What Is Blockchain Technology?

Blockchain is a distributed registry technology that keeps the history of any digital currency unchanged and transparent with the help of a decentralized network and cryptographic hashing.

A blockchain is a chain of encrypted blocks. There are main (essential information and further instructions) and subsequent blocks (hash of previous blocks). Unlike traditional databases, you cannot change or delete public blockchain records; you can only add new ones. Find more information on the WhiteBIT blog. 

How can blockchain technology change the future of digital data storage and privacy?

Features of the technology make data storage more secure and transparent. The potential of blockchain solutions is already known to popular brands. Louis Vuitton and H&M were the first to integrate the technology into its system.

As a database, bitcoin looks better than traditional solutions in terms of the impossibility of changing or deleting the entered data. Thus, the history of actions associated with a particular transaction remains unchanged, and the use of the blockchain guarantees access to the entire history of operations related to this transaction. Certain conditions are needed to run smart contracts. It ensures transparency and increases trust, which benefits both the producer and the consumer.

Why governments and industries will be using blockchain soon 

In the future, the blockchain will influence the very concept of data storage, as evidenced by many points of contact between technology and artificial intelligence. We can already give an example of projects that have combined blockchain and artificial intelligence technologies, like Bext360. AI adapts the process of growing coffee beans to weather conditions and determines their quality. The data in the blockchain cannot be altered or hacked.

The obvious benefits of blockchain will likely lead to mass adoption of the technology by governments and industry. There are many activities in which blockchain can help: healthcare, banking, transport, logistics, etc.

For manufacturers, blockchain opens up the opportunity to provide customers with information collected about the product in a single database: raw materials for production, origin, etc.

Blockchain can be highly effective in detecting counterfeits. Authenticating a product using blockchain will protect both the buyer and the brand.

Blockchain technology is also starting to be used by governments around the world. In particular, people use it in state document management, company registration, and elections. It is essential to understand that the capabilities of the technology continue to grow, and the range of possible applications of blockchain is expanding. It is safe to say that most blockchain features have yet to go ahead.

What are the advantages and disadvantages of blockchain?

Blockchain is actively used in various industries, providing increased security. However, with all the obvious advantages, its decentralized nature does have a few drawbacks.

Advantages:

It’s distributed

Data is kept across several devices in a distributed network of nodes, making blockchain extremely resistant to malfunctioning technology and hostile attacks. There is no possibility of a “weak link”: each node creates and stores a copy of the database, and shutting down one node will not affect the stability of the rest of the network.

All this makes blockchain different from conventional databases that use only one or a few servers.

It’s stable 

Changing or deleting the data registered in the blockchain is a complicated process. It makes blockchain ideal for storing financial records, acting as a high-quality audit trail, where all changes are tracked and controlled in a public ledger.

Due to this quality, companies can use blockchain to control employees and prevent fraud. 

No third parties

When using blockchain technology, there is no need for intermediaries such as banks, payment providers, etc.

There is no risk associated with trust in the blockchain. Costs and fees are reduced significantly by eliminating intermediaries.

Disadvantages:

51% attack

Blockchain can suffer the “51% attack,”: a case in which the attacker takes control of more than 50% of the hashing power. At the same time, as the network develops, so does security. For example, there has never been such a precedent in the Bitcoin blockchain.

Data changes

The flip side of blockchain is that it is challenging to change. Changing the information or code of a blockchain requires a lot of effort and, most often, a hard fork.

Private keys

Blockchain technology uses public-key cryptography (asymmetric cryptography) to confirm users’ ownership of blockchain data. Each blockchain address has a corresponding private key. The loss of which means the actual loss of data.

Inefficiency

Blockchains that use the Proof-of-Work algorithm have a relatively low level of efficiency. Mining requires being extremely competitive: miners must constantly increase their computing power to have a better chance of succeeding. At the same time, there is a trend towards a more environmentally friendly and economical Proof-of-Stake (PoS) algorithm, which solves the problem of inefficiency.

Although blockchain technology has existed for more than ten years, modern standards consider it relatively young. People think it is a novelty in many countries, and its use is not generally regulated.

Nevertheless, the versatility of blockchain applications gives reason to believe that it will soon become not an innovative but a generally accepted technology.