When we say the words “block” and “chain” in this context, we are actually talking about digital information (“block”) stored in a public database (“chain”). The blocks in a blockchain consist of digital information consisting of the following parts:
1. Blocks store transaction information, such as the date, time and dollar value of the last purchase.
2. Blocks store information on who participates in transactions. How does Blockchain work? Instead of using a real name, the purchase will be made without identifying the information with a unique ‘digital signature’ such as a monitored username.
3. Blocks store information that distinguishes it from other blocks. Just like you and I have names to underline, each block stores a unique code called a hash that allows us to distinguish it from any other block.
1 How to do a secure Transaction on Blockchain
When a block stores new data, it is added to the blockchain. Blockchain consists, as the name suggests, of several blocks of coordinates together. To add a block to the blockchain. These three things always happen:
- The transaction must be verified. After the purchase, the transaction must be verified. For other public information records, such as the Securities Commission, Wikipedia or the local library, someone is responsible for checking new data items. However, thanks to Blockchain, this work is left on the computer network. These networks usually consist of thousands of computers all over the world. When you buy something, this computer network immediately checks if your transaction is proceeding as you said. This means that they confirm the purchase details including transaction time, dollar amount and participants.
- This transaction must be stored in the block. After confirming that the transaction has been corrected, a green light will appear. The dollar amount of the transaction, digital signature and database are stored in a block. There, the transaction can join hundreds or thousands of other people who like them.
- This block must be encrypted. After reviewing all transactions in the block, provide a unique identifier called an abbreviation. The block also has a link to the last block added to the blockchain. After encrypting a block, you can add it to the blockchain.
2 Blockchain 1.0
Blockchain 1.0 is the first blockchain module to appear in bitcoin format. Bitcoin played a similar role because it is the first to interest and involve people. The concept of a public book has been introduced. The public book has attracted the attention of bankers, lawyers, accountants, and governments because it could quickly change their economic models and ways of working.
Distributed books are ideal for recording digital transactions (signing contracts, sending and receiving money, keeping medical records, buying and selling securities, and the list goes on). One of the key features of Distributed Ledger technology is its “invariability”, which is unable to manage or delete transactions due to its advanced encryption technology. I’m sure we’ll see Blockchain 1.0 as we saw it on the Internet in the 1990s in the coming years.
3 Blockchain 2.0
It is a popular, open-source public computing platform and the operating system is known as Ethereum and is based on the use of tokens that can be bought, sold or exchanged. Ethereum’s questions were written in one of Turing’s seven complete languages.
Many applications have been proposed for the Ethereum platform, including those that are not possible. Use case proposals included funding, Internet of things, agricultural products, electricity, prices, and sports betting. Ethereum is (from 2017) the main blockchain platform for currency projects with a market share of over 50%.
In January 2018, there are over 300 DApps, of which hundreds are under development.
Through the antithesis, Ethereum replaces the more limited bitcoin language (a scripting language of about 100 scripts) and changes it into a language that allows programmers to write their own programs.
Ethereum guarantees that the developers program their smart contracts or “autonomous agents” as defined in the white paper Ethereum. The language is “Turing-complete”, which means that it supports a large set of calculation instructions.
4 Blockchain 3.0
Blockchains are changing with new test protocols that seem to change a known system. The last incarnation is called “Blockchain 3.0”
A new company called COTI has designed a new block without blocks and mines, they say solves the cryptocurrency problem and slows it down. All encryption has been introduced to make payments cheaper, faster, safer and easier. They probably did everything, but they didn’t.
The time and money required by miners to execute transactions mean that bitcoin transactions in TPS 3 to 5 (transactions per second) and Ethereum may be slightly better for 15 TPS. This is a clear problem if we expect millions of cryptocurrencies to be used for daily purchases. Not to mention the nightmare of launching the wallet and coding energy consumption.
Blockchain 3.0 is the updated version of Blockchain 2.0, designed to increase technology capabilities and solve existing problems, enabling faster, cheaper and more efficient transactions. One of the things that makes blockchain 3.0 unusual and practical compared to Acyclic Graph (DAG).
