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What is blockchain, exactly? And why should you care? In this article, we will guide you through and break down the core concepts that you need to know about blockchain and how it is changing the world as we know it.
You’ve probably heard of blockchain by now. You may even know that it has something to do with cryptocurrencies like Bitcoin and Ethereum. But what is blockchain, exactly? And why should you care? In this article, we will guide you through and break down the core concepts that you need to know about blockchain and how it is changing the world as we know it. We’ll also take a look at some companies that are using this technology to create life-changing products and services. So, whether you’re a business owner or just someone curious about this new technology, read on for a clear and concise explanation of blockchain!
What Does Blockchain Mean At its Core Definition?
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Blockchain is a distributed ledger technology that allows for secure, transparent and tamper-proof transactions. Blockchain is unique because it doesn’t require a third party to complete transactions. This makes the process more efficient and cost-effective. Transactions in this sense is not limited to a monetary value like the dollar or the euro, it is much broader than that. To put it short, transactions can be any type of data exchanges. These types of transactions can be put to work in various ways, which you will see further down in the examples of startups and companies using blockchain.
But what does this even mean in real-life scenarios? There are currently many different applications of blockchain technology within various industries. Some examples include supply chain management, voting, file storage, and identity verification.
Some notable examples include:
IBM is using it to improve food safety. They have partnered with Walmart to track the supply chain of pork from China to the US.
The startup Propy is using blockchain to make it easier for people to buy and sell property around the world.
The startup Sweetbridge is using the technology to create a more efficient global logistics network.
Chronicled is using it to track pharmaceuticals throughout the supply chain.
Bitnation is utilizing the technology to provide secure identity verification services.
The startup Akasha is attempting to use blockchain to create a decentralized internet.
The latter example raises a new question; is blockchain actually fully decentralized?
So, is Blockchain Actually Fully Decentralized?
To answer this question, we first have to explore how the technology originated.
So, who created the technology? It was first introduced in 2009 as part of the cryptocurrency Bitcoin. It was created by an anonymous person or group of people under the name Satoshi Nakamoto. Satoshi is a pseudonym, and his/her/their true identity remains unknown.
So, does this mean that Bitcoin is blockchain? Well no, not exactly. Bitcoin was the first to introduce the framework of blockchain and are in today’s ecosystem just one example of how blockchain can be used. Blockchain technology can be used to create any type of digital asset, including other cryptocurrencies like Ethereum and Dogecoin.
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference.
Dogecoin is a cryptocurrency based on the Bitcoin protocol but featuring a Shiba Inu dog from the “Doge” Internet meme as its logo.
So how is blockchain different from these other cryptocurrencies? Blockchain technology is the underlying technology that allows digital assets to be traded without the need for a third party. Cryptocurrencies like Bitcoin, Ethereum, and Dogecoin are all built on top of blockchain technology.
Wait, Was it Decentralised Or Not?
We now know enough about the core concept of blockchain and a few of its ecosystems actors to answer the question. However, to provide an answer we need to know about the difference between on-chain and off-chain blockchain.
As already stated, one of the most important features of Blockchain technology is that it allows for thrustless transactions. This means that two or more parties can interact without having to rely on a third party to mediate the transaction. Blockchain achieves this by using a distributed ledger, which is a record of all transactions that have ever taken place on the network. To be considered fully decentralised it must be built as an on-chain framework.
An on-chain framework is the one that takes place on the main blockchain network. They are slower and require more storage space than off-chain transactions, but they are more secure and provide a higher level of transparency.
Off-chain blockchain refers to any type of transaction that takes place outside of the main blockchain network. This can be done for a variety of reasons, such as to speed up the transaction process or reduce the amount of data that needs to be stored on the blockchain.
What cryptocurrencies use off-chain technology in their technology?
Dogecoin is unique in that it uses both on-chain and off-chain technology. Bitcoin, Ethereum and Litecoin all use off-chain technology to speed up their transaction processes. Bitcoin Cash does not use off-chain technology, but it has a larger block size than the other three currencies so that transactions can be processed more quickly.
Does it really matter whether it is on-chain or off-chain? Overall, for the sake of many of the examples of cases that were mentioned at the start of the article the answer is; Probably not. It all really depends on the use-case of the technology.
Off-chain transactions have a number of advantages over on-chain transactions. They are faster, cheaper, and require less storage space. They also allow for more privacy, as the details of the transaction do not need to be stored on the blockchain. However, there are also a few disadvantages. They are less secure than on-chain transactions, as they are not subject to the same level of verification. Moreover, they are less transparent, as the details of the transaction are not always publicly available.
Are There Any Disadvantages or Cons of Blockchain?
There are some disadvantages of blockchain technology. For example, the technology is still in its early stages and there are concerns about its scalability. There have also been cases of hacking and theft in the cryptocurrency world. Blockchain technology is also not very user-friendly and can be difficult to understand for people who are not familiar with it. Finally, there are concerns about the amount of energy that is required to run blockchain networks.
Bitcoin, Ethereum and Blockchain technology in general, consumes a lot of energy through electricity from the data storage. The Bitcoin Energy Consumption Index estimates that the annual electricity consumption for mining all bitcoins is about 31.951 TWh. In addition, Ethereum uses about one-third of the energy as Bitcoin. This large amount of energy consumption has raised concerns about the environmental impact of blockchain technology. Some people have suggested that cryptocurrencies should be taxed based on their energy consumption.
What can be done to improve this situation?
There are a few things that could be done to improve the situation. For example, blockchain technology could be made more efficient so that it consumes less energy. The mining process could also be made more democratic so that it is not as reliant on large data centres. Finally, the cryptocurrency world could move towards green energy sources to reduce its environmental impact. Moreover, new offerings and technologies are constantly hitting the market, which might solve these problems all together – however, that a subject for another time.