Blockchain is a technology that allows safe, transparent,
and secure peer-to-peer data transfer without trusted third parties. The
technology concept appeared in 1991, but the real blockchain boom happened in
2009.
Today, each respectful IT specialist of high qualification
should have a mention of blockchain in their CV. If professional requests
"write my resume for me," they should ensure the presence of work experience with
blockchain.
However, what is blockchain exactly? How does it contribute
to the IT industry and beyond it? This article overviews blockchain technology.
It explains why this trend is one of the vital technological advances of the
twenty-first century.
How Does Blockchain Work?
We can imagine blockchain as a database spread across
different network nodes. Each node stores its piece of the chain's data, and
each node has a limited capacity, which is the chain's main trick.
As soon as one of the nodes is full, it closes and becomes a
part of the chain, and the next block opens for receiving data. As soon as the
block closes, data within becomes uneditable, and the block becomes a part of a
common, irreversible timeline. This technology allows storing and reading data
but not editing it once data storage is complete; it also helps keep the most
valuable data safe.
For example, the modern way of keeping data includes servers
and hard drives with enormous storage capacity. A company that owns the storage
has full access to the data and can edit it.
However, if something happens physically or a massive hackers attack
breaches the company's security, the data is lost. Due to its decentralized
nature, the blockchain helps to prevent such accidents.
Security and Transparency
Blockchain creation is a transparent process in which viewers are special programs. They help to see all the data transferred within the blockchain. Therefore, users with access to it can trace and cross-reference each piece of data in the chain.
Yet, this transparency does not mean that anyone can access
the data. The data in the blockchain has special encryption, and each block
transforms data into a hash stream of letters and numbers. Only the chain
owners can decrypt it with their pair of public-privacy pairs of keys.
In combination, these two features make blockchain
technology virtually unhackable. Of course, a hacker may try to break into the
blockchain. But a hacker needs to overwrite more than 50% of the blocks
simultaneously, making it discreetly and quickly. All of these factors are
impossible to combine. In addition, such an operation will require enormous
resources and be unsuccessful.
Blockchain Usage
Blockchain technology has close links to Bitcoin. The first
cryptocurrency introduced blockchain technology in 2009 and revolutionized the
IT world. Since then, thousands of projects have aimed to incorporate
blockchain technology.
It should be mentioned that Bitcoin uses blockchain
protocols to store transaction data. Cryptocurrencies are one of the many ways
this technology can be implemented in everyday life.
The financial sector is one of the first to benefit from
blockchain's active inclusion. Blockchain technology reduces the times of
transactions, increases the security threshold, and consumes much fewer
resources. Besides, security concerns become less pressing as the technology is
protected by design.
Smart contracts are another option for blockchain usage.
Smart contracts are algorithms that start to work only when all the conditions
within the blockchain are met”for example, payment of the security deposit for
the rent in exchange for the door code. The absence of a third party makes the
deal clear and transparent for everyone.
Smart contracts can work well on the job market as well.
This technology will help hiring managers and job seekers find the best options
for each other and avoid confusion with ATS bots.
The security properties make blockchain a great option for
voting. The idea can be realized through crypto coins and wallets. For example,
each voting citizen can receive a unique token, and candidates will have
individual wallets. Voting transactions cannot be tampered with and will show
clear and honest results.
The way blockchain stores information may be in use as well. For example, food tracking is one field that uses this technology. Each point of destination, from warehouses to factories, to shopping malls, can be traced via blockchain. Such technology usage helps find any shortcomings in the supply chain and fix them.
Besides, the healthcare system may benefit from blockchain
technology. For example, storing a patient's data in a blockchain will help
track all the steps in medical history without fear of the data being
compromised.
Advantages and Disadvantages of the Blockchain Technology
The blockchain has undisputable advantages that are:
- Decentralization
- Security
- Transparency
- Reduction of transaction costs
Yet, several issues require addressing as well:
- Legally grey zone
- Data storage limits
- High cost of the technology itself
- Usage not only by official bodies
The decentralization of blockchain makes third parties
redundant in any transaction. Yet, this feature opens space for illegal
operations as well. As a result, not only regular users but online criminals
and active participants may use blockchain technology for criminal activities.
This phenomenon raises another issue - the legalization of
blockchain. It is challenging to stop the technology's growth or to control any
given chain without special permission. Therefore, blockchain products have
become the subject of debate in the juridical field.
The technology is imperfect also. For example, a blockchain
consumes a tremendous amount of energy. While cryptocurrency mining may cover
the expenditures, any social program that involves blockchain will require
sufficient investments.
Finally, the data processing is relatively slow. It takes
approximately ten minutes to add a new block to a chain. On average, a
blockchain can manage only seven transactions per second. However, the speed
leaves much to desire. The amount of data that a single block in the chain
should contain is a subject of discussion also.
Bottom Line
Blockchain technology is a natural answer to data
transparency and security requests. Decentralization makes blockchain a perfect
way of data storage, and transparency makes the technology ideal for working
with vital data. Certain issues present in the technology, such as legalization
and technical limitations, will be addressed as the technology evolves.
