Blockchain is a distributed, unchangeable ledger that has eliminated the double-spending problem and enabled cryptocurrencies and Web3. On a blockchain network, virtually anything of value may be recorded and traded, lowering risk and cutting costs for all parties involved.
The importance of blockchain: Information is the lifeblood of business. The faster and more accurate it is received, the better. Because it delivers immediate, shareable, and entirely transparent information kept on an immutable ledger that can only be viewed by permissioned network users, blockchain is excellent for delivering that information. Orders, payments, accounts, production, and much more may all be tracked using a blockchain network. You can see all facts of a transaction end to end since members share a single view of the truth, providing you greater confidence as well as additional efficiencies and opportunities.
The essential features of a blockchain
- Technology based on distributed ledgers
The distributed ledger and its immutable record of transactions are accessible to all network participants. Transactions are only recorded once with this shared ledger, eliminating the duplication of effort that is common in traditional corporate networks.
- Records that cannot be changed
After a transaction has been logged to the shared ledger, no participant can edit or tamper with it. If a mistake is found in a transaction record, a new transaction must be made to correct the error, and both transactions must then be visible.
- Smart Contracts
A collection of rules called a smart contract is stored on the blockchain and executed automatically to speed up transactions. A smart contract can specify requirements for corporate bond transfers, as well as payment terms for trip insurance.
How does the blockchain work?
Each transaction is logged as a “block” of data as it occurs.
These transactions depict the movement of a tangible (a product) or intangible asset (intellectual). The data block can store any information you want, including who, what, when, where, how much, and even the state of a shipment, such as the temperature.
Each block is linked to the ones that came before it and those that came after it.
As an asset transfers from one location to another or ownership changes hands, these blocks form a data chain. The blocks validate the exact timing and sequence of transactions, and they are securely linked together to prevent any block from being changed or inserted between two other blocks.
In an irreversible chain, transactions are blocked together: a distributed ledger technology
Each successive block reinforces the prior block’s verification, and hence the entire blockchain. The blockchain becomes tamper-evident as a result, giving the key strength of immutability. This eliminates the risk of tampering by a hostile actor, and creates a trusted record of transactions for you and other network users.
Duplicate record keeping and third-party validations waste a lot of time in operations. Fraud and cyberattacks can make record-keeping systems susceptible. Data verification might be slowed by a lack of openness. And, with the advent of the Internet of Things, transaction volumes have skyrocketed. All of this slows business and depletes the bottom line, indicating that we need to find a better solution. Then there’s the blockchain.
As a member of a members-only network, you can trust that you will receive accurate and timely data from blockchain, and that your confidential blockchain records will be shared only with network members to whom you have specifically authorised access.
All network participants must agree on data accuracy, and all confirmed transactions are immutable because they are permanently recorded. A transaction cannot be deleted by anyone, not even the system administrator.
Time-consuming record reconciliations are eliminated with a distributed ledger shared across network participants. A collection of rules called a smart contract can be placed on the blockchain and implemented automatically to speed up transactions.
Types of Blockchain Networks
A blockchain network can be built in a variety of ways. They can be public, private, permissioned, or constructed by a group of people.
- Public Blockchain
A public blockchain, such as Bitcoin, is one that anybody may join and participate in. Significant computer power is required, there is little or no privacy for transactions, and security is inadequate. These are crucial considerations for blockchain use cases in the industry.
- Private Blockchains
A private blockchain network is a decentralised peer-to-peer network, analogous to a public blockchain network. However, the network is governed by a single organisation, which determines who is authorised to participate, implements a consensus procedure, and maintains the shared ledger. Depending on the use case, this can greatly increase participant trust and confidence. A private blockchain can be used within a company’s firewall and even hosted on-site.
- Permissioned Blockchain
A permissioned blockchain network is typically set up by businesses who create a private blockchain. It’s worth noting that public blockchain networks can be permissioned as well. This limits who is authorised to engage in the network and what transactions they can do. To participate, participants must first get an invitation or authorization.
- Consortium Blockchain
The upkeep of a blockchain can be shared across multiple companies. Who can submit transactions or access data is determined by these pre-selected organisations. When all members need to be permissioned and share responsibility for the blockchain, a consortium blockchain is perfect.
To know more about other fascinating concepts of Web3, check out the Crypto101 series by Coin Crunch India.