Blockchain Technology

Blockchain Technology.

Ever heard of blockchain? Do you know how it works? Do you know where it is used? What are its advantages and disadvantages? Stay informed with us. Today's article is all about blockchain technology.

What is blockchain and How does it work?

To understand blockchain we will use two analogies.

The Village Analogy

A first analogy involves people in a fictional village. It’s a bit long but here’s the gist:

A village of about 10 families would farm, hunt and gather their goods and would trade them with each other. They trusted each other quite well. If the farmer didn’t have any rice to trade for the hunter’s meat, the hunter would let it slide and would wait for the rice harvest. But the villagers started making too many promises and it got more difficult to keep track of these promises.

So the village appointed “LedgerMan” to keep track of all the services exchanged among the people to keep things fair and honest. It worked well for a while and the villagers trusted LedgerMan. However, he started charging a small fee for his scorekeeping, because it felt like a full-time job. Unfortunately, he started to accept bribes and even went on to unfairly raise his prices.

After much fighting and chaos, the villagers ousted LedgerMan. Scrambling for solutions, they came up with the perfect replacement - everyone would keep a ledger! They called it the Smart Ledger system.

Villagers from all the families would gather at the village square throughout the day. At these gatherings, they would trade goods and everyone would keep track of every promise made in their ledgers.

Once a week, each villager would read out one another’s ledger to check for discrepancies. If there were any, the villagers would cross-check all ledgers and would choose the most commonly entered record as the correct one.

Blockchain works exactly like the Smart Ledger system, except that the records are stored digitally. Banks, lenders and institutions, though, use a centralized system that can be easily manipulated and kept away from the public.

Google Docs Analogy

Our second analogy to explain blockchain involves Google Docs, courtesy of William Mougayar.

With Microsoft Word, working on a document requires lots of back-and-forth. A person works on a document, and the recipient has to wait for the author to send the file back before the recipient can make edits or add comments.

Comments, notes and other changes made to the document are only visible to the person working on it, or someone sitting nearby watching the author working.

The only way around this is to look over the author’s shoulder (which wouldn’t go too well with most folks).

However, with Google Docs, you and everyone else who the documents have been shared with can access the file and collaborate with whoever is working on it in real-time. Everyone with access can view it, make comments or suggest changes, and even the revision history is visible to all guests. What’s seen and entered cannot be denied by anyone, and one person can’t make a change without everyone seeing the change.

That, folks, is precisely how blockchain works. Of course, instead of it being a shared document, it’s a shared ledger that all involved parties have access to. Whatever changes within it can be verified by everyone in that network.

Blockchain defined

It is essential to understand that blockchain is not a device, machine, or cryptocurrency in itself. Instead, it functions as a system, a methodology for maintaining and tracking information. However, cryptocurrencies like bitcoin, ethereum, litecoin, and others operate on blockchain platforms.

Furthermore, this public ledger extends beyond currency. Numerous companies and industries are increasingly embracing blockchain to establish secure repositories for sensitive data and information, ensuring protection against any form of tampering. In simple terms, blockchain technology represents the future, and it has the potential to shape your future as well.

Where is blockchain used?

There are so many applications of blockchain but here I will give only 5 uses which are either most common or will be most common.

1. Payment processing and money transfers

Arguably the most logical use for blockchain is as a means to expedite the transfer of funds from one party to another. As noted, with banks removed from the equation, and validation of transactions ongoing 24 hours a day, seven days a week, most transactions processed over a blockchain can be settled within a matter of seconds.

2. Monitor supply chains

Blockchain also comes in particularly handy when it comes to monitoring supply chains. By removing paper-based trails, businesses should be able to pinpoint inefficiencies within their supply chains quickly, as well as locate items in real time. Further, blockchain would allow businesses, and possibly even consumers, to view how products performed from a quality-control perspective as they traveled from their place of origin to the retailer.

3. Digital voting

Worried about voter fraud? Well, worry no more with blockchain technology. Blockchain offers the ability to vote digitally, but it's transparent enough that any regulators would be able to see if something was changed on the network. It combines the ease of digital voting with the immutability (i.e., unchanging nature) of blockchain to make your vote really count.

4. Real estate, land, and auto title transfers

One of the primary goals of blockchain is to take paper out of the equation, since paper trails are often a source of confusion. If you're buying or selling land, a house, or a car, you'll need to transfer or receive a title. Instead of handling this on paper, blockchain can store titles on its network, allowing for a transparent view of this transfer, as well as presenting a crystal-clear picture of legal ownership.

5. Food safety

Yet another intriguing use for blockchain could be in tracing food from its origin to your plate. Since blockchain data is immutable, you'd be able to trace the transport of food products from their origin to the supermarket. What's more, should there be a food-borne illness, blockchain would allow the source of the contaminant to be found considerably quicker than it can be now.

What are the advantages and disadvantages of blockchain?

Here are some advantages and disadvantages of blockchain.

Advantages.

1.Open: One of the major advantages of blockchain technology is that it is accessible to all means anyone can become a participant in the contribution to blockchain technology, one does not require any permission from anybody to join the distributed network.

2.Verifiable: Blockchain technology is used to store information in a decentralized manner so everyone can verify the correctness of the information by using zero-knowledge proof through which one party proves the correctness of data to another party without revealing anything about data.

3.Transparency: It makes histories of transactions transparent everywhere all the nodes in the network have a copy of the transaction in the network. If any changes occur in the transaction it is visible to the other nodes.

4.Efficiency: Blockchain removes any third-party intervention between transactions and removes the mistake making the system efficient and faster. Settlement is made easier and smooth.

Disadvantages.

1.Scalability: It is one of the biggest drawbacks of blockchain technology as it cannot be scaled due to the fixed size of the block for storing information. The block size is 1 MB due to which it can hold only a couple of transactions on a single block.

2.Immaturity: Blockchain is only a couple-year-old technology so people do not have much confidence in it, they are not ready to invest in it yet several applications of blockchain are doing great in different industries but still it needs to win the confidence of even more people to be recognized for its complete utilization.

3.Storage: Blockchain databases are stored on all the nodes of the network creating an issue with the storage, increasing the number of transactions will require more storage.

4.Regulations: Blockchain faces challenges with some financial institutions. Other aspects of technology will be required in order to adopt blockchain in a wider aspect.

This is an introductory article. In our next article on Blockchain we will talk about its connection with web3 , where it started, some controversial stories about crypto and many more. So stay with us and continue enjoying our stories.

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As Kenya celebrates 60 years of independence, let us continue to stand by one another during these challenging economic times. As many of us belong to the youth, it is crucial to remember that we are the leaders, mothers, and fathers of tomorrow. Let us embark on our endeavors with this realization in mind. I extend my best wishes for success in all aspects of your lives.

A special shout-out to all those who fought for our country's independence.