First of all, we understand the logic of the data structure, DAG. As the name suggests, the information on the DAG-based network is extremely fluid. This means that the information cannot be returned to the sender. Information flows only in one direction. This ensures that the nodes are not linked to the previous ones. This structure removes the 10 minute lock time for bitcoins and 20 seconds for Ethereum, so transactions can be processed almost in real-time. The network uses IoT DAG (ITC) and processes 10,000 transactions per second, which is much more than a visa.
5 Advantages of Blockchain technology
Despite the fact that blockchain technology is a new idea, it has demonstrated its value and importance in no time. Here is a list of some of the main advantages of blockchain technology.
1. Zero percentage of fraud
Since the blockchain is an open sourcebook, all transactions will be made public, so there is no possibility of cheating. The advantages of the blockchain system will be constantly monitored by miners who observe all types of transactions 24 hours a day.
In fact, there are thousands of miners who monitor all transactions all day and all night. Therefore, blockchain-based virtual currencies will be closely monitored, making them almost impenetrable to fraud.
2. No government interference
The government or any financial institution has absolutely no control over blockchain-based virtual currencies. Therefore, there will be no government interference. Government interference has often led to the devaluation of several currencies, and the last Zimbabwean dollar is a good example.
3. Immediate transactions
Blockchain-based virtual/digital currencies offer 10 times faster transaction times than the normal banking system. For example, if the transaction was made to a person with another bank account, it will take at least two days to complete the transaction. However, blockchain transactions are generally completed within minutes.
4. Greater financial efficiency
Blockchain technology allows individuals and companies to make transactions directly with the end-user without the involvement of third parties. This significantly improves financial efficiency in each country and allows people to be less dependent on financial institutions and / or banks. This will not only save you a lot of money on commissions but also other bank charges.
Once the data/transaction is added into the block and the block is confirmed by miners it is very difficult to change or reverse the data. That makes blockchain a great technology to store financial and other data that will be visible to everyone and will be secured by the network computational power.
6 Disadvantages of Blockchain
As in toss, you cannot get heads every time in the same way you may face some disadvantages in blockchain as well, some of them are mentioned below:
1. 51% Attack
The proof of work (POW) consensus algorithm that protects the blockchain from attacks has proven very efficient from many years. As we all know with every technology people find some disadvantages too. There are some attacks that can be performed against the blockchain. 51% attack is one of these attacks. As we explained above in the post that to add any new block or data majority of the nodes are agreed on that. If more than 51% nodes of the network disagreed than the data will not be included in blocks.
If any hacker or any party able to control more than 51% of the total computational power than they can add or remove any transactions from the blocks. It is very difficult to achieve 51% power of the bitcoin chain because the bitcoin network is decentralized and the cost of doing a 51% attack is much more than the total market cap of bitcoin.
2. Very unstable
Virtual currencies based on blockchain technology are subject to very high volatility. Of course, a good example is the fluctuating prices of bitcoins that change overnight. One reason for this extreme variability is that decentralized blockchain technology and virtual currencies are extremely new on the market. This means that companies, investors, governments and other groups that adopt them or not will have a significant impact on volatility.
Due to the anonymity found in the decentralized blockchain and the virtual currencies based on them, they have become the second home of all illegal transactions. A good example is “Silk Road”, the digital black market. People used this platform for illegal transactions using blockchain-based virtual currencies. However, the FBI closed this location after learning of its existence. Although closed, many people still think that decentralized technology is too attractive to criminals.
4. A problem for non-technological experts
Storing the virtual coins used in the blockchain is a big headache for people who are not familiar with the technology. Safe and secure storage space is easy for users who are familiar with the technology. In fact, this can be achieved simply by buying “chilled” wallets like Trezor. However, as people who are unable to support the technology may experience problems in creating a Bitcoin or Ethereum portfolio and in transferring coins from the digital wallet to the cold wallet.
