Blockchain Technology – A Journey into the Future
Blockchain technology continues to reshape the world around us. This technology has come a long way from its introduction to the world nine years prior. Blockchain tech is in use by thousands of groups, companies, and governments globally. Let’s take a moment to look at how far blockchain technology has come.
What is Blockchain Technology?
Blockchain technology utilizes an interconnecting chain of transactions called blocks. This data is saved in duplicate across all computers (nodes) on the network. These nodes validate changes made to the network. Prior to the acceptance of any changes, 51 percent of the nodes must confirm the additions using the previous chain of transactions as a reference. The decentralized nature of this technology provides users with full transparency.
Blockchain vs. Traditional Systems
In contrast, traditional systems function on a restricted access basis. In a blockchain network, you can see everyone’s account, and where each Bitcoin resides. However, you do not know who owns what wallet. When you send a Bitcoin, all the nodes in the network monitor the changes. This use of nodes creates a near-instant validation process.
When you send funds using a traditional banking system, your transaction undergoes multiple third-party verifications. Each step of the validating process adds additional time and costs to the operation. Conventional banking transactions require the involvement of over thirty-six third-party verification and regulatory compliance procedures. These added costs make blockchain technology a better option to consider.
Blockchain technology first emerged as the underlying technology behind Bitcoin in 2008. Bitcoin’s developer, Satoshi Nakamoto, stated in his whitepaper that Bitcoin is “a peer-to-peer electronic cash system.” While blockchain technology is perfect for these tasks, its development didn’t stop there, and today, blockchain systems are emerging in every business sector.
One of the first significant upgrades that occurred to blockchain technology was the addition of smart contracts. Think of smart contracts as pre-loaded protocols that automatically engage upon receiving crypto. Ethereum was the first cryptocurrency to make smart contract protocols easy to use. Today, Ethereum’s ERC-20 protocol is the most widely used token issuance platform in the world.
Smart contracts gave businesses the ability to automate their fundraising process. Due to the automation, companies could accept payments of smaller denominations from a larger group of individuals. In the ICO process, users purchase tokens issued by the company. These tokens permit users access to the company’s platform (utility tokens) or, the tokens grant the owner some percentage in future profits (security tokens).
Initially, companies didn’t require any information from the investor other than their wallet address. More recently, the SEC has stepped into the space and required KYC and AML compliance from investors of security tokens. As a result, security tokens with SEC requirements built into their smart contracts are now becoming standard.
Second-layer protocols, such as the Lightning Network, are what make smart contracts possible. These networks sit on top of the blockchain and allow the pinning of extra data to points on the blockchain. Second layer protocols are taking blockchain technology to new heights.
The Lightning Network creates personal payment portals which allow users to send unlimited transactions between each other without adding congestion to the blockchain. Closing the payment portal will add the transactional data to the blockchain. When you consider that Bitcoin only handles seven transactions a second, the need for second layer protocols becomes obvious.
Blockchain Technology and the Future
Blockchain technology is a considerable advancement over the traditional means of conducting business. Logistics, government, real estate, and even law enforcement can benefit significantly from this tech. Expect to see increased blockchain adoption in the coming years.
Guest post by the Blockchain Industry Group (BIG)
The Blockchain Industry Group (BIG) is dedicated to promoting the adoption of blockchain technologies and digital currencies by actively collaborating with and promoting the efforts of our global blockchain community.