As the world moves towards more alternative types of currency, there is increasing debate about the most effective methods of processing it. This is particularly the case for businesses as companies are constantly seeking more secure, standardized, and efficient ways of making transactions.
Blockchain is one of the hot topics of discussion right now. But what is it exactly, and how is it used?
What is Blockchain?
Blockchain is a shared public ledger that enables transactions to take place across networks. Transactions made using blockchain are permanent and each one affects the entire string of transactions that preceded it. The networks through which blockchain operates are known as Peer-to-Peer (P2P) networks. It belongs to the class of distributed ledger technologies (DLTs).
The name derives from the “chain” of “blocks” that comprise the records in a given blockchain. Each of these blocks contains several standardized components: a timestamp, transaction data, and a mathematical function known as a cryptographic hash, which comes from the previous block.
Why is blockchain becoming popular?
Blockchain is best known for its role in recording transactions of cryptocurrencies such as Bitcoin. With standard currencies, transactions require third-party verification, but blockchain eliminates the need for this.
Some blockchains utilize smart contracts. Ethereum, for example, is known for having created smart contract programmability into its networks.
In addition to its use for cryptocurrencies, blockchain also has other uses, although 1they are less widely known. For example, it is starting to be used in various healthcare operations, logistics, and even the Internet of Things (IoT).
Advantages of using blockchain
Once a given network is created, transactions made are made and their calculation is recorded as part of the larger overall network. There is no risk of human error as the system is automatically created to calculate and record the data. If a transaction is rejected, it simply won’t appear on the blockchain. For businesses, this eliminates the need for middlemen, which can streamline business processes to much greater degrees.
In addition, banking hours are no longer a consideration as the system is global and can be accessed 24 hours a day. This can be a big advantage for businesses with a global reach.
Once a given transaction is made, it cannot be changed or reversed. Even the operators of the database cannot make changes to the chain. In order to alter a ledger, a person would have to alter more than half of the other users’ copies of a given database, thus making it extremely difficult to hack. Therefore, it is one of the most secure methods for making transactions.
The fact that blockchains are decentralized means that the need for authorization by a central party is eliminated.
Attempts to be environmentally friendly
One of the biggest criticisms of the use of cryptocurrency is its negative effect on the environment. Environmentalists abhor the use of cryptocurrencies because they say that the energy required for their usage is greater than the value of the currencies themselves. The carbon emissions produced by Bitcoin is said to have increased more than 100 times over just the last several years.
Therefore, blockchain is being used in an attempt to reverse some of these damages. It is said that sustainable sources for mining Bitcoin have also increased manifold in recent periods, and there is an effort to meet and reverse the pace of the damages done.
In addition, blockchain technology is being used to remove carbon dioxide from the atmosphere, and in some cases, it is working alongside cryptocurrency functions to utilize carbon credits.
Crypto itself is questionable – Perhaps the biggest question for businesses hoping to utilize blockchains in their various processes – at least when it comes to the question of whether or not to utilize crypto – is whether or not these types of currencies are worth getting involved in.
Cryptocurrencies are somewhat controversial, and not only because of their effect on the environment. Because of their limited nature, Bitcoin and its brethren are not always considered stable currencies. Also, according to Buidlbee, these currencies can be volatile by nature as they are speculative and not measured against any established system. Therefore – as with currencies of unstable countries – there could easily be a sharp drop in the value of crypto and if your business is dependent on one, your assets will go down with it.
Data is fixed
Once a given transaction is made, it cannot be modified. This can be good in terms of preventing hacking, but in some cases, modifications do need to be made.
Some people and businesses would like to keep their information private. However, because of the open nature of blockchain, this generally isn’t possible. If confidentiality is what you are looking for, you might need to find another means of conducting your business.
Incompatibility of chains
The information in a given chain is fixed within its own system, but each system is discrete. Therefore, conducting transactions between blockchains is not possible.
Getting locked out
If you lose your private key for a given blockchain, it is difficult to recover your account. There is no bank that you can call easily for quick account recovery.
Consider your own business needs
Implementing enterprise blockchain solutions enhances transparency, security, and efficiency in business operations, illustrating the transformative power of blockchain in the corporate landscape.
The decision is yours to make, of course. If you take all of the above points into consideration, you should be able to make a wise decision that suits your business interests. If you do end up utilizing blockchain, you could find your business processes substantially simplified.