5. No Data Modification
This is one of the biggest advantages of a blockchain network but sometimes it also acts as a disadvantage. Sometimes there will be some data in the blocks that need some modification but no one is allowed to do that. One way to edit or modify data is to achieve 51% power of the network and make modifications. Another way to edit the data from blocks is to do a hardfork on the chain and split it into two chains. The old chain is abandoned by the nodes and new chain with new data is accepted by all nodes. But the problem with hardfork is that it also requires supports from all nodes.
6. Need Huge Storage
As with time new blocks and transactions are added to the network and the network size increase with every transactions. Bitcoin chain now needs more than 250 GB and increasing daily. The ledger will become very large in future and the storage required for that will cost more. Blocks are stored on the network permanently means you can see the first transaction on the chain and also the last.
7. High Maintenance Cost
Proof of Work (PoW) algorithm is very costly to maintain. As we discussed above bitcoin network has more than thousands of miners that are securing the network but also all these miners hardware required electricity and other resources. Once a transaction is made all miner are in a race to confirm it first and only the first comer gets the rewards and all other miner work is just wasted. The price of increase with time because new miners coming with time and the maintenance cost of network increasing.
7 Future of Blockchain Technology
Blockchain technology gaining its popularity due to its security and fairness that makes it the most useful tech in the number of industries like gaming, finance, social media, banking, trading, etc. Blockchain technology opens the doors for new ideas and new businesses that can change our life, society, and economy totally in different ways.
Following are some predictions on the future of the blockchain technology:
- Government’s Cryptocurrency: There is a great possibility that the government should either adopt cryptocurrency or create its own cryptocurrency in the future.
This will happen because cryptocurrencies are far better than fiat currencies as cryptocurrencies provide better control of the supply of currency, the privacy of people, extremely hard to counterfeit, easily traceability, can be forked easily.
The most important thing is cryptocurrencies can be printed out of thin air with zero cost which is far cheaper than printing paper currencies.
These cryptocurrencies are worked on blockchain technology that makes blockchain tech more demandable and useful for government needs in the future.
- Blockchain Identity System: Blockchain Identity System can decentralize the data collection mechanism, cross-verifies the collected data via a consensus algorithm, and these data can be stored securely on a decentralized immutable ledger. It allows the reduction in the risk of security breaches, increase efficiency as well as fairness, higher reliability, and most importantly self-sovereignty.
Blockchain-based identity system can be used to store different types of data including:
-> Government records (e.g., date of birth, etc.)
-> Reputation & trust scores (e.g., credit history)
-> Certificates & attestations (e.g., university diploma)
-> Healthcare & medical records
-> Tax identification records
-> Employment records, and many more.
- World Trade on Blockchain: In the future, most of the international trades will be conducted by using the blockchain technology as it is fair, trustable, cheap, fast and secure. There is no possibility of inefficiencies, errors, and fraud in the blockchain-based systems.
So blockchain technology will be very useful in solving the real-world business problems that are occurring today due to unfairness, lack of trust and security.
Some of the most important examples of real-world supply chain problems that need to be solved are:
-> Counterfeit medicines in the pharmaceutical industry
-> Food supply chain in China (the tragic case of adulterated infant formula)
-> Fake Louis Vuitton handbags and other fashion apparel in Asia
-> Counterfeit auto parts in North America
-> Grey market or counterfeit electronic equipment, including medical devices (World Health Organization (WHO) estimates that 8% are fake)
-> Enterprise IT equipment — a major manufacturer of enterprise networking equipment estimates 10% of products in its multi-billion-dollar supply chain are grey market
It is very hard to solve these big problems because the business ecosystems are fragmented, siloed, only partially automated, and also due to lack of a trusted central authority with jurisdiction, resources, and credibility to track provenance and certify authenticity.
In the past 10 years, A massive growth and adoption were seen in the Blockchain technology from a Bitcoin to 2900 cryptocurrencies in the market today.
Today blockchain technology is used in a number of industries where decentralized exchange markets are one of them that working totally on blockchain technology.
Blockchain Technology to be proved as a successful and very useful tech for today as well as for the future. Blockchain technology has no limits to growth.