Blockchain – A Beginner’s Guide

Blockchain is not exactly new technology, indeed, it has been around for quite a few years and was initially used with cryptocurrency such as Bitcoin and Ethereum. Blockchain can be described as a decentralised ledger-based system, where all participants agree before a new data block is added to the chain. The network is very transparent and there is no centralised control, which makes it very different from any other digital network, plus blockchain is very secure, which is another big plus that users find attractive.

How does blockchain work?

A blockchain is a digital ledger that comprises blocks of data and when a new block of data is added, all stakeholders carry out hidden calculations to verify the authenticity and once a new block of data is added to the chain, it cannot be altered in any way, shape or form. The only way to change data is to add more blocks, and as each block is connected to the previous one, it is virtually impossible to hack into the network. This immutable chain of data is chronologically recorded and the open digital ledger is managed by numerous computers called nodes.

Blockchain & cryptocurrencies

Cryptocurrencies run on blockchain networks because using this digital ledger system actually eliminates double spending, plus the system is very secure due to the fact that all blocks of data are linked and it is not possible to hack or amend data once it is added to the chain. There are blockchain developers in Australia and other countries that specialise in creating blockchain networks for digital currencies and they can be found with a simple Google search.

Types of blockchains

There are numerous types of blockchains, which include the following:

• Public blockchains – Network activity is made public, which means that every transaction is accessible to all. This kind of blockchain offers decentralisation and transparency that every stakeholder can easily access.
• Private blockchains – A company or organisation acts as the gatekeeper and controls who is eligible to join the network, which appeals to businesses and organisations that require a level of privacy.
• Consortium blockchains – Similar to private blockchains, this type of network is suitable for a group of companies or organisations that wish to work together. This network can be used by many different healthcare providers, for example, which allows providers to share data while maintaining a level of privacy and confidentiality. 
• Hybrid blockchains – A blend of private and public blockchain is known as a hybrid blockchain; companies use these because some data is accessible, such as a product origin, while other data remains confidential.

Benefits of blockchain

When compared to other data storage systems, blockchain technology brings with it many benefits, which include:

• Superior security – Because no single entity controls a blockchain network, there is a higher level of security. Each block of data is connected to the previous block using hashes and this makes it virtually impossible for hackers to access the data.
• Increased transparency – All stakeholders have access to all data and the decentralised database means no single stakeholder has control. There is an auditable trail of transactions that is available to all, which is not available with other database systems. This builds trust with all participants.
• Cost reduction – By removing the need for third parties, costs are greatly reduced, while automating processes also keeps costs to an acceptable level.
• Preventing tampering – Any attempt to amend data on a blockchain is visible, even though such attempts would be futile; the only way to amend data on a blockchain is to add new blocks of data.
• Trust building – Due to the transparency and security, all stakeholders have complete trust, as all transactions are easily verifiable.

Ways in which blockchain is used

Blockchains are used in many ways, such as:

• Supply chain management – Using smart contracts, a company can effectively streamline and manage its supply chains. All transactions are openly recorded and there is a high level of accountability.
• Streamlining business transactions – Smart contracts automatically execute when predefined conditions are met. These contracts are tamper-proof and the terms and conditions cannot be altered by any party.
• Intellectual property – Blockchains are ideal for storing information regarding intellectual property rights; the only way to transfer ownership of an intellectual asset is to add new blocks of data to the chain.
• Electoral voting – Using blockchains to record votes eliminates all risk of fraud and because the system is completely transparent, all parties can trust election outcomes.
• Real estate ownership – Governments use blockchains to record property ownership, which is an immutable system. 
• Secure trading platforms – Traders of all commodities use blockchains for online trading and as time passes, more markets are using blockchain technology to record share acquisitions across global markets. Click here to learn about how AI is being incorporated into trading platforms.
• Qualifications and accreditations – Regulatory bodies use blockchains to store data on qualifications and accreditations because of the security aspect. If, for example, a potential employer wishes to check that an applicant does possess the qualifications they claim, they can do so with confidence, knowing that the data is secure and immutable.

Smart contracts

smart contracts are an important component of blockchain networks, as they facilitate financial transactions automatically; written in computer code, a smart contract has predefined conditions that are agreed upon by all parties and when these conditions are met, the contract executes and a transaction is made. It is important to have smart contracts audited by an established company to ensure there are no vulnerabilities or weaknesses that could be exploited. Cyber-security is something you cannot overlook with any digital system; when you commission a company to build a blockchain network, security is built-in and regular updates are recommended.

To conclude, blockchain technology is constantly being developed and used in many ways, while AI is being incorporated into the systems to provide a higher level of automation and security.