FinTech

What is Blockchain Technology and Importance of Blockchain Technology

What is Blockchain Technology

In today’s world, we are facing a lot of under-the-table corruption and due to this corruption, there is a lot of black money transactions which is stored in some or the other databases. But we don’t consider these databases as reliable as there is no centralized access and the admin of these databases can change the data anytime which is immensely risky and lacks security. So, we need such a decentralized system and the authority of this system is been shared by all the users. Also, any malpractices, temperance, and interference with the data can be avoided with such an advanced system or database called a Blockchain.

What is Blockchain Technology?

Blockchain is an underlying technology behind Bitcoin and Ethereum. In simple words, Blockchain is a continuously updated record of who holds what. These records are stored in different blocks, secured using cryptography, and linked together in the form of chains and that’s how it’s named Blockchain. Cryptography means the records are encrypted with the help of a code that ensures security to the user. This is called automated trust-a trust that can be inherently built inside the system. This list of records, known as the distributed ledger is decentralized and is available for everyone to see and verify. In addition, the Blockchain is tamper-free and unhackable due to its distributed nature. If any tampering or editing is tried by any of the users then the request is been rejected by others members in the distributed system and hence no changes can be made in the Blockchain. Blockchain is a data repository that is tampered evident in itself.

History of Blockchain Technology

Blockchain was first outlined in 1991 by Stuart Haber and W.Scott Stornetta, two researchers who needed such a system in which the data like document timestamps cannot be hampered by anyone. But it took around two decades for the actual implementation of the idea. In 2009, an unknown developer named Satoshi Nakamoto launched Bitcoin through the implementation of Blockchain and that was when the real-world application of Blockchain came into existence. Later, the boom of Blockchain proliferated exponentially and is still ruling the world.

Most people think that Blockchain is for criminal-minded and anti-government people. But the hard truth is, Blockchain is far beyond cryptos and has numerous other applications.

Importance of Blockchain Technology

Why prefer cryptocurrency over normal Bank Transactions?

Normal bank transactions are more prone to frauds whereas there are no chances of frauds in cryptocurrency as the central government cannot counterfeit with the cryptocurrency as it does with normal paper currency. There are many ways by which a bank transaction can fail but there are no chances of cryptocurrency transactions to be failed. Some technical issues can occur in bank transactions during the money transfer which can even lead to loss of money. Also, there are many cases of a bank account being hacked. Alongside, the Bank account has some transfer limits and charge for high transfer charges. On the other hand, there are no such constraints on cryptocurrency transactions.

Blockchain – The next stage of the Internet

Blockchain is even considered the next generation of the Internet by many researchers and businessmen as it holds vast potentials for business, society, and individuals.

Let’s understand how?

Presently, the Internet is working on the concept of copying and distributing information. For example, if you are watching a YouTube video or checking out your mail, then you are looking at the digital copy of the original. This is called double-spending. Double spending was one of the major hurdles in the development of digital currency and one day in 2008, it wasn’t a problem anymore. People could now transfer money, trade securities, buy and sell assets, and so much more using digital currency without an intermediary.

FITS model of Blockchain application

FITS is an acronym for Fraud-Intermediate-Throughput-Stable data. It highly focuses on aspects with a high propensity of frauds then Blockchain can help in reducing the frauds. It can be used to eliminate middlemen where intermediaries do not provide any value. Throughput of Blockchain can be increased using decentralized computing. Blockchain needs stable data as it needs to stay in the chain for a long period.

Decentralized Autonomous Organizations (DAOs)

Internet is emerging as a new technological era as web2.0 due to the advancement of Blockchain technologies leading to technological, economic, and social innovations such as digital currencies, distributed ledger’s Blockchain IoT systems that will remodel industries from finance to insurance and energy to cybersecurity.

Tokenization

Tokenization is the process by which a physical or virtual asset or commodity can be digitally represented. In simple words, if you have a digital token or value that represents 1/1000 the value of your home and that 1000 tokens equal the entire value of your home and you have a token that represents a piece of that physical asset that you own.

How security and Transparency both go hand in hand?

As the record is stored in the encrypted form no one can access the data and make changes to it. As the Blockchain technology works on the decentralized method, the information is transparent to all the participants and if there is any discrepancy or anyone is trying to reach out to the data, permission is asked to all the existing participants and if the permission is approved by all the participants then the data is accessible and if the request is rejected then no access is available.

Blockchain is cost-effective than the traditional economic models

Blockchain involves no third-party individual or middlemen to perform duties like digital payments, for insurance claims, for asset management, for the stock exchange, for land registry, and many more, and the transactions occur directly from one individual to another by reducing the cost.

Prevention of data leak and hacking

There have been many cases in the past that have broken the trust of people from companies. But in cryptocurrency, there are fewer possibilities of data hacks and leaks.

Blockchain and IoT

Blockchain and IoT are revolutionary technologies that are changing the world around us. Blockchain refers to an encrypted, distributed, decentralized computer filing system designed to facilitate the creation of tamper-proof, real-time records. IoT is a term used to describe the interconnection of computing devices embedded in everyday objects via the Internet that allows them to send and receive data. When you merge these two technologies, you create a model for a reliable, secure, and permanent method of recording data processed by intelligent or While Blockchain empowers IoT devices by enhancing their security and bringing transparency within the IoT ecosystems, IoT allows smart devices to send data to private blockchain ledgers to be included in shared transactions along with other tamper-resistant records. The combination of Blockchain and IoT can enable businesses to both access and share IoT data within their private network safely, without needing any central control and management system whatsoever. rather “smart” devices.

Digital Footprint

It means that the footprint of all the digital assets can be traced back to the beginning, and it will be very beneficial for specific industries such as Healthcare or Banking Industry. In healthcare, they can trace back the medical conditions and disease that has happened to a patient to understand the health of a person in a better way. In the banking industry, it will help to understand the transactional behavior and financial ability of a person to decide on giving a loan or services, etc.

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