Blockchain technology is considered one of the most interesting technology trends today. With its properties, blockchain has the potential to be widely applied in areas ranging from financial services, manufacturing, supply chains or even education and healthcare. In this article, let’s learn all about what Blockchain technology is , how it works, and its applications.
Blockchain concept | What is blockchain technology ?
According to Wikipedia, a blockchain (blockchain) is a decentralized database that stores information in blocks of information that are linked by encryption and expand over time. Each block of information contains information about the creation time and is linked to the previous block, along with a timecode and transaction data. Blockchain is designed to resist data change: Once the data has been accepted by the network, there is no way to change it.
Blockchain technology is the technology of encoding data into blocks, linking them together into a long chain. When a change of information or transaction occurs, the old block is not lost, but instead a new block is joined with the old block to form a new chain.
In particular, the information of the blockchain is not only stored on a single server, it is distributed and backed up on many servers connected to the blockchain system. From there, each user can view and check their transactions, which makes the blockchain system transparent and secure, no one can modify or cheat in the information.
Blockchain is considered the technology of the future and is applied in many different industries and fields. There are many large enterprises or countries that have invested considerable resources and time in the research and development of blockchain technology because of its high practicality and good security.
How blockchain works
First of all, there must be 4 elements for a block to be added to the chain:
- There must be a transaction: Transaction here is simply an activity of buying – selling, exchanging.
- That transaction must be verified: All information related to the transaction must be recorded, such as: Time, location, quantity of goods, amount …
- That transaction must be stored in the block: Whenever a user can review the transaction information he has made, they are always stored in the block.
- That block must receive a hash (a function that converts one value to another): only when a hash is received can a block be added to the blockchain.
The blockchain algorithm allows users to exchange and transact without the presence of a third party and without having to rely on trust. In other words, blockchain is the foundation of smart contracts.
Example: A and B play a game of guessing C’s check-out time. They each bet $10. If at the time C checks the fingerprint, the minute hand falls on an even number, then A wins. Conversely, if the minute hand falls on an odd number, B wins.
To manage transactions, A and B have several options as follows:
- Ask the third person, D, to keep the total bets of the two: $20. The winner will be given the money back by D => If D turns his face, does not want to return the money, both A and B will lose
- Choose to trust each other => Even if they are close colleagues, there is still a possibility that the other person will not give money.
Obviously, the two ways above still face certain risks. Blockchain was created to solve those problems.
Through a few lines of command, the money of both will be transferred to the program of the Blockchain. Collecting data from timekeeping software, this program will automatically transfer money to winners.
Features of blockchain
We already know how blocks and chains work. From there, the main characteristics of blockchain can be realized such as:
- Chains cannot be manipulated, altered, tampered with or destroyed: Blockchain only really disappears when there is no internet left.
- Immutability: If the transaction or data has been recorded by the holder of the private key (the secret key – only the originator of the Blockchain has) that data cannot be corrected.
- Data security: Information and data about blockchains are distributed and absolutely safe. Only the holder of the private key has access.
- Transparency: Anyone can track the path of the blockchain and track its entire exchange history.
- Smart Contracts: Contracts are embedded by a piece of code (IFTTT), allowing them to self-execute. In practice, there will be an intermediary to ensure that all parties involved are in compliance with the terms.
Blockchain platforms still have disadvantages
Blockchain is not really perfect, it has certain obstacles that we need to overcome in the future if we want to put it into widespread application:
Extremely high power consumption
Every time information is transferred to another block, the blockchain copies itself and there are large redundancies. For example, when we make a Bitcoin transaction, it will consume a lot of electricity because it is confirmed many times through each block in the chain. If it is a private blockchain, it does not consume much electricity because it is possible to limit the blockchain to a small number of computers. However, in terms of blockchain in banking, it is different, the number of transactions that can take place every minute around the world, this is a matter of concern.
Storage space problem
The problem is that when you want to operate a block on the Bitcoin blockchain, the data you have to download now is 60GB. What if the Bitcoin market thrives? At that time, there will be many blockchains with Terabytes of use, and to operate them, there must be large-scale server “farms” to be able to operate all blocks. That takes away the decentralization of blockchain as it creates a centralized network, or is considered a strange decentralization.
The downside of immutability
Explain a bit what a blockchain wallet is . It has the same features as a regular electronic wallet but will use cryptocurrency (crypto) for transactions. For example, users forget the authentication code to open their wallet, will not be able to recover their password, without a support hotline, they will lose all the money in the wallet.
In fact, if we know how to handle data responsibly, we will not fall into the situation of losing everything. But the problem here is “responsibility”, which is why a quarter of the world’s Bitcoins are gone forever.
So when making transactions on the blockchain, we need to be very careful, because each transaction made will not be reversed or redone. The data and information of the transaction will stay on the blockchain forever.
Decentralized ledgers allow the encoding of simple contracts, automatically executing contracts when certain conditions are met. Ethereum is an open source blockchain project, built specifically to meet this requirement. In its early stages, Ethereum has the potential to take advantage of blockchain on a much larger scale.
With current technology, smart contracts can be programmed to perform basic functions. Example: A transaction can be settled when financial conditions are met, without the involvement of a third party or a witness.
Companies like Uber, AirBnB have proven the sharing economy has the potential to thrive. However, at the present time, users who want to use car-sharing services must rely on an intermediary, Uber. By enabling peer-to-peer payments, blockchain creates direct interactions between parties, resulting in a truly decentralized sharing economy.
OpenBazaar uses blockchain to create peer-to-peer eBay. The application can be downloaded to your computer and transacted with the OpenBazaar provider without paying transaction fees. The “no rules” feature of the protocol means that a personal reputation in a business interaction is more important than the interaction itself on eBay.
Expanding the capital calling market
Kickstarter and Gofundme already have initiatives to attract investment, which has fueled this emerging peer-to-peer economy. The presence of these websites shows that people want to contribute their opinions in product development. Blockchain has taken this to the next level thanks to its ability to generate more venture capital for startups.
In 2016, there was an example of this. DAO (Decentralized Autonomous Organization), based on Ethereum, raised 200 million USD in just 2 months. Participants who buy DAOs get to vote on a venture capital smart contract (the right to vote is based on the number of DAOs they hold). The amount of money the project earned is proven, the project is given without risk due diligence. Thus, it can be seen that blockchain has the potential to open a new model for economic cooperation.
By making results transparent and publicly accessible, distributed database technology can bring full transparency to an election or any other form of polling. Ethereum-based smart contracts will help automate the whole process.
Apps like Boardroom allow organizations to make decisions on the blockchain, thereby making corporate governance transparent, verifiable digital assets, fairness or inside information.
Supply chain check
Consumers increasingly want to know how much truth is in the claims of companies’ product standards. Blockchain provides an easy way to confirm that the products we buy are genuine. Transparency comes with blockchain based timestamp of date, location…
In the UK it is possible to check the provenance of consumer goods through the supply chain. Using the Ethereum blockchain, the quality control pilot project ensures that the fish sold in Japanese Sushi restaurants has been properly caught by fish suppliers in Indonesia.
Decentralized storage on the Internet brings tangible benefits. Distributing data throughout the network helps protect data from being hacked or lost.
The Inter Planetary File System (IPFS) makes it easy to conceptualize how a distributed web might work. Similar to how bittorrent moves data across the Internet, IPFS removes the need for client-server relationships. An Internet made up of fully distributed web sites has the potential to increase file transfer rates and stream times. This improvement is not only convenient, but also a necessary upgrade for currently overwhelmed web content delivery systems.
The accuracy of an event will be higher the more predictions about the probability of that event, this has been proven. Unexplored biases can lead to erroneous judgments. Taking the average opinion from the predictions helps to reduce those biases. There are already early applications of blockchain in predicting markets. For example, Augur, the market prediction application is still in the development stage. It makes an offer to share about the outcome of real-world events. Participants can earn money by buying correct predictions. The more shares bought according to the correct prediction, the higher the amount received. With a small investment (less than $1), anyone can ask a question, create a market based on a predicted outcome, and collect half of the total trading fees that the market generates.
Protection of intellectual property rights
As we know, digital information can be infinitely copied and distributed widely thanks to the Internet. This has given web users across the globe a goldmine of free content. However, copyright owners are not so lucky, they lose control of the intellectual property and the money that should have belonged to them from it. Smart contracts can protect copyright and automate the sale of works online, eliminating the risk of copying and redistribution.
Mycelia uses blockchain to create a peer-to-peer music distribution system. Founded by British singer-songwriter Imogen Heap, Mycelia allows musicians to sell songs directly to audiences as well as license templates for producers and split profits among musicians, singers, all All these functions are done automatically by smart contracts.
Internet of Things (IoT)
In a nutshell, IoT is the management of a control network of certain types of electronic devices, such as the air temperature in a warehouse. Smart contracts can automate the management of this system remotely. A combination of software, sensors and networks will facilitate data exchange between objects and operating mechanisms. The result is increased system efficiency and reduced monitoring costs.
The biggest manufacturers in manufacturing, technology, and telecommunications are all vying for IoT dominance. Think Samsung, IBM, AT&T. Expanding existing infrastructure controlled by humans with IoT applications will perform tasks from predicting mechanical parts to data statistics and automated systems management at scale.
The need for identity verification on the web is becoming increasingly urgent, especially for online financial transactions. Existing solutions to serve this need are not perfect. With blockchain, we will have advanced methods of proving who we are, along with the ability to digitize personal documents. As mentioned above, in the sharing economy or business transactions, a good identity is extremely important.
Developing digital identity standards is a very complex process. In addition to the technical challenges, a universal online identity solution requires collaboration between individuals and governments. Add to that the need to navigate legal systems in different countries and the problem becomes exponentially more difficult. Current Internet e-commerce relies on SSL certificates (the little green key on the browser) for secure transactions on the web. If blockchain is adopted, everything will become a lot easier.
AML and KYC
Blockchain has strong potential in Anti-money laundering (AML) – anti-money laundering and know your customer (KYC) – know customers. Currently, financial institutions have to go through a multi-step, labor-intensive process to find new customers. KYC costs can be reduced through customer verification while improving monitoring and analysis efficiency.
Polycoin, a startup with AML and KYC, deals with the analysis of transactions. Transactions identified as suspicious are forwarded to the relevant departments. Tradle, another startup is developing an app called Trust in Motion (TiM). Described as “Instagram for KYC”, TiM allows customers to take snapshots of key documents (passport, utility bill, etc.). Once verified by the bank, this data will be stored as cryptographically on the blockchain.
The capabilities of blockchain in the stock market are being vigorously tested. When done peer-to-peer, transaction confirmation becomes almost instantaneous. As a result, intermediaries such as auditors, custodians, etc. can be eliminated.
Blockchain technology allows buying and selling of renewable energy, generated by neighboring microgrids. When solar panels make energy redundant, Ethereum-based smart contracts automatically redistribute it.
Applications of Blockchain in some specific fields
In the production process, Blockchain acts as a ledger to monitor the production process, inventory, distribution, quality, transaction information… Blockchain will replace a smart device that grants permission. effective management to dramatically increase the productivity of supply chain management processes.
For consumers, they can check whether the product is genuine or not, which will prevent all fake and counterfeit products on the market.
In the healthcare sector., Blockchain is applied to asset management and patient health information storage, inventory management, orders, payments for medical devices as well as pharmaceuticals. Although there are many smart devices to monitor these services, there are many limitations on the confidentiality of patients’ personal information. Therefore, Blockchain is a preferred option.
When applying blockchain to education, the information stored on the blockchain is not only transcript data, but also the training process, practical experience, and recruitment history of each individual. Avoid the case of candidates cheating in the process of applying for scholarships, promotions, etc.; lying about their education, work experience, and discipline. Not only that, with the smart contract feature, Blockchain also allows automatic enforcement of the terms of the training regulations, handling violations of the regulations, improving the limitations in the teaching process if necessary. students give feedback.
Food chains need to become more sustainable to enhance consumer trust and loyalty, and the key to enhanced trust is effective traceability. A distributed ledger system will assist retailers and consumers in storing transaction information and increase transparency of information throughout the product’s flow from production to processing facilities. distributors, supermarkets, retailers and ultimately consumers.
Data related to quality management, price management, financial management, sales management can all be continuously updated into the blockchain chain.
According to many experts, the current retail market is gradually shifting to online commerce, especially with the development of e-commerce platforms. That raises issues of security, supply chain management, the process of transporting goods to consumers, costs from traditional ways that create many barriers between consumers and manufacturers.
Blockchain solves that problem with smart contracts, making it easy for parties to sign, linking with multinational businesses with cost savings thanks to the elimination of intermediaries, payment solutions are also provided. mounted directly on websites, e-commerce platforms.
Communication and telecommunications
By deploying cloud-based blockchain solutions, it will help communication service providers optimize existing processes while enhancing network security, overhauling operational processes, processes such as roaming and identity management in its business model. From there, improve and develop better services.
In addition to the above fields, Blockchain promises to be extremely widely applied in all industries. Currently, there are many large companies and corporations that are building their own networks using Blockchain technology . It is certain that Blockchain will make a revolution in the next few years in Vietnam and play an increasingly large role in changing the world of Information Technology.
What is outstanding about Tech Town’s blockchain programming service ?
Tech Town is currently one of the leading companies in the field of providing Blockchain application programming services in Vietnam, we can convert transactions to become safe, cost-effective and can extend. From blockchain application, we have become a developer of fintech applications that is trusted by major partners in the financial field at home and abroad.
In addition, with a team of experienced staff in the field of blockchain technology and working professionally, we are confident to bring satisfaction to customers and partners at home and abroad. and solution.
Blockchain application development services we provide
- Private Ethereum blockchain development
- Smart Contract Development (ICO)
- Development of the Whitelabel Crypto exchange
- E-wallet application development
- Decentralized application development (dApps)
- Decentralized e-commerce development
- Blockchain technology consulting
Tech Town is a technology company from Vietnam, specializing in providing technology solutions with the application of the most modern technology techniques such as Blockchain, AI, machine learning… Tech Town is also an application development company. and professional blockchain platform have cooperated with partners from many countries around the world such as: USA, Canada, Netherlands, Japan, Australia, UK, New Zealand, Singapore and other developed countries.
Contact us if your business has any technological challenges.