Blockchain Technology is a new advanced form of technology that works on complex algorithms that is very difficult to hack. Cryptocurrency works on Blockchain Technology.
Blockchains come in many forms and generally share four main features: decentralized data storage (a public ledger of transaction records), encryption, immutability, and a consensus algorithm.
As a specialized type of decentralized ledger technology (DLT), block-chains store encrypted data across peer-to-peer networks, linking together sequential “blocks” of information into “chains”.3
The information available to all network participants is a shared ledger of all information transactions on the blockchain.
The consensus algorithms ensure that information is consistent and immutable across this decentralized network and deter individual users from adding to ledger information without authorization from the web.
Furthermore, due to block-chain’s structure, prior information on the chain cannot be edited or removed, as doing so would compromise the integrity of the decentralized ledger.
For blockchains, membership or accessibility are two typical classification schemes. Public block chains feature a publicly available ledger and are fully decentralized; users may still need the authorization to write or add to the block chain.
Most cryptocurrencies are public block chains. Private blockchains are accessible only to the specific host organization and are used primarily for internal purposes, such as auditing or records management.
Consortium blockchains (or hybrid blockchains) are semi-private and accessible to a set group of organizations, such as banks, energy traders, or hospitals.
They can facilitate more efficient transactions or information-sharing among the parties. The type of block chain depends on its purpose and will also result in different design schemas.
Private and consortium blockchains are less decentralized and focus on smaller groups of users; thus, they may be more sustainable and cost-efficient than public block chains.
Many public blockchain implementations have different design schemas for qualities, including the consensus method, data accessibility, inconstancy, decentralization, and the focus on design architecture.
Additionally, some blockchain projects focus on developing the blockchain architecture itself (i.e. the platform level). In contrast, other block chain projects build on top of blockchains to implement specific functions (i.e. the application level).
Blockchain has the potential to advance essential elements of public purpose, such as:
Blockchain can enhance data security through decentralization or having exact copies of the same ledger stored and updated simultaneously on all system nodes.
Blockchain prevents individual actors from taking control of or maliciously editing data ledgers and offers an advantage over centralized databases when paired with encryption.
All transactions and information on blockchains are available to the network in encrypted form. Blockchain can increase real-world processes and information transparency, such as identities, electronic voting, and public utility costs.
Additional assurance is required in the Cryptocurrency and token arena, which is now one of the critical uses of the blockchain (such as for trading of securities-equivalents, tokenization of assets, taxation of cryptocurrencies, etc.).
Current blockchain tools and intelligent contracts rely heavily on code, which can be risky for non-coders who cannot verify the stated function of the code. Moreover, there is not enough public education about blockchain, resulting in a skewed understanding of the technology.
It is also important to understand blockchain’s limitations and whether it is appropriate for a specific application in considering blockchain applications. Many ICOs and public blockchain projects failed to deliver on their promised functions (due to technical limitations and fraudulent behaviour).
There are instances where blockchain may be appropriate, especially when blockchain can coordinate shared information or settle transactions among decentralized actors. Such cases are more prevalent among private and consortium blockchains.
Thoughtful approaches to regulation and development can help prevent or mitigate these challenges.