The growing popularity of crypto investments has aroused a keen interest in blockchain technologies and their possibilities. Today, blockchain is used as a generic term, and most people associate it with Bitcoin, the cryptocurrency created using the distributed ledger technology for the first time.
However, the potential and scope of the application of decentralized ledgers have already become so much broader. Blockchains can be used independently from a cryptocurrency and can easily be modified. Anyone who knows the basics of programming is capable of creating his/her own blockchain.
When Does the Need for Blockchain Arise?
The answer to this question reveals the essence of distributed ledger technologies. First, all actions are automated. Second, recorded data cannot be deleted or modified, but a chain of transactions can be tracked anonymously. Third, there are no intermediaries between participants; data is exchanged in seconds. The guarantee of a transaction and storage of information about it are the basic mechanism laid down in the essence of a decentralized ledger. The blockchain technology can be applied in the field of social insurance, education, medicine, copyright, logistics, product quality assurance etc.
What Does a Blockchain Consist of?
Blockchain is a decentralized database, which can be supplemented and updated and consists of blocks sequentially linked in a chain. Each block contains information about the previous block. The data of blocks is copied and stored on different computers without being bound to one specific server, which makes the substitution of records impossible.
Key characteristics of the blockchain technology:
- No limits on the volume of data stored;
Disadvantages of the majority of blockchain systems:
- Speed of transaction confirmation;
- High energy consumption during mining. The disadvantage that exists today, i.e., excessive consumption of energy by miners, is also a solid basis for promising projects on the development of methods and tools for creating and implementing renewable energy sources, which can fundamentally change the approach to cryptocurrency mining;
- Vulnerability of keys: impossibility of restoring access to a lost electronic wallet, spoofing of a project wallet address or illegal access to private keys.
Each blockchain functions using one of the consensus algorithms: PoW, PoS, PoA, PoB, DPoS, LPoS, PoL or one of their modifications. The protocol influences the functioning principle of a ledger and its scalability.
Today, companies are carefully testing this technology as part of demo and pilot projects. For instance, IBM and Maersk have jointly launched in test mode an international logistics system comprising 90 large member companies. If everything goes as planned, the launch of the commercial version of the TradeLens platform is scheduled for late 2018.
The rapid development of digital technologies creates the need for quick adaptation of business and technological processes. IT developments, which can solve the arising issues, attract professional interest. When choosing a blockchain platform, there are a few things to consider with regard to its functionality and capabilities.
First, its potential and scalability. If information is intended to be used by many people, it is extremely important to quickly carry out online processing of scenarios of a network consisting of millions of users.
Second, the possibility of creating smart contracts with custom settings. The algorithm for the automatic fulfillment of specified conditions is extremely important for solving legal issues in any field, from commerce to manufacturing.
Third, economic transfer of value and trading of tokens on crypto exchanges. Developers of blockchain platforms are actively working on the creation of open source code, which would make it possible to exchange cryptocurrency between blockchains. This once again confirms that the blockchain technology potential has not been fully realized.
Promising Blockchain Platforms
Some functional technical tools, such as algorithms for creating smart contracts, acceleration of transaction speed and adaptive scalability, have found a solution in certain blockchain platforms. Let’s have a look at the most promising platforms and describe their application fields.
The Bitnation platform was created in 2014 based on the Ethereum technology. It provides administrative services typical of a state: identification, notarial services, credit history, insurance etc. Bitnation-based virtual communities already count over 15,000 people. The government of Estonia showed interest in the possibility of using the blockchain technology in the state’s notarial system. The Bitnation ideologists promote their platform as a “state in a smartphone”. Users of the state blockchain will be able to join the community based on the ideas and goals of the group regardless of their place of residence. Thus, people can choose the administration system, economic organization, work procedures etc. on their own.
Ukraine is one of the world’s leaders in implementing distributed ledger technologies — when it comes to government processes, the blockchain technology is being tested on the voting system. The experiment is being conducted on the NEM blockchain with 28 nodes and XEM cryptocurrency. Its disadvantage is commission: voting in each polling station costs about 1,227 XEM. However, experts believe it is a reasonable price for storing publically important data for an unlimited period of time.
Borderless is a mobile version of the Bezant blockchain platform. This actively developing project allows anyone to create storage of electronic payments and to receive transfers in any currency from anywhere in the world. The unique Hyperledger tool allows creating an open distributed accounting system (ledger), which maintains global business transactions. The Bezant blockchain can serve as a prototype of a bank blockchain. The Borderless mobile version could change electronic commerce.
Chronicled is an Ethereum-based open ledger for the Internet of Things. Creators of brands and other intellectual property register unique codes of built-in chips (NFC and BLE) and enter them into a public blockchain ledger, which allows them to protect their products from forgery. Chronicled is an important step in the IoT ecosystem development.
MIT’s Blockcerts project has been officially approved and is used to store documents in the University of Nicosia, which is part of the European University Association. The university offers open online courses in 83 countries, tuition payment is accepted in Bitcoins, and diplomas are recognized all over the world. The use of distributed ledger technologies makes it possible to fundamentally change the education system. First, many people have access to online courses; second, combining courses into blocks allows developing highly specialized disciplines; third, standards can be developed allowing for worldwide recognition of diplomas and certificates.
Blockchain-based applications are actively used in the management of food supply logistics. For example, Walmart and IBM are jointly testing the Food Trust blockchain network. Suppliers can track and control time of delivery, temperature conditions etc. online.
The use of decentralized ledger technologies is particularly popular in the investment field. One such promising blockchain-based technologies demonstrating stable development dynamics is the Bitbon System, which functions on the basis of a modified version of the Ethereum blockchain and is expected shortly to be transferred to a separate Simcord blockchain with open source code. The System functionality is very suitable both for investors and initiators of projects with various degrees of complexity and readiness for implementation. The main component of the System is Bitbon Crypto Value, a digital financial instrument backed by assets, which indicates security of invested funds. The Bitup-Agency as one of the Bitbon System participants conducts the evaluation of proposed business ideas or existing businesses, which require additional financing. After the evaluation and during all subsequent life cycle stages of the project, the Bitup-Agency supervises its implementation. Since the processes of interaction in the System are much broader than the “investment” concept, the developers have proposed their own definition — Contributing. Many other processes in the System have received new names as well, which is justified by the innovative nature of the Bitbon System.
The capabilities of the digital platform technology are not limited to investing. The Bitbon System allows the conducting of business activity, evaluating property rights to assets: immovable property, machinery and production equipment, copyrights, know-how, shares in statutory funds etc. and transferring their value in digital form using Bitbons.
When choosing a technology, it is necessary to assess its multifunctionality and adaptability to existing technologies. The main disadvantages of blockchain platforms with regard to scalability, transaction speed, and energy consumption already have some sort of solution. In the near future, blockchain will be used as routinely as the global Internet network, which until recently was considered something fantastic.