Last updated on January 7th, 2020
Maybe you are also looking for the answer to the question What is blockchain technology and what does the future of blockchain technology hold. This article will help you in getting the answer to most of your questions regarding distributed ledger technology.
If you are looking for investment in cryptocurrency right now, read this article Best Cryptocurrency Under a Penny to invest in 2018. Before getting the answer to ‘What is blockchain technology’, we need to understand a short history of the World Wide Web. The worldwide web starts its journey in 1989. When the British Scientist Tim Berners Lee invented the World Wide Web.
The network was originally conceived and developed to meet the need for automatic information sharing between scientists at universities and research institutes around the world.
As the new technology was making its way to the world, there was a need for a more powerful world Wide Web. The web 1.0 contains simple static pages and the user interaction was not that so good.
Then the researches result in another generation for internet know as web 2.0. The web 2.0 contains some dynamic web pages that help in increasing the user interaction with the application.
We witnessed the giant platform during web 2.0. E-commerce platform like Amazon, eBay, Ali express, and many others start their journey during web 2.0. Also, social networks like Twitter, Facebook, Youtube revolutionized the way we interact with the internet.
Despite this revolution in the technology of the web, we still need some more powerful and secure web.
While using the internet we are still at risk of being hacked. We need the next generation of the web to secure our assets and data from hackers.
This is the time to implement the distributed ledger technology to businesses around the world. And what if I tell you the giant of the web are already working on it.
Companies like Ali express, Google, Facebook, and many others are working to develop the most secure web using blockchain technology.
The blockchain is introducing the world with web 3.0 where the users and business will interact in a more efficient and secure way.
What is blockchain technology
The blockchain is a database of the distributed ledger that store the data more securely. The data is stored in different blocks using the cryptographic technique.
Each block contains:
Whenever a new transaction is requested, the block is generated and after passing through the verification, the block joins the other blocks. Thus the different blocks join to make a blockchain.
Let’s try to understand distributed ledger technology with a simple real-life example.
There are four friends living in a hostel. They used to go for dinner every night and one of them pay the entire bill of the dinner.
He pays the bill throughout the week and writes down all the expenses in a register.
But there is an issue. The issue of trust. Maybe he writes it down incorrectly by mistake. They have another solution to solve the issue. All they need is to buy 4 copies and give to 1 copy to everyone.
Whenever they go for dinner, everyone is required to write down the expenses in his own copy. Yes, it is a time-consuming process but in the end, you will get efficient storage of data and everyone will be satisfied.
The blockchain technology works in a similar way. The data is stored in blocks and the blocks are distributed all over the network.
There is no central authority controlling the data. All the data is stored on different computers. Now, you will ask! Where are the computers that will store the data of blockchain?
The answer is really simple! Your computer will save the data and maybe some files will be available on the computer available in your office. The people will be making the network and no central authorities will own the data.
Banks Vs Blockchain Technology | Blockchain Impact on Banks
There is a huge blockchain impact on banks. Let’s clarify by comparing the blockchain with a bank.
The banks have a central database of all the customers. The central ledger contains all the necessary information of customer including balance, transaction, and account number, etc.
The bank keeps on updating the information whenever the customer makes a withdraw or deposit.
The bank has full control over your data as the data is stored on the server of the bank. Hackers can access the server and they can steal the user information.
On the other hand, distributed ledgers are much secure. The data is stored on a peer to peer network instead of central authority, many computers have copies of a distributed ledger.
Every node stores a copy of the data. The computers store the data from the start of the ledger until now.
For every transaction, different nodes verify it, and then all nodes update their records so that all the data stays in proper order and up to date.
Blockchain Technology in Transactions
Why We Need Blockchain Technology
I hope you have to get the answer to the question “What is Blockchain technology!”
Next, we will discuss why we need blockchain technology?
Well, the internet we are using is safe enough and it is providing us the reliability and efficiency. Still, we need a more efficient and secure system?
Yes, we need a more efficient, reliable and secure system. When we talk about the transparency and security of data, blockchain is the key.
As I have stated at the start that we need a more scalable and robust system to meet the user and business requirements. The blockchain is gonna solve the issues that we already have with our current network.
The existing system is centralized and blockchain is based on decentralized technology. Decentralized means no central authority will own the data. The data will be available on different nodes across the network.
The drawbacks in the centralized system are all the data control by the central authority. For example, Facebook is based on a centralized system and the company controls the data of the users and they can use it for a negative purpose.
As the central authority has a control over the data, they can manipulate the data or hackers can access the central server.
But the blockchain is totally a new network. The hacker has to steal the data from each node available on the network to completely hack the system.
But It is nearly impossible to hack the systems based on blockchain technology.
Future of Blockchain Technology
The future of blockchain technology is really bright as the giants of the internet are working to develop their own version of the blockchain.
Blockchain was introduced to the world in 1991. But people were not able to find the potential in this newly born technology.
Later on a mysterious person “Satoshi Nakamoto” release the white paper of Bitcoin.
Bitcoin is just a single example of blockchain technology. There are many other examples of the blockchain. Bitcoin is also known as the first generation of the blockchain.
The bitcoin is using the PoW(Proof of Work) technology. PoW is also known as mining. The individual nodes on the network involved in mining to process bitcoin transactions.
The miner also mines the new Bitcoin using Super Computers and ASIC miners. There are some issues with the Bitcoin blockchain. Scalability was the main issue. The bitcoin can handle 7 transactions per second. But on the other hand credit card can make 24000 transactions per second. Another main issue with bitcoin is the high mining cost.
Ethereum enters the market in 2013 with the aim to solve the issue with scalability but failed to meet the user requirements. Ethereum platform is providing the opportunity to build decentralized applications.
Ethereum is also known as the second generation of blockchain technology and the Ethereum blockchain is using POS(Proof of Stack) instead of POW(Proof of Work) technology.
Also, read: Ethereum dapps List to Consider in 2018
The Ethereum can make a transaction speed of almost 15/TPS. This is also a very low transaction speed to meet the requirements of the users.
Now, its time for the 3rd generation blockchain. Many companies are struggling to introduce a more scalable and secure blockchain.
Cardano is one of the companies that are working to introduce the world with the 3rd generation of the blockchain. We will witness some more generations of blockchain technology in near future.
But in the end, blockchain is going to take over the world. The adoption of blockchain is rapidly increasing all over the world. The below chart will help you understand how fast is blockchain technology evolving around the world.
Who Will Use Blockchain?
There are numerous blockchain applications available in the market. These applications are aiming to solve the real world problems more efficiently as compared to traditional technology. Blockchain is Fast, Secure, and immutable. Applications based on distributed ledger technology will provide the world with an efficient and reliable data storage and transfer. Bitcoin is the most common application of blockchain. Here is the complete list of industries where blockchain can make a positive impact.
Consumer Financial Services
- Cross Border Transfer
- Peer to Peer Payments
- Micro Charity
- Smart Contracts
Enterprise Financial Services
- Investment Bank
- Smart Contracts
Government to Citizens Non-Financial Services
- Records Storage & Management
- Verification of Identity and Issuance
- Rigging Free Voting
- Tax collection
- Government Transparency
- Regulatory Oversight
- Clinical Trial data integrity
Enterprise Non-Financial Services
- Supply Chain Management
- Health Care Data Management
- Media Distribution
- E-commerce without 3rd Party
- Sharing economy without a central authority
- Authenticated Data Sharing
- Data Sharing among companies
Consumer Non-Financial Services
- Energy Management
- Authenticated certificates
- Secure Medical Records and Genome Records
- Safe Accounting
- Date Tracing
- Digital Content Distribution
- Drug Tracing
- Prediction marketplaces
- Data Storage
- Cyber Security
- Database Management
- IoT Data Network
- Blockchain Search
- Distributed Computing
- Bitcoin, Ethereum, Eris, etc.
- Blockchain News Outlets
- Blockchain Analytics Software
- Blockchain consultancies
- Blockchain investment funds
Read more details here: Blockchain Technology Applications in 2019
Blockchain Applications Infographics
The 4 Generations of Blockchain
There are 4 Generations of blockchain. The first 3 Generations are already available in the market for some time. Although some companies are claiming to have a 4th generation blockchain, it’s still a myth. So far, there is no practical example of 4th Generation.
Here is the complete list:
1st Generation blockchain
It all started in 2008 when Bitcoin started its journey. The idea was to offer a decentralized payment system to send and receive money across the globe. Bitcoin was the start of blockchain technology, it was based on a distributed ledger technology. That’s why it is called the 1st Generation of distributed ledger technology.
The blockchain of bitcoin is utilizing proof of work algorithm. In Pow, the nodes which perform the most work through hashing power had the most voting power. The sole purpose of 1st Generation blockchain was to offer a fast and secure global payment system. The issue with PoW is its high energy consumption and low scalability.
2nd Generation Blockchain
The second generation of blockchain resolved the issues that were present in the 1st Generation. Ethereum, NEO, etc. are the leading projects know as 2nd Generation of innovating technology. The second generation blockchain is beyond financial transactions. Ethereum introduced the idea of Smart Contracts with blockchain. Ethereum and NEO provide the business with a platform to build decentralized applications and launch ICOs. The use of Smart Contracts technology in the 2nd Generation really revolutionized the blockchain technology.
However, the second generation blockchain failed to provide the users with scalability. The transaction speed was very low. Sometimes, users have to wait several hours for transaction confirmation. Also, the first two generations of blockchain have a high transaction fee and they consume a large amount of energy.
3rd Generation Blockchain
The 3rd generation blockchain came with innovating technology. The use of sharding and cross chain transactions helps the 3rd generation to achieve high scalability and low transaction fees. Thus, resolving most of the issues that were present in the 1st and 2nd generations.
The 3rd generation is merging IoT, AI, and, Big data with blockchain to provide the world with a more scalable and efficient blockchain. The leading projects in 3rd generation blockchain are Matrix AI, Zilliqa, QurakChain, and IOTA, etc.
Matrix AI is combing the Artificial intelligence with blockchain in a hybrid consensus PoW/PoS algorithm, the project claimed to have 1,000,000 TPS.
4th Generation Blockchain
The 4th Generation blockchain is still in developing phase. Multiversum and MetaHash are claiming to have a more scalable blockchain as compared to the 3rd generation. MetaHash is aiming to provide a more scalable and faster platform to build dapps. It uses multiple proofs of the stack consensus algorithm. But it will take some time to practically implement the 4th generation blockchain in the real world.
The blockchain technology is still in its early phase. It is just a start and the more is yet to come. As the internet was a network of static pages in 1990, the blockchain is also in its early phase and the world will witness projects like Facebook, Amazon, Twitter, Google, etc based on the blockchain technology in near future.
I hope this article will help you by letting you know what is blockchain technology and the future of blockchain technology. Share the article with your friends and family around you to let them know about this innovating technology.