What is blockchain?
The blockchain was almost exclusively referred to when discussing topics of cryptocurrency. However, this genius tech is not limited to creating crypto millionaires overnight but instead has become the bedrock for the future digital economy, including decentralised financial services.
Blockchain is an immutable, decentralised ledger that records transactions across a peer-to-peer network. Consequently, the ledger tracks and records tangible (house) and intangible (NFTs) assets in a business network and is a decentralised technology allowing users to initiate and confirm transactions without any central clearing authority, like a bank. Applications for the blockchain include but are not limited to fund transfers, settling trades and voting.
Example of blockchain technology
Bitcoin and Ethereum are examples of blockchains. Also, non-fungible tokens (NFTs) are part of the Ethereum blockchain which is a cryptocurrency, keeping track of who owns and has traded which NFTs from their inception. Non-fungible tokens take many forms, the most popular of which is NFT art.
Who invented blockchain?
Using the suspected alias Satoshi Nakamoto, the first blockchain created was by an unknown person (or group). Later, the technology was released in 2008 as the decentralised public ledger for the infamous cryptocurrency Bitcoin.
A lesser-known fact is that the implementation got based on previous work by Stuart Haber, W. Scott Stornetta, and Dave Bayer.
Benefits of the technology
1. Improved private and government service delivery
Blockchain has permanent decentralised database applications that improve service delivery. In addition, governments can securely store data like births and deaths, marriages and divorces, licences, and medical records. The technology can significantly reduce bureaucracy, corruption and mismanagement of state resources.
2. Financial services inclusion
In their book, The Blockchain Revolution, Alex and Don Tapscott talk about the benefits of blockchain technology to underpin transactions. In essence, blockchain technology can transform the financial market by improving money storage and giving access to those excluded from the financial services sector.
The book highlights some benefits of blockchain:
- It’s nearly impossible to hack.
- Financial services are speedier, more cost-effective, and fairer than traditional banking systems.
- Strong privacy and data protection coupled with transparency.
- Decentralisation bolsters service delivery.
3. Protection of identity
Web 2.0 is the internet phase of social media platforms where users share their lives online. This phase gave rise to tech giants controlling their user’s data, resulting in the exploitation of that priceless information by third parties. Presently web 3.0, built on blockchain technology, has a cornerstone of secure digital identity called self-sovereign identity (SSI) ensuring users are in control of their information.
Drawbacks of the blockchain
Having discussed the awesomeness of blockchain, we must note the technology has some drawbacks.
Blockchains require a large amount of storage space, rendering them less effective than traditional centralised databases.
Transaction speeds depend on network congestion since the more people or nodes that join the network, the higher the chances of slow transactions. Markedly, Bitcoin transactions get limited to around 4.6 per second. In contrast, VISA can handle 1,700 transactions per second.
Energy consumption is high.
4. Private key
Suppose a user loses the private key needed to access their data on the blockchain, in that case, their wallet will no longer be accessible.
5. High cost
Blockchain implementation can be very costly.
Despite some disadvantages, blockchain technology offers distinctive benefits and is here to stay and evolve. Furthermore, developers will overcome these drawbacks as the technology grows and becomes more widely adopted.
The future of blockchain
1. Government use
Governments will implement distributed ledger technology (DLT) to replace historical and outdated systems. In addition DLT promotes trust, transparency and security using encryption and validation features. Equally important, this approach will improve the efficiencies of services to citizens, like requesting an ID card or marriage certificate. Furthermore, governments will shift from fiat currency to cryptocurrency for traceability and speedy settlement times.
2. Shared blockchain
There may become a single blockchain shared between various industries. This sharing will make it easier to use and more accessible to the public, providing greater transparency coupled with the solid security the technology offers.
3. Improving trade relations
International trade can be inefficient, with dysfunctional processes slowing commerce and discouraging trade between countries. It can be riddled with corruption, like fraud and dirty politics.
A unified payment method, like crypto, can eradicate poor administration and corruption and curb inefficiency. This approach may bolster international commerce and build stronger global relationships based on trust.