What is Blockchain Technology, and How Your Business Can Benefit out of it.

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At this point, it’s clear that the blockchain technology has a potential to transform our society and the way we do business.

Fortune 500 enterprises, the UK and the U.S. government, major international banks – the list of influential institutions that have expressed interest in exploiting decentralized ledgers seems utterly endless. That said, the fever for blockchain innovation has yet to capture companies of smaller scale.

What is blockchain?

Filtering out all the hype and confusing technical jargon, we can say that a public blockchain is a decentralized recordkeeping system that anyone, anywhere, with an internet connection, can use. It doesn’t belong to any centralized entity, has no single point of failure, and is distributed across the wide network of its users.

Blockchains are designed in a way that prevents users from modifying entries retroactively. Generally speaking, they function as giant google documents with one distinction - one can view or add information to them but not, in any way, alter the records they already store.

Created initially as an accounting method for the Bitcoin digital currency, Blockchain has been found to possess a vast potential for companies in various industries and society as a whole.

Ethereum platform, for example, has provided a functionality that enables programmers to create simple or complex smart contracts and have them executed on the public blockchain. These programs seek to replicate legally binding agreements through code and, thus, they will allow companies to automate such complicated procedures as clearing and settlement.

Blockchains are already being used to host peer-to-peer marketplaces such as OpenBazaar (a decentralized Ebay competitor), and ride-sharing projects like Chassyr that may potentially render Uber obsolete and costly. All in all, every industry that relies heavily on intermediaries stands to be transformed by this promising technology.

Public vs Private Blockchains: What’s the Difference?

As 106 years old Big Blue (and then Microsoft) started to recognize blockchain promise and propose private decentralized ledgers for individual business use cases, the technology has earned a whole new level of recognition.

Walmart and Visa are already testing how private decentralized ledgers can help them streamline supply chains, store records, move and issue assets efficiently. And that such giants have expressed interest goes to show that blockchain is about to be picked up widely across corporations across the world.

Private blockchains impose restrictions as to who can view and control them, they belong, usually, to an organization or a consortium of firms. They are to blockchain ecosystem what intranets are to the Internet - closed networks designed for specific groups of authorized users that allow a company (or whatever entity controlling it) to maintain a high level of data secrecy and a controlled flow of traffic. Here are some of the major differences between Public and Private Blockchains:

  • They are typically governed by a few known and trusted nodes and therefore protected from a 51% attack.
  • They run faster and are cheaper to use than their public counterparts.
  • Being state machines, blockchains allow to track the movement of assets in real time and therefore eliminate the need to check with weekly and monthly reports.
  • Unlike public chains that are unregulated, private blockchains can be designed to comply fully with AML (Anti-Money Laundering), KYC (Know Your Customer) and HIPAA (Health Insurance Portability and Accountability Act) laws.

What are Smart Contracts on Ethereum?

Proposed initially in 1994 by a computer scientists Nick Schabo, the smart contract technology is meant to combine advanced contract law with the protocols used in online commerce. It allows attaching programmed logic to digital transactions.

Bitcoin, the most famous application of blockchain, was the first network to enable smart contracts. It permitted one to transfer value to another party and have the transaction validated if certain predefined conditions were met. It was limited to the cryptocurrency use case, however, and therefore the functionality it provided (in terms of programmable contracts) was limited.

Ethereum, the second largest blockchain network, was created specifically to support smart contracts and decentralized applications. It replaced Bitcoin’s scripting language (which consisted of about a hundred scripts) with a more versatile, Turing-Complete programming language of its own.

Currently, popular use cases for smart contracts include:

  • Initial coin offerings (ICOs) – unregulