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In this article, we will discuss what is blockchain technology in detail.
It is rare that the technology industry comes up with a term that describes in the simplest terms what exactly a new technology it has created actually does.
Blockchain is one such example as it is exactly what the name suggests. It is a technology that allows blocks of information to be created and stored in a chain. Each time a new block is created it is added to this chain to form what has been called a ’digital ledger‘.
There are public blockchain and private blockchain networks. A public blockchain can be joined by any individual whereas a private blockchain network allows verified members to join and access a digital asset stored on a decentralized blockchain database.
While it has been possible to create digital ledgers before, blockchain ledgers have a number of revolutionary benefits over traditional approaches.
The advantages of blockchain ledgers:
Blockchain technology allows the digital ledger to be distributed to many different nodes which therefore removes the need for the transaction data to be processed and stored by a sole third party.
This helps to prevent the data from being hacked, as it wouldn’t be stored on one system with one security system. It also removes the controlling element of that third party over the transaction.
Blockchain has the obvious benefit of helping to remove control over transactions thereby making blockchain applications in finance cheaper and more accessible.
One of the main advantages of blockchain technology is that it is incredibly secure. It uses encryption to secure the transaction ledger so that only individuals with a unique key code can gain access to the data.
The fact that blockchain transactions are peer-to-peer, and are, as such decentralized, means that they are far more secure. Despite its popularity, the bitcoin blockchain has never been hacked because blockchain technology makes this next to impossible.
The beauty of the blockchain ledger is that blocks are unalterable once written. This has a number of enormous advantages when implemented into day-to-day business transactions through smart contracts. To start with, it means that these digital ledgers can be a trusted source of information.
One example of where this could be a game-changer is in the drug development industry where test results could be recorded into the ledger. Once written they would be unalterable.
This means that neither the drug company nor anyone else would be able to alter the results in an attempt to represent a particular drug as performing better than it really did.
The same level of data confidentiality can be ensured by financial institutions when it comes to processing financial transactions on a blockchain platform.
Distributed computer processing
While large companies have the financial resources to implement large server systems, or otherwise to pay an outsource company for the pleasure of using theirs, small to medium-sized companies often don‘t have the finances to do so. This could deter them from developing new ways to implement IT solutions into existing processes/transactions for fear of rising costs.
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Blockchain technologies actually distribute the processing of transactions to anyone who meets the criteria to do so. These individuals/companies are commonly known as miners.
While the power needed to process a single blockchain transaction is generally higher than traditional methods (especially as the blockchains get more complex), distributed processing does mean that companies don‘t need to invest in large new server systems or in paying for processing power they may not fully need.
Looking Forward to Investing in the Blockchain Technology?
You are likely wondering whether to invest in the development of blockchain. Well, don’t wait too long because many of your peers in the financial services sector are certainly doing that!
A MarketWatch report states that total investment in blockchain in the banking and financial services sector amounted to $2.3 billion in 2018. The report states that this spending will likely reach $17.47 billion by the end of 2025, with a CAGR of 33.6% during the 2019-2025 period.
If you are planning to invest in blockchain technology for your business, today is the right time. However, you will need a skilled team of blockchain experts to do so. Blockchain is a new technology that requires a specific skill set to implement successfully.
Read our blog on implementing a blockchain cryptocurrency payment solution for your enterprise and how to develop an ethereum blockchain app to get an idea of blockchain development.
Write to us your initial blockchain development project details via this quick form and one of our technical managers will get back to you to discuss further project details.
Top FAQs on What is Blockchain Technology?
It is a digital ledger technology where blocks of data are stored as a chain of information on multiple network nodes. Hence, blockchain is also called a distributed ledger technology.
A blockchain is a decentralized network as there is not a single point of data storage, secure, especially private blockchain networks, as the transaction data is encrypted, and unalterable as data, once written on the blockchain network, cannot be changed.
Some of the major challenges faced by the blockchain industry include low scalability, no regulations, lack of privacy, insufficient design and implementation skillset, etc.