BLOCKCHAIN TECHNOLOGY PAPER

BLOCKCHAIN TECHNOLOGY PAPER

What is Blockchain?

If you have been up to date with investing, banking, or digital currency in the last decade, then probably blockchain has been one of the buzzwords encountered. It all started in late 2008 when an anonymous entity, Satoshi Nakamoto, came up with a white paper that proposed a peer-to-peer financial system for cryptocurrencies. It was brought into practical use in 2009 when the first cryptocurrency, Bitcoin, was launched. Since then, subsequent digital coins such as Ethereum and hundreds of others have been launched. The good news is that blockchain is easier to understand than how you may have thought. Blockchain is a distributed public ledger technology that records and secures transaction information across a peer-to-peer network.

Peer-to-peer networking means that there is no central authority to control or manipulate it. All participant directly talks to each other. This allows direct data exchange without third-parties involvement as shown below;

Blockchain being a distributed ledger, means that it is a decentralized database of transactions that is synchronized with and shared across a cluster of computers and locations.

Imagine, for instance, when using a google spreadsheet that contains transaction information by real people, it is being shared among many computer networks. That means anyone can access it but cannot make any changes by editing. Blockchain works with blocks where each consisting of data. Each block in the chain is secured and bound to the next using cryptographic principles.

Why is knowing about Blockchain technology important

Before you get into understanding blockchain deeper, I am sure that you want to understand why blockchain popularity is increasing and why should you learn it? Since the emergence of this technology, businesses and lots of other domains are beginning to adopt the technology to expand and improve their models.  What is the importance and impact of blockchain technology and decentralization?

• Cryptocurrencies and Initial coin offering (ICOs)

We all know that after bitcoin, there have been many other types of cryptocurrencies operating on a blockchain network. Even though the reliability and legitimacy of digital money is still questionable, if you have ever thought of investing in cryptocurrencies, you must have an understanding of the blockchain and DLT system. This is because blockchain is the primary system behind crypto coins.

The impact of digital currency in business today

As cryptocurrencies continue to gain popularity, large and small online retailers, financial management businesses, as well as non-profit fundraising groups globally, are embracing this new frontier and using it in their operational strategies. The best way to decide whether your company should adopt the new technology is by is looking at its impact on your business bottom-line. Below are some of the ways how digital currency may offer potential benefits or risks.

Faster payment

When using credit cards, it may take days to clear simple transactions. The transactions for cryptocurrency happen almost immediately, and you access the payment in just a few minutes.

Reduced transaction fees

In regular cases, banks serve as intermediaries, and there is a fee charged whenever you conduct transactions. Thanks to cryptocurrencies’ decentralization, this means that no third parties are involved.

Improved customer access

Because digital currency is non-governmental, the more consumers and business customers show interest in cryptocurrency, the more your audience of buyers increases. Furthermore, cryptocurrency has no exchange rates or fees across borders, and so is theoretically the perfect way to conduct global business.

Volatility in value

The value of cryptocurrencies is not stable; they crash after some time. This makes them attractive to investors seeking high reward through elevated risk, but potentially dangerous for businesses that accept them as payment

Taxation and accounting challenges

Before your company begins to invest in cryptocurrency, understanding of its changing regulatory environment is necessary; you will need to factor in the tax and accounting tasks that will be required of them. For instance, according to the IRS Notice 2014-21, cryptocurrency is considered a property and not a currency; that means it has to apply the U.S. tax principles that apply to any property transaction during an exchange.

Lack of regulation

Most governments have issued differing regulations with others, no regulations at all. This will result in uncertainty for a business that deals in cryptocurrency, including uncertainty about what kinds of taxes and investment limitations may be imposed in the future.

• Digital Identity

Today, almost everyone uses digital transaction services. This has made it easier for hackers to carry out cybercrimes. Our digital identities are no longer safe. Learning about blockchain will introduce a strict cryptographic system where it is impossible to access and manipulate information.

In Estonia, for instance, apart from one physical identity, every citizen has an electronic identity. Unlike many other countries, Estonia is way ahead to authenticate its citizens without physical contact. The digital ID is used as proof of identification for bank accounts, for voting, submitting tax claims, checking personal medical reports, among others. The techniques of cryptography and individuals credentials are identified as genuine.

Interoperability and its Significance

Blockchain networks can share information across each other without involving a third party. This is important because it enables the sharing of blockchain solutions on various enterprises.

• Industries on Blockchain

The blockchain technology is on-demand not only in the industrial sector but is also proving to be useful in areas such as cybersecurity, entertainment, governance, the financial industry. It is a perfect solution to monitor industrial operations, especially supply chain management. Maersk company, for instance, will use the technology in tracking their containers and supplies globally.

• Transparency and Improved Governance

Lack of Transparency and accountability in governance is one of the major problems facing many countries recently. Citizens have no voice and are not part of the decision making and do not have access to records and other information by the government. Learning and knowing about blockchain will ensure legitimacy in government systems like in elections, welfare payments, and payment of taxes transparency. For instance, Dubai successfully integrated blockchain into its official operations and has become the first government that is entirely powered by blockchain.

• Chain Disruption

Through the concept of a peer-to-peer concept and distributed ledger that is secure, blockchain is disrupting established processes and chains. Unlike these systems which have a centralized body that controls them, blockchain is decentralized. This is greatly shifting how businesses are going operate to operate in the future hence the need to understand the technology in depth.

From the list above, blockchain is indeed becoming one of the world’s most significant technology. This concludes that it is essential to learn blockchain and consider it a profession. I am sure that you have got all the reasons to learn blockchain.

What does Blockchain technology mean for your industry or organization

Have you thought why companies are so excited by blockchain? According to a survey, as of 2019, respondents in consumer products and manufacturing industry reported over 30 percent blockchain adoption in manufacturing industries.  We have already talked about blockchain and its basics. Here is why blockchain will change the industrial sector.

• Cryptocurrencies and Smart Contracts

Since the invention by Satoshi Nakamoto in 2009, cryptocurrencies have gained popularity even through the ups and downs. People have begun looking beyond bitcoin as being a controversial currency and have ventured into the endless possibilities that it presents. Blockchain is now the new alternative to traditional currency. Through the application of smart contracts which are self-automated computer programs that can carry out the terms of any contract, financial security is achieved. Businesses can now use smart contracts in bypassing regulations and hence lower the costs for a subset of our most common financial transactions.

• Supply-Chain Communications and Proof-of-Provenance

Blockchain is poised for explosive growth in the industries allowing data transfers to be both automated and transparent. The technology is immutable; hence, it cannot be altered or corrupted, which makes it a permanent, unalterable network. It increases transparency and makes it tamper-proof. Using blockchain technology would proactively provide digitally permanent, auditable records that show stakeholders the state of the product at each value-added step

• Cloud Storage

Decentralized cloud storage is changing the face of the internet. People could only store and access large files on CD ROMs. Today you can back all contents in your computer online. Companies like Transcodium, Ochain, iExec, and Definity are bringing blockchain to computing and storage applications.

Blockchain is going to be adopted widely as primary technology that will continue to transform many industries from medicine, healthcare, and logistics, and the hospitality sphere. Companies that adopt a shared ledger technology will demonstrate their readiness to build trust relationships caring about their data as well as data of their partners and customers. The decentralization makes it easy to access the system from the web and store your assets there. Anything can be stored, including cryptocurrencies, contracts, and other essential documents. You control all this through a private key.

Why does blockchain have this impact?

Blockchain is still one of the most influential technologies of the 21^st century. When talking about blockchain technology, very few understand why its impact is going to revolutionize every practical industry. Here are the reasons why businesses will re-look into its value.

Blockchain invents a new way of storing information. It keeps a record of data related to a product or service decentralized and secure such that nobody can tamper with it. This is one of the reasons why every company will soon switch to this new technology.

Blockchain promotes the authentication of products. From data analytics to one-channel shopping, this technology is revolutionizing the way we work by improving trust and transparency. The blockchain technology is secure and trustworthy. You purchase from the Amazon because you are sure that the goods will reach you at a specific time. The American dollar is considered the standard because of its stability. All this happens because of trust.

Blockchain technology will continue to have an enormous influence in the airline, hospitality, retail, and many other industries.

How to Prepare for Future Impact of the blockchain technology

The development of blockchain is more than just its salient features. It forces many businesses and different platforms to adopt a new system of operation. centralized repositories of information. When using e-Bay or Uber, for instance, these platforms are largely centralized. As blockchain continues to become more common, the information for whatever platform will be easily accessible and searchable without the need of a central body to show you what you need. To prepare for this great evolution, companies will need to train more professionals who will make it possible to achieve total decentralization.

Having a robust and growing public blockchain would draw all the right players to our business, including job seekers, hiring managers, and other staffing companies. This is why companies will also need to build a public network where they can share much of the information that employers are looking for besides set up a private one with paid access to more granular data about work experience of each individual and sales records. For everyone in the private blockchain, candidates and companies, all public and private information would be funneled through one integrated profile, simplifying the user experience.

What everyone must know about blockchain

Here is what every person should know about blockchain that will equip you for your next trivia hour or business exchange.

2009. Bitcoin, is the cryptocurrency that pioneered blockchain technology. Since then, its accounts are over 9 million which more than 100% growth per year since it began in 2009. The team of experts behind it, is a secret entity by the pseudonym Satoshi Nakamoto.
2010. Blockchains have been very transparent, because anyone with access to a blockchain can view the entire chain.

• There is much more investment in today’s great tech plartfoms for instance the Microsoft and IBM in the blockchain technology. IBM has dedicated $200 million and  over 1,000 employees in project powered by blockchain. On average, investment in blockchain projects about $1 million.

1. Amost 90% of major North American and European banks are exploring blockchain solutions.
2. It is only 0.5% of the population in the world using blockchain today, even though 50% of people use the internet.
3. A majority almost 9 out of 10 agree that blockchain is going disrupt the banking and financial industry. Statistics show that banks could up to $12 billion per year if they used blockchain technology.

• Just like any other rising technological platform, there will be jobs that will be displaced and new other careers that we have not even thought of. All as  a result of the blockchain transformation.

It is time that everyone learns all  about blockchain technology and get a team working to find out what other opportunities it will create for the future.

How Blockchain Works

The blockchain technology operates through a collection of nodes. Every node on the system has a copy of the digital ledger. To add a transaction, each node needs to check its validity. If the majority find it valid, it is then added to the ledger

A node initiates a transaction; then, it is digitally signed with a cryptographically created private key. A transaction represents a transfer of value between users on blockchain. Transaction data includes relevant rules, transfer of value, source address, validation information, destination address.

A transaction is propagated using a flooding protocol to peers that prove validation of the transaction. There must be two or more nodes for verification of the transaction.

After transaction validation, it is included in a block and propagated onto the network. After that, the transaction is confirmed.

The block which has been created in this stage becomes a part of the ledger and cryptographically links itself to the next block and the transaction is confirmed for the second time here and the block for the first time. The re-affirmation continues after every formation of a new block. At least six confirmations are required before the transaction is considered final.

Application of the Blockchain technology

Blockchain has a wide range of applications beyond just cryptocurrencies. This decentralized blockchain system is changing how you conduct transactions for business, manage assets, vote, use your machines, rent a house, and even prove your identity. What the future holds for blockchain is significant; it is going to transform, governments, companies, financial, and health institutions. Here is what the blockchain does and what it means to you.

• Decentralized cryptocurrencies

digital coins are passed through an electronic network. You make transactions either by cash or virtual currencies such as Bitcoin (BTC), among others, where you use an electronic coded address to make the transaction.

• Fighting corruption

Banks are not that trustable anymore, and that is why the global economy needs a trustless environment to solve the problem. There are large amounts of money that get hacked through regular traditional channels. You may spend a lot of money trying to protect your business from external attacks forgetting that there are internal cybersecurity threats that come from corrupted third parties. Adopting the blockchain technology will ensure secure banking systems by preventing malicious individuals from altering and stealing crucial information.

• Human Resource Management

The Society for Human Resource Management is beginning to adopt blockchain technology to modernize the hiring process. This is going to fasten the hiring, making it easy for HR managers to verify candidates and current staff much faster. Third parties are no longer going to interfere with data accuracy for any job applicants.

Blockchain can shore up this valuable part of the economy. It can record digital transactions and interactions securely and efficiently, offering transparency and protection to form a solid foundation that companies can rely on.

The original structure allows the creation of unique digital IDs, which make traveling safer by doing away with identity fraud. In restaurants, food can be tracked all through the entire supply chain. It has improved monitoring from the time from raw materials to finished products in the industry hence the quality and safety of food.

The Challenges of Blockchain

Amongst many benefits, the most lauded being decentralization, blockchain is still not accurate. Blockchain has replaced most of the roles played by central bodies in validating data and transactions. This reduces cost, improves efficiency, and creates a trustless working system. Despite being adopted into different organizations, sectors, and industries, there are still issues that arise concerning the technology

Scalability

Blockchain networks are slow when it comes to processing their transactions. While a visa manages over 1600 transactions per second, Bitcoin blockchain can do only 7. It takes a long time is taken to reach a consensus. Compared to its centralized counterparts, this technology is non-viable for mass adoption. As cryptocurrencies are becoming more popular, blockchain is unable to support a large number of users; hence the transaction time also increases.

There are many challenges coming up to address the issue of scalability.      For instance, Sharding brings subsets of the network together into smaller systems called shards. Shards are responsible for transactions within their network and hence helps to scale up the application.

Interoperability

Blockchain Interoperability is the ability to share information among other blockchain network platforms. An example is when the data in Ethereum Blockchain can be used in EOS blockchain. To achieve interoperability, there must be standardization across Lower scalability leads to lower interoperability.

Use these reports also to write on Blockchain challenges later on in this chapter

(amongst others: Scalability, interoperability, sustainability)

https://www.eublockchainforum.eu/reports