Can Blockchain Networks be trusted? If So, Why?
Blockchain networks are based on a decentralization system that is not controlled by any one entity and combines ease of use, low cost and high security.
Trust is a core for every business and it is the foundation of any Blockchain network. Without trust, there cannot be any business relations. To make any transactions successful today, there are many intermediaries that trust each other.
Blockchain is the new technology which is redefining the way we transact our business. Blockchain has the potential to change the way we buy and sell, interact with the government and verify the authenticity of everything from documents to fresh products. It combines the global internet with cryptography to give everyone a safer way to verify key information and establish trust.
Blockchain became very popular after the launch of Bitcoin in 2009. Though apart from just being known as a digital currency or cryptocurrency, Blockchain can be used in various applications like peer-to-peer payment services, real estate, education sector, supply chain management, cross-border payments, clearer property rights and broader access to finance and much more.
How a transaction works in the traditional system
In the current scenario, if anyone wants to send money to another person, he/she approaches the bank and provides all the necessary information to the banking official.
The banking official checks your account and if the account has the balance, the official then verifies the information and transfers the money. The whole process might take hours, days in some cases weeks depending on the request made.
How it works in the Blockchain
If the same process is sent using Blockchain networks: User A sends money by a Blockchain network to User B. If he/she has the balance in its ledger within minutes the money is sent to User B. There is no middleman to verify the information and after a transaction is made to a specific address, a block is created on a chain and it will be reflected on all the users ledgers in the blockchain. Once a block is added, it cannot be tampered with or deleted.
A block gathers data from transactions and a chain is the platform on which the block is created. Until now the word blockchain has mainly been linked to Bitcoin, the open-source, peer-to-peer payment system, but the blockchain technology and its principles have almost unlimited application possibilities in business transactions.
The main feature of Blockchain is that it is not managed in one location, such as the central server of a bank, but it is distributed among the users of the blockchain. There are countless copies, potentially millions distributed throughout the network. The chaining of the blocks ensures that the content of the block remains trustworthy at all times. By combining encryption, decentralization, a multitude of stakeholders and community control, this system is nearly impossible for hackers to penetrate. Blockchain networks are also called Trustless Networks, where parties don't have to trust each other, they only trust the network, as it has full proof from tampering, or hacking.
Blockchain technology produces a structure of data with inherent security qualities. In most blockchains or distributed ledger technologies (DLT), the data is structured into blocks and each block contains a transaction or bundle of transactions. Each new block connects to all the blocks before it in a cryptographic chain in such a way that it's nearly impossible to tamper with. All transactions within the blocks are validated and agreed upon by a consensus mechanism, ensuring that each transaction is true and correct.
Blockchain technology enables decentralization through the participation of members across a distributed network. There is no single point of failure and a single user cannot change the record of transactions. However, networks are typically labeled as either public or private, which describes who is allowed to participate, and permissioned or permissionless, which describes how participants gain access to the network.
Public blockchains are public, and anyone can join them and validate transactions.
A public blockchain uses internet-connected computers to validate transactions and achieve consensus. Bitcoin is the best example of a public blockchain, and it achieves consensus through mining.
Public Blockchains are also known as Permissionless blockchains that have no restrictions on processors, in such a way that they can achieve great decentralization and distribution.
Private blockchains are restricted and usually limited to business networks. A single entity, or consortium, controls membership. It uses identity to confirm membership and access privileges and typically only permits known organizations to join.
Private Blockchains are also known as Permissioned blockchains that are limited to a select set of users who are granted identities using certificates.
The permissioned network achieves consensus through a process called selective endorsement, where known users verify the transactions.
According to industry figures, by 2022 banking infrastructure can save between $15 billion and $20 billion by using blockchain technology. Even so, the popularity of virtual currencies is quite high at 80%, while use is still low at 5%.
Though lots of developments are happening in Blockchain technology, it is still at a very early stage. The world still needs to change a lot to adopt it on a large scale. We cannot expect third parties or middlemen will be replaced overnight by blockchain platforms. However, many established financial service providers have already started investing billions of dollars in Blockchain technology.
It is a Klever decision to opt for Blockchain technology.
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