Introduction to Blockchain Technology
There’s a lot of buzz going on in the business and finance world around cryptocurrencies and the blockchain technology. Ever since Bitcoin appeared back in 2009, the popularity of cryptocoins has been increasing. Nowadays, there are over a thousand different cryptocurrencies and the blockchain technology continues to evolve. Many investors turned their gaze towards digital currencies when Bitcoin’s price started to skyrocket. However, the digital currency market is still unregulated and highly volatile, but that doesn’t prevent investors from seeking out good investment opportunities.
Needless to say, the blockchain technology is the most popular innovation so far, yet very few people understand it properly. It’s estimated that the blockchain technology will revolutionize business models and operations, payment methods and more. Even though there’s a huge hype going about this technology, the understanding of it greatly falls behind. Therefore, here’s an introduction to blockchain technology.
What’s blockchain technology?
As mentioned before, Bitcoin was the very first blockchain technology. It represented a decentralized public ledger, based on a peer-to-peer (P2P) digital payment system for transactions with no middleman to arbiter those transactions. In other words, the transactions weren’t meant to be regulated by any central banks or governments. The Bitcoin cryptocurrency, otherwise known as tokens, is used as means of payment to be transferred via the payment system, as well as to validate transactions.
The blockchain technology is a system that combines computer networks, cryptography and game theory that’s designed to be an open ledger that consists of various records called blocks. Its purpose is to record and store data about transactions. Blocks hold information, such as transaction timestamps, the amount of tokens transferred, but not the information about users. A single block also contains a link to a previous block. The blocks are linked using strong cryptography so that the data cannot be altered once it’s in the block.
Therefore, the original blockchain technology was designed to allow users across the globe to make seamless transactions for a small fee, with no intermediaries to monitor or obstruct the transactions. Transactions are public and transparent, while the technology prevents malicious intent and double-spending of coins.
Since 2009, the blockchain technology has come a long way. Many engineers and tech experts have worked on the original Bitcoin blockchain technology to design and develop it further. As a result, new and improved blockchain technologies have emerged. A good example is Ethereum that utilizes blockchain technology to provide smart contracts. The technology used is no longer just about recording and storing data, but is also capable of running an arbitrary code and running as a public blockchain. Similar to Bitcoin, Ethereum also utilizes tokens called Ether.
The only difference is that the number of Bitcoin tokens is finite and there’s only 20% left to be mined, while there’s no supply limit to the number of Ether tokens. Many more startups and new blockchain technologies are being developed as mentioned before, which provides a good investment opportunity for investors. Investors can invest via initial coin offering (ICO), but they must carefully research the company behind the new blockchain first. For instance, resources, such as The Blockchain Review, offer good information about the ICO investments and newest blockchain technologies on the market.
Pros of blockchain technologies
Experts estimate that the blockchain technology is the biggest discovery so far, even compared to the discovery of the Internet. The blockchain has already made progress towards creating an information economy environment. With further development, businesses will be able to rid themselves of any brokers or central parties throughout various different processes.
This will allow companies to reduce, if not eliminate, human errors, additional fees and costs, as well as time and security risks that follow today’s operations. Moreover, the latest progress in the blockchain technology has made significant improvements to the original. The before-mentioned Ethereum had made their programming language called Solidity, which is open-sourced. The language itself is highly adaptable and easy to use, which means it could help build various other more powerful and more sophisticated applications.
The drawbacks of modern blockchain development
There’s a shortage of blockchain developers and there’s a high demand for experts these days. Even though many companies ranging from for-profit organizations to governmental and non-governmental organizations are starting to invest in blockchain technology, there’s still a long way to go. What’s more, cryptocurrencies are still not regulated, which is their original intent, or considered private nor public securities. However, without proper regulations, many startups and blockchain development companies don’t have standardized traits.
Simply put, many ICOs are not supported by a viable product. That is a big risk for investors. The main reason is that some ICO tokens don’t provide or they’re not required to provide disclosures or brochures. Some are only backed by whitepapers stating the purpose of the technology and company’s goals. The Securities and Exchange Commission (SEC) is looking to regulate ICOs and investor participation, in order to protect them from scams that could result in loss of investment.
The blockchain technology is rumored to be the next big step in technological development that will reshape business models, capital markets and financial services. Still, there’s a lot of confusion and lack of understanding that surrounds this topic. The blockchain technology is still in its infant stages and it remains to be seen how it will develop further.
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Writer: David Webb
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