“What is Blockchain Technology?” – this is the question that more and more people ask nowadays. Since its advent in 2009, it has steadily risen in popularity and adoption. It is predicted to disrupt the value flows and create new business models.
What is Blockchain Technology?
The blockchain is not a new technology. We can define blockchain as a combination of proven technologies applied in a new way. It combines the Internet, asymmetric cryptography and governing incentivization to provide information registration and distribution that eliminates the need for a trusted party. It makes a flow of value without intermediaries easy and secure.
The blockchain is a database in a form of digital ledger. It contains a continuously growing list of data records that are chained together against revision and tampering. Records are arranged in data batches called “blocks” and each block is connected to the previous one by a hashing function, forming a chain of blocks that cannot be altered.
The ledger is not stored in a single location or managed by any particular company. The cryptographic linking between blocks ensures data immutability. It is public and easily verifiable because it is hosted by millions of computers simultaneously. Anyone can maintain a copy of it and verify its correctness. In other words, servers and clouds are replaced by a vast number of “nodes” run by volunteers from across the globe. This provides resilience and trust without any central third party.
Originally Blockchain has been developed along with Bitcoin which allows only peer-to-peer payments between its users. However, Blockchain proved to be highly useful in a large variety of applications beyond cryptocurrencies.
A most popular example of, so-called Blockchain 2.0 solution, is Ethereum. It is an application platform that uses Blockchain as its storage and programmable Smart Contracts to execute its business logic. This combination proved to be highly disruptive and presents very promising perspectives for new technologies.
Smart Contracts are a digital version of traditional contracts written in a programming language. They are programs that directly control the transfer of digital assets between parties under certain, programmed conditions. Once deployed they automatically and safely execute agreements between untrusted parties. The whole process takes place on the blockchain, therefore the execution is transparent, certain, immutable and decentralized.
We expect wide adoption of Blockchain and Smart Contract platforms. A peer-to-peer immutable database that can safely store and transfer digital assets is a truly disruptive idea that can change the world. Blockchains can become the norm for data records sooner than we think. There will be also a lot of demand for blockchain software development services.