The blockchain is a decentralized transaction and a data management technology which was developed primarily for Bitcoin cryptocurrency. Increased interest has been noticed in the Blockchain from the time this idea was coined. The main reason why this term has gained substantial attention lies in the central attributes which provide security, anonymity and data integrity to the third party organizations involved in the process. It also created interesting research areas especially from the perspective of technical challenges and limitations that are there due to Blockchain technology.The currency transactions between companies and individuals or companies and companies are often noticed to be centralized as well as controlled by a third party organization. Making digital payments or currency transfer is what demands a middleman for completing the process of the transaction. This same process is also applicable in several other domains. Transactions systems have often been noticed to be a centralized system in which the information is controlled as well as managed by the third party providers. Blockchain technology has been mainly developed for resolving the issues which are present due to the involvement of two entities in the transaction process. Blockchain technology aims at creating a decentralized environment where no third party controls the data transaction. Blockchain provides distributed database solutions for maintaining continuous grown data records. Public ledger is used for recording the data.
Different applications of Blockchain technology
You might have heard about the bitcoin and the cryptocurrency concepts. But, Blockchains are something that has created huge splashes in the tech community. There are various applications besides the currency which has been developed due to this technology, and among all these, major five applications of this technology are as follows
- Distributed cloud storage
Blockchain data storage are expected to become a massive disruptive in coming few years. Currently, the storage services are mostly centralized. Thus as a user, you are required to trust a single provider for controlling as well as managing your online assets. With the help of Blockchain technologies, decentralization of the storage can be made possible.
- Digital identity
Blockchain technologies help in tracking as well as managing the digital identities securely and efficiently which results in a seamless sign-on as well as fraud reduction.Irrespective of the fact that whether it is banking, healthcare, national security or citizenship documentation, the identity authentication as well as authorization remains a major process for intricately woven into the culture and commerce worldwide.
- Smart contracts
These are the legally bound and programmable digitized contracts and are implemented as variables as well as statements which can release the funds with the help of bitcoin network rather than trusting a third party for this.
- Decentralized notary
One of the interesting features that the blockchain technology chain has is its timestamp feature. Entire network essentially validates the different state of the wrapped data at one time. Being a trustless and a decentralized network, it essentially helps in confirming the existence of stated time. Only centralized notary services can help for this purpose.
- Digital voting
One of the greatest barriers for the online electoral processes comprises of security for its detractors. With the help of Blockchain technology, the voter can keep an eye on the submission of his vote. Blockchains can be helpful for this purpose in making the organizations more transparent.
Application of blockchain in banking and finance industries
Banking and financial services share a complex relationship with Blockchain. On the other hand, there are ample opportunities that are present for the banking and the financial industries because of this. The Blockchain technology helps in providing the participants of the business network with a shared as well as the immutable transactional history that cannot be altered once agreed. Various traditional banking procedures can be streamlined because of this. Banks and financial sectors are more concerned for ensuring KYC compliance as an important step in preventing the criminal use of services and funds.
Industries making use of blockchain technology
- Bank of America filed 20+ blockchain patents
- China construction Bank created Blockchain platform for Bancassurance
- CLS consortium made use of open-source Hyperledger Fabric Blockchain
- Canada’s Royal Bank Transfer Funds from the US using hyperledger blockchain
Advantages and disadvantages of blockchain technology
One of the biggest advantages of Blockchain technologies is disintermediation. With the help of this, the database can be shared directly without having a central administrator. Rather than having a centralized application logic, the blockchain transactions keep their proof for the validity and authorization for enforcing the constraints.Other advantages associated with Blockchains includes
- High-quality data
Data provided by Blockchain is complete, timely, consistent, accurate.
- Empowering users
Users are in control of their transactions as well as other information.
- Increased durability, reliability and longevity
Because of decentralized networks, blockchain does not contain central point for failure of systems and thus can withstand greater attacks.
- Process integrity
The users can easily trust the Blockchain transactions which can be executed by the commands given by protocol.
- Transparency and immutability
Changes done in Blockchains are viewable to all the public parties so that more transparency can be offered.
- Ecosystems simplification
All the clutter complications associated with multiple ledgers are reduced with the help of public ledgers added by Blockchains.
- Faster transactions
The interbank transactions carry the potential for clearing and making final settlements. Transaction times can be substantially reduced due to this.
- Reduction transaction costs
With the help of eliminating the third party involvement, extra costs and overheads can be reduced for exchanging assets.
The decentralized databases nature of blockchains is what that makes it slower. Additional burdens on the Blockchain systems includes the signature verification, consensus mechanism and redundancy.
- Consensus mechanism
- Nascent technology
- Uncertain regulatory status
- Large energy consumption
- Control, security and privacy
- Integration concerns
There are some technical challenges which are associated with this technology, and they may act as a constraint in the adoption of this technology in future.
The maximum throughput by the Bitcoin network is up to 7tps. Throughput of Blockchain networks is required to be improved for cases where the transaction frequency increases.
Current Blockchain technologies are not secured. They are prone to approximately 51% of the attack. Organizations are required to perform more research on the security subject for having a better understanding.
- Wastage of resources
Mining the bitcoins leads to wastage of huge amount of energy. There are other alternatives too which can be used by the industries and one of those alternatives include proof-of-stake.
Bitcoin API for the development of services is something which is very difficult to be used. It is thus required to develop a friendlier interface for Blockchain.
Ethical, social and legal considerations related to Blockchain technology
Making use of the BlockChain technologies makes organization lead to technology failures. Companies may also indulge in the wrong advertisement. It is thus not a nice idea drafting smart contracts.
It is one of the important things to understand before implementing the Blockchain technology that blockchain technologies are not applicable for brand choices of social concerns. Social implications of blockchain have been mainly noticed to be positive. A substantial number of individuals have been noticed to be attracted towards this technology. These high involvements have shunned the traditional payments systems like debit cards, ATMs and credit cards.
Legal implications associated with the Blockchain technology mainly revolves around the smart contract structures, unchangeable. Major implications related to the legal considerations arise during organizations confusion for making use of smart contracts. Transformation of the legal terms according to a programming language is quite difficult to be understood. For contracts validation, there is also a requirement for clear consensus.
It is undoubtedly a great subject for discussion as it is one of the hot topics in the current times. Appropriate involvement of government and laws implementation is what that is required. Evolution of Blockchain technology is required to be assisted with undivided attention from the government. Technology is required to be used in such a manner such that no assets of the organization are compromised due to this. Initial issues of the organization must be explored parallel so that there remains a balance between the technology use and its protection. All the regulatory and legal requirements must be considered for this. The business, as well as customer’s data, is required to be protected. There have been various technological innovations that have been noticed in the financial services payment industry. Also, the financial and the payment sector is often viewed as one of the most dynamic areas of the present world. Data affecting the solvency as well as the reputation of organizations can be made immutable as well as independently auditable with the help of leveraging the blockchain standards.
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