Blockchain is an incredible database technology, playing a vital role in banking, finance, IoT (internet of things), and many other modern technologies. Blockchain is known for its secure and decentralized transaction recording and data storage structure. Blockchain is gaining immense popularity and acceptance; you must have heard about blockchain technologies in the last few years. But what is blockchain technology? How is blockchain technology aiding the digitalization process? This blog will thoroughly discuss blockchain technology, its implementations, future, pros, and cons.

What is Blockchain Technology?

Blockchain is a shared, immutable, decentralized database technology that facilitates the transaction recording process. Blockchain technology structure makes it nearly impossible to hack, alter, or manipulate the data.

Data or information is the most precious asset for today’s organizations. The size of data, the accuracy of the information, data transfer speed, and transparent and secure data storage structures are the crucial factors to make a business successful. Blockchain technology seems the only solution to facilitate data transactions by maintaining data accuracy, transparency, security, and transfer speed. It is one of the most secure and advanced technologies for maintaining digital ledgers. 

Distributed ledger technology (DLT) is the fundamental concept behind the blockchain technology structure. It allows storing data on multiple decentralized network nodes, making data immutable to hack or manipulate. Hackers have to attack hundreds of thousands of nodes simultaneously to exploit or hack the data, which seems nearly impossible.

Key Features of Blockchain Technology

Nobody can administrate or control the blockchain-based database, making it more exceptional than traditional databases like SQL, Oracle, etc. Blockchain is a decentralized technology; it removes the intermediary organizations and persons’ role in making a transaction to make the data management process faster & transparent.

The term blockchain refers to the chain of blocks stored on a distributed ledger. We have enlisted the key features of blockchain technology to understand it better,

• Distributed Ledger

Blockchain is a distributed digital ledger; every node of a network has access to a similar distributed ledger. That means there is no need for data duplications. Real-time data updating and all network nodes’ access to a single data copy make distributed ledger transparent & immutable.

• Immutability

It is nearly impossible to alter a transaction made on blockchain technology. You can’t edit or reverse the transaction on a distributed ledger. Make a new transaction if there is an error in the previous transaction, and then both transactions will be visible to all nodes. But, the blockchain immutability feature will not allow you to reverse or alter a completed transaction. It helps blockchain to avoid data manipulation and cheating.

• Data Encryption 

All the data blocks are individually encrypted, making blockchain technology the most secure digital transaction recording facility. Blockchain technology relies on evolving hash encryption to protect the data blocks – the hash encryption of the block update with the addition of every new transaction.

• Anonymous identity 

Blockchain technology does not require you to reveal your identification like traditional data management systems. It lets you use a pseudonym instead of a legal name, making blockchain a popular technology.

• Consensus

The majority of blockchain nodes need to validate a transaction for its successful completion in public blockchains. The nodes’ majority consensus is essential for adding a new information block to a public blockchain. It makes blockchain technology-based digital ledgers more secure and transparent than traditional data management modules.

• Smart Contracts

Smart contracts are programmable triggers on blockchains, automating the workflow when certain conditions meet. Smart contracts enable blockchain technology to speedily process transactions without an intermediary person role.

Types of Blockchains 

• Public Blockchains

Public blockchains are open to all; anyone can join the blockchain to write, validate, or edit transactions. You do not need anyone’s approval to enter the public blockchains.

Public blockchains are secure and immutable as it requires the consensus of thousands of nodes to make a new transaction in public blockchains. Bitcoin and Ethereum are the two well-known examples of public blockchains.

• Private Blockchains

Private blockchains follow the centralized transaction recording mechanism. Private blockchains are created and controlled by a centralized authority. Generally, organizations develop private blockchains to speed up the transaction validation process and control access to their blockchains.

Private blockchains are not open to everyone; it requires an authentication process to join a private blockchain. A centralized approach gives organizations control of a certain level over their private blockchains. They can choose trustworthy people to provide private blockchains access. It improves blockchain security and speeds up the transaction recording process.

• Blockchain Consortium 

Consortium blockchains or federated blockchains allow multiple organizations to share responsibilities. It enables an organization to join an established blockchain structure instead of initiating from scratch. 

Organizations with similar goals can create a blockchain consortium to save their time, and money and speed up the research and transaction recording process. 

• Hybrid Blockchain

Hybrid Blockchain is a mixture of private and public blockchains; it integrates the ideal features of private and public blockchains.

Hybrid blockchains allow organizations to establish a private authentication-based system parallel to the public permissionless system. It will let the organization protect a particular data by denying its access to the public except for a few individuals and storing the other data on a public blockchain.

Hybrid blockchain lets you enjoy private and public blockchain benefits by integrating their best features. It enables you to run a private blockchain parallel to the public blockchain on the same infrastructure.

Pros and Cons of Blockchain Technology 

Blockchain is an incredible technology, but it also has pros and cons like other technologies. We have compiled a list of blockchain technology pros and cons below,

Pros of Blockchain Technology 

• Speed – Blockchain technology has sped up the transaction process. It allows completing a transaction in real-time, while the traditional transaction processing module takes days to complete a transaction.
• Low Cost – It has minimized the cost of completing a transaction by removing the third-party infrastructure for transaction validation.
• Secure and Transparent – Blockchain technology decentralized model makes transaction processing and storing safe and transparent.
• Impossible to manipulate – Every transaction needs validation from most nodes to get completed. And, blockchain does not allow editing a transaction. It makes blockchain immutable and impossible to hack, cheat, or manipulate blockchain transactions.

Cons of Blockchain Technology

• Quality Issues – The quality of blockchain relies on the quality of its nodes. In public blockchains, you can’t control or maintain nodes’ quality and ultimately struggle to build a quality blockchain.
• Scalability Issues – The blockchain’s basic working algorithm creates severe scalability issues. The blockchain module needs all or maximum nodes’ validation to complete a transaction. The increasing number of blockchain nodes will ultimately slow down the transaction recording process. Private blockchains have solved the scalability issues on the cost of decentralization. We may witness a more improved shape of scalable blockchain technology in the future as it is one of the most rapidly evolving technology.
• Energy Consumption –  In Public blockchains, minors solve complex mathematical algorithms to validate and complete a transaction. And they get rewarded in cryptocurrencies for their time and work. This process is called consensus or proof of work. Miners’ computer systems consume too much energy in this process and produce immense heat. The vast amount of energy consumption is another issue in blockchain technology prosperity.

Blockchain Technology Applications 

Blockchain technology is not all about digital currencies; it has a continuously growing list of use cases. We have enlisted below a few significant blockchain technology use cases in the real world,

• Cryptocurrencies – Blockchain technology is the backbone of digital currencies; all digital currencies rely on blockchain technologies, including Bitcoin and Ethereum. When people shop with digital currencies, all the transactions are made and stored on blockchain technology.
• Banking & Finance – Blockchain technology has replaced the banks’ traditional transaction processing modules. Banks and finance sectors use blockchain technology to complete transactions in real-time by eliminating third-party modules.
• Assets Transfer – Blockchain technology can be used to transfer assets and record transactions. Digital assets like NFTs rely on blockchain to represent ownership proof or transfer ownership. Blockchain technology can also document the transfer of physical assets like property deeds or vehicle ownership transfers. And we will witness blockchain technology used to record the physical asset transfer soon.
• Smart Contracts – Smart contracts are the programmable triggers that run when certain conditions meet. Smart contracts have great potential to automate transactions and write legal contracts in the future. 
• E-voting – Blockchain technology has the potential to revolutionize voting systems. Experts are researching to make e-voting secure and transparent where votes can’t be tempered, altered, or manipulated to any level.

Final Words | An Introductive Guide to Blockchain Technology

 Blockchain technology is a decentralized, distributed, secure, and transparent transaction recording module. Blockchain technology revolutionized the digital world by eliminating third-party administrative roles to ensure privacy, security, and faster transactions.  We have discussed blockchain technology’s vital features, practical implementations, and pros & cons. Share your precious thoughts in the comment section to spark a valuable discussion regarding blockchain technology.