Blockchain is one of the fastest-growing technologies used for creating innovative solutions such as popular cryptocurrencies and NFTs. Although blockchain is often misrepresented as cryptocurrency, there are significant differences between these two concepts.
Cryptocurrency as we know it is in existence today because of the successful creation of a blockchain. The blockchain is the technology that underpins the creation of cryptocurrencies. However, not all blockchains have cryptocurrencies.
In this article, you will learn what a blockchain is and its relevance in the emerging Web3 global economy.
What is the blockchain? A blockchain is essentially a digital ledger of transactions duplicated and distributed across the entire network of computer systems connected to its database. In its simplest term, it is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
Because the blockchain relies on a distributed system of verification, it serves as one of the most transparent data storage technologies. Besides transparency, there is a high level of automation through smart contracts that ensure the smooth running of operations cannot be reversed. There is no single point of failure in this decentralised system of record keeping because there is no middleman. Data is recorded, verified, and shared with numerous nodes to ensure it is tamper-proof.
Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions. The Bitcoin blockchain has over 47,000 computer nodes from miners across the globe. These miners verify transactions and add them to the growing list of information blocks. All validating nodes in a blockchain network are expected to store the latest information added to the block.
Types of Blockchain
There are four (4) known types of blockchains used across the world and they include;
Public blockchain: This is also known as a permissionless blockchain that allows anyone in the network to access the entire data set, including the blocks and chains. Public blockchains are often built with open-source codes e.g. Bitcoin, Ethereum, etc. One of the major advantages of a public blockchain is security. Because it is a large network, transactions are safer and the network is hack-resistant.
Private blockchain: unlike the public blockchain, this network works in a restrictive environment like a closed network or a network controlled by a single entity. This type of network is used by an organisation that doesn’t want to disclose private information to the public. A private blockchain is a permissioned blockchain in which an organisation can determine which of its personnel (computer node) can view, add or change data.
Hybrid Blockchain: a hybrid blockchain combines all the features of public and private blockchains to help organisations set up both permission-based and permissionless blockchains and allows them to control what information goes public and who assesses certain information on the blockchain.
Consortium Blockchain: The fourth type of blockchain, consortium blockchain, also known as a federated blockchain, is similar to a hybrid blockchain in that it has private and public blockchain features. But it’s different because multiple organizational members collaborate on a decentralized network. A consortium blockchain is a private blockchain with limited access to a particular group, eliminating the risks that come with just one entity controlling the network on a private blockchain.
Below are some of the popular blockchains in use.
Bitcoin Blockchain: This is the first blockchain that set the precedence for other popular blockchains. The Bitcoin blockchain allows transactions to be verified by network nodes through cryptography and recorded in a public distributed ledger.
Ethereum Blockchain: Ethereum blockchain is like the Bitcoin blockchain. But unlike Bitcoin, it supports smart contract development. Some blockchains that perform similar tasks as Ethereum’s include; Binance Smart Chain, Solana, Tron, Tezos, Stellar, etc.
Cosmos Blockchain: is like the internet that powers an ecosystem of blockchains designed to scale and interoperate with each other in a decentralised manner.
IBM Blockchain: is a private, decentralized blockchain network that has been the most successful with less risk-averse enterprise clients.
Hyperledger Fabric: Hyperledger Fabric is a set of tools that help create blockchain applications. Championed by The Linux Foundation, it was built with the purpose of enterprise distributed ledger.
ConsenSys Quorum: Quorum is a customized version of Ethereum developed by the financial services company JPMorgan. It takes advantage of the core work on the Ethereum blockchain platform and repackages it into a hardened environment suitable for banks.
Applications of blockchain to various sectors While the idea of a blockchain was first conceived as the mechanism supporting Bitcoin to solve the double-spending problem associated with government-issued digital currencies, it has evolved to so many use cases and can be applied in many sectors. Some of these are:
🚀Financial sector: The mining of digital currencies such as BTC, ETH, BNB, ADA, etc. is fundamentally executed on the blockchain, including non-fungible tokens (NFTs). Financial services such as money transfers, money exchange, lending, and saving have been made simpler and easily accessible with the aid of blockchain technology. Blockchain has helped to remove middleman hurdles associated with the traditional banking system.
🚀Insurance industry: Using smart contracts on a blockchain can provide greater transparency for customers and insurance providers.
🚀Voting: When voters' personal identity information is stored on a blockchain, there will be transparency in the voting system without election malpractice or voter record manipulation. There are so many other sectors where blockchain technology is applicable, such as the automobile industry, health care and life sciences, logistics, retail, banking, telecommunications industry, etc.
Conclusion Blockchain is becoming more mainstream these days. It has facilitated various companies in providing efficient security measures and improving the infrastructure to stay alert against cyber attacks. With increasing awareness, more and more industries and governments are likely to adopt this technology in the coming years.
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