In this first blog post, from the series of '100 Days of Learning' web3 project management, we will be understanding concepts on 'Blockchain Technology' and 'How It Works'. Blockchain Technology was first implemented in 2009 as the underlying technology behind Bitcoin which can be considered as the first blockchain network. Since then, Blockchain technology has been gaining significant traction and popularity due to its many potential applications in different industries. In this blog we will be covering below topics:
What is blockchain technology?
Blockchain technology is a cryptographic protocol that allows for secure, transparent and tamper-proof transactions. Blockchain technology has revolutionized the world of technology, bringing more secure and transparent aspects to applications in various industries. Blockchain technology helps facilitate digital transactions on a decentralized ledger system, providing a secure and unalterable record of data management.
By allowing peer-to-peer transactions without any intermediaries, blockchain technology has opened several potential applications such as cryptocurrency and smart contracts. This can enable new avenues for data handling and writing permanent records that are immutable even after a change of ownership.
Other potential blockchain applications include supply chain management, voting systems, healthcare networks, and online identity management -all of which depend securely on blockchain's incorruptible nature.
Components of a Blockchain
A blockchain is a digitally distributed, decentralized, public ledger that exists across a network - Investopedia .
It is an encrypted, distributed ledger technology dlt that allows for secure, verifiable, and permanent data sharing. A blockchain system is made up of three primary components: blocks, nodes, and miners.
Blocks are the digital records of transactions that are added to a blockchain network like new “pages” filled with transactional information.
Nodes are computers connected to the blockchain network; they keep an updated copy of the entire blockchain ledger and share their version with any other new or existing node on the network.
Finally, miners validate transactions on the blockchain by using powerful computers to solve computationally difficult puzzles before adding the transactions to these blockchain networks.
Types of blockchain platforms
A blockchain record cannot be modified retrospectively without modifying all following blocks and gaining network consensus. This permits the creation of two distinct blockchain kinds, public and private.
A public blockchain is one that allows anybody to join the network and participate in the process of transaction verification. This means that everyone is able to examine the transactions on the blockchain, participate in the consensus process, and generate their own transactions. The Bitcoin blockchain and Ethereum blockchain networks are two instances of public blockchains.
In contrast, a private blockchain protocol is one that is controlled by a single entity or group. This implies that only a limited number of individuals and organisations are permitted to join the network and participate in the consensus process. This can give a higher level of security and control for the institution that runs the private blockchain network, but it does not make the network completely decentralised.
The Corda platform produced by R3, the Quorum platform built by JPMorgan Chase, and the Hyperledger Fabric platform developed by the Linux Foundation are examples of private blockchain networks.
Major players in the blockchain technology space
Blockchain technology has made it easier for businesses to transact, manage data, and move funds around efficiently.
Ethereum blockchain was the first major player in this movement with its innovative use cases that are backed by Blockchain technology. Its a community driven ecocystem powering the cryptocurrency ether (ETH) and thousands of decentralized applications (dApps). Among cryptocurrencies, ether is second only to bitcoin in market capitalization.
Ploygon further expanded its flexibility of Ethereum blockchain with layer 2 solutions and enhanced scalability. Its an Indian blockchain platform that enables blockchain networks to connect and scale and aims to create a multi-chain blockchain ecosystem. Its used by over 53,000+ decentralized applications (dApps) in multiple segments, including Defi, DAOs, and NFTs.
Hyperledger is a multi-project open source collaborative initiative launched in 2015 by The Linux Foundation to improve blockchain technologies across industries. It is a umbrella project for open source blockchain platforms and related tools.
With each of the Blockchain projects bringing something new to the table, the Blockchain space looks incredibly promising for many years to come.
Challenges and issues of Blockchain Technology
Blockchain technology is a revolutionary approach to digital recordkeeping, and its potential applications are tremendous. Despite this potential, blockchain technology also presents a variety of challenges and issues that impede progress. Below are some of the most common problems blockchain technology currently faces:
Complexity of blockchain technology infrastructure,
Lack of public understanding, and
High energy consumption (which is drastically reducing since 2022. Check out what happened during 'The Merge' of Ethereum)
Additionally, blockchain technology is still in its early stages of development without enough comprehensive regulatory frameworks or legal standards in place to support it.
As blockchain technology and these blockchain networks evolves with time these technical and legal issues need to be addressed promptly so that this transformative technology can reach its fullest potential.
Industry applications of Blockchain technology
Blockchain technology is being used by businesses in a variety of industries from Finance, ecommerce, gaming, supply chain management, land record keeping, and real estate transactions.
Blockchain technology is used to make financial transactions more efficient and secure. Some banks use blockchain to speed up and secure money transfers. Other financial institutions are using blockchain to establish digital currencies for payments and money transfers.
It is utilised to make ecommerce transactions more secure and efficient. Using blockchain, several ecommerce companies establish digital wallets to store and spend digital currency. This can make online shopping easier and reduce fraud.
Blockchain technology is utilised to construct decentralised gaming platforms. These services employ blockchain records to make purchasing and selling virtual objects transparent and secure. This makes games more fair and transparent for players.
Supply Chain Management
In supply chain management, blockchain technology creates more transparent and efficient methods. Using a blockchain network, firms can monitor items from origin to sale, creating a more accurate and secure record. This improves supply chain efficiency and reduces fraud risk.
It creates more secure and transparent land registration procedures. Using blockchain, governments and other organisations can construct an unalterable digital land record. This can reduce fraud and make land purchases more secure and transparent.
Blockchain technology is improving the efficiency and security of real estate transactions. Some organisations use blockchain to establish digital property deeds that can be quickly transferred. This reduces the time and cost of real estate transactions, making buying and selling easier.
The technology is still in its infancy, but it has the potential to revolutionize a wide range of industries. By understanding how blockchain technology works and its key features, businesses can begin to explore how they can use this technology to their advantage. While there are many benefits to using blockchain protocols, there are also some challenges that need to be addressed.
As the adoption of blockchain technology increases, we will continue to see new and innovative ways that business can leverage this game-changing technology. Stay tuned for our 100 days of learning journey as we learn together how to manage blockchain and web3 projects!
This video from Simplilearn explains how a blockchain protocol and a distributed ledger technology works in simple terms.
Coming up in the next blog - 'Blockchain Platforms and Blockchain projects'.
Note 1: This blog is part of a 100 Days of Learning Series on Web3 Project Management frameworks and best practices published on Program Strategy HQ. For more details on the 100 days of blogging campaign check out Blog 0.
Note 2: Reach out to info@programstrategyhq for any queries.
Note 3: Program Strategy HQ Disclaimer for Reference.
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