not a silver bullet. It will not magically protect forests, reduce CO2 emission or restore ocean health. But, applied correctly, it can facilitate smart choices by producers and consumers, governments, and corporations.
Looking at all these latest blockchain technology trends, one can guess that 2021 will be a significant time for this emerging technology in various industries. The considerable advantages of blockchain technology include lower transaction costs, protection from cyber-attacks, the option to change the rules, help maintain confidentiality and operate in a closed ecosystem. Hence, there’s no denying that blockchain technology is likely to impact many different industry verticals differently. However, the technology is still in its early stages, with many technological, legal, and network effect challenges ahead.
Blockchain-based solutions also need to take ground-truths into account, including existing physical and social infrastructure.
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