Even if you’re relatively new to blockchain, chances are that cryptocurrency has made you skeptical of it. While some people speak about this technology as if it were as big as the invention of the internet, many more people have been burned (or know someone who has been burned) by buying late into the fall-winter bull run of 2017-2018.
The worst part about the bull run (yes, beyond the market cap shrinking from over $700 billion all the way back down to $200,000 in a matter of just months) is the damage to blockchain’s reputation. Blockchain technology is here to stay. If it wasn’t a serious technology, then what could explain the blockchain patent war taking place as we speak between IBM and Alibaba?
This article explains what blockchain technology is, what the use cases for it are, how it is used in cryptocurrency, and why it might be here long after cryptocurrency is gone.
Want to take part in Buying.com’s revolutionary eCommerce marketplace? Click here to participate in the token sale.
Blockchain was co-created at the same time as Bitcoin with the release of Satoshi Nakomoto’s Whitepaper on Bitcoin, developed in 2009. Blockchain can be thought of as an infrastructure technology, in a similar way as the internet or steel. It can be used to build things. We build websites on top of the internet. In a similar way, blockchains can have dApps built on top of them. (Decentralized applications are computer programs that can run without any centralized body or governing agency.)
Blockchain is the highway, dApps are the cars that can ride down it.
dApps run on blockchains through the use of a network of decentralized nodes. One of the biggest use cases for blockchain is distributed ledger technology, which the nodes are responsible for maintaining. Information is stored on a blockchain through the use of establishing individual blocks of information which cannot be altered. The blocks are stored on a distributed ledger (called distributed because it is widespread as opposed to being centralized). The nodes validate the blocks to make sure the information is correct and that a consensus is made whenever a change occurs on a network.
How the information is updated and validated can depend on which type of blockchain you are using.
Types of Blockchains
There are three general types of blockchains which are easy to remember: private, public, and federated blockchains.
Public Blockchains are open-source and can be updated by anyone. Bitcoin, Ethereum, and Monero are all examples of public blockchains. The public blockchain is the most common.
Private Blockchains, on the other hand, are created with the intent to be used internally by a company. That company maintains the control of the information as opposed to miners.
Federated Blockchains, the third and final group to be discussed here, are held by the leadership of a group or organization. These types of blockchains do not allow anyone with internet access to access them. They are often seen within the banking sector due to the level of speed that this type of blockchain typically has compared with the other types.
Use Cases for Blockchain
There are many ways in which blockchain can be integrated into the modern retail, tech, accounting, governmental, and transaction industries. It is most widely used now in the tokenization of cryptocurrencies and assets, but in the future, the use cases will be much more ubiquitous and vast.
For now, we’ll look at two increasingly common use cases: tokenization and voting.
In tokenization, investors take an asset such as a hotel and divide ownership between investing parties by way of tokens. Say you own a hotel in New York City that is worth 1 billion dollars. During the tokenization, coins are created at a rate of 1 coin per $1 USD. You and your four partners each own 25%. Thus, each of the partners receives 250 million tokens each. Tokenization would be even more beneficial if that same hotel had 10,000 owners. You might think that it would be complicated to divide that ownership. The fractionation that tokenization allows enables more people to own high-end assets like real estate. A blockchain would be useful for this scenario because it can maintain any transaction of tokens in a way that is immutable and verifiable.
As for voting, a blockchain can help in a similar way: through immutability. A blockchain can prevent voter fraud by uploading votes to a distributed ledger. This ledger allows for anonymity while still protecting identity through encryption. It also ensures that everyone that is supposed to vote is actually the one voting. The blockchain will also allow the results to be fully inalterable. The next presidential elections, at least in the USA, can certainly benefit from voter fraud solutions.
Whether it’s tokenizing a multi-billion-dollar hotel or securing the interest of the general public in a country election, blockchain is taking the world by storm. But first it has to prove to the world that it can be used for many more reasons beyond cryptocurrency. The large number of blockchain patents being filed from the world’s leading tech companies just goes to show how big of a priority this technology is.