As blockchain technology rapidly, so does the range of its utilization. According to the Grand View Research report in 2023, USD 17.46 billion, with an average of 87.7 %% growth.
The relative simplicity of development allows such systems to be created quickly and without significant investments. However, only a professional blockchain application development company will be able to uncover this technology’s positive features and use them to maximum advantage. And this article will focus on the positive features and benefits of this technology.
What is the Blockchain?
A blockchain is a digital ledger that stores information about all activities within the blockchain. The activities are called transactions and are recorded in a kind of storage called a block. The block then passes through a validation procedure carried out by nodes. The blockchain network nodes are devices attached to it and perform transaction processing, validation, and creation of new blocks.
When miner nodes create a new block, it is opened and filled with transaction data. After reaching the capacity limit, the network waits for a new block to be made. If most nodes confirm that the new block is valid for addition to the network, the previous block is closed utilizing a cryptographic function, and the information in it is encrypted and turned into a hash sum, which will be written to the next open block. Such an algorithm of block linking minimizes the probability of changing the information in the block or its deletion, as it will have to change all the previous blocks. Eventually, the block information appears at each node, thanks to the consensus mechanism, which is responsible for synchronizing all databases on all nodes.
Decentralization in blockchain means no single central authority governs the network. Each node in the network owns its copy of the database and influences it as much as any other node. The nodes ensure the viability of the network. The network grows because nodes solve the cryptographic puzzle necessary to create new blocks. New blocks must be approved by at least 51% of the nodes in the network before being added to the chain. It means each node cannot take over control of the network and add information uncontrollably.
Decentralization significantly mitigates the impact of node hacking, as it cannot grant complete control over the entire system. In centralized systems, only designated authorities are accountable for validating transactions. Their compromise can bring the system to a complete standstill or enable the validation of fraudulent transactions.
However, blockchain technology includes several types of networks that sacrifice decentralization by concentrating control in some hands for other benefits, called private networks. They are often used within an organization or group and can only be accessed by invitation. Such invitations usually include specific rules, such as registration or verification.
2. Increased Security
Blockchain is a more secure system compared to classical ones, and this is achieved by:
Distributed Ledger: One of blockchain’s crucial security features is its distributed ledger, which stores transaction data across various nodes on the network. It makes the network less susceptible to any single point of failure. Moreover, every block on the blockchain includes a hash of the preceding block, forming an unbreakable chain of blocks that guarantees the network’s integrity.
Consensus Mechanism: Another vital security feature of blockchain is its consensus mechanism, which guarantees that all nodes in the network concur on the legitimacy of each block, making it problematic for malicious individuals to tamper with the blockchain and undermine its security.
Encryption: Blockchain technology applies robust encryption techniques to safeguard transaction data, user information, and other sensitive details. This involves utilizing hash functions, digital signatures, and private keys to guarantee the legitimacy and security of transactions.
3. Full Transparency
All blockchain transactions are publicly visible, allowing for verification by anyone. This transparency is due to the decentralized nature of the blockchain, which grants every network node access to an identical ledger. This high level of transparency and auditability enables users to monitor the network’s movement of data and assets with complete accuracy and reliability.
Furthermore, the transparency of blockchain technology assists in deterring fraud and corruption by impeding bad actors from concealing their activities or manipulating the system for their gain.
4. Automation Opportunities
Blockchain has the potential to automate routine processes. For example, the technology can be used to automate voting systems within an organization and across countries. This application allows for directly questioning potential voters without verifying the vote with an authority. The vote is then recorded in the blockchain system and cannot be changed or revoked. Since the vote is already registered on the blockchain, it can be seen by every user on the network, which negates the possibility of voter fraud.
At the same time, it is essential to note that there are types of blockchains that allow users to join and perform actions only after confirming their identity, so it will only be possible to vote once.
This automation is possible due to the technology of smart contracts, which are scripts. They self-execute the moment the conditions prescribed to them are met. Smart contracts validate transactions on the blockchain and work on the principle of a vending machine. When a customer makes a payment, the vending machine dispenses the goods without needing a third party to validate the transaction.
One of the main benefits of automation for users is the increased availability of services. A smart contract will validate the transaction regardless of the time of day.
Blockchain technology offers numerous advantages over traditional databases and centralized systems, including enhanced security, transparency, and automation. Decentralizing the control and storage of data eliminates the need for intermediaries, giving users greater control over their information. Its security features make it an ideal solution for industries that need high levels of data protection, especially finance and healthcare. As more companies embrace blockchain technology, we can anticipate innovations in supply chain management, digital identity verification, and voting systems. With its numerous benefits, it’s evident that blockchain is not going away and will play an essential role in shaping technology’s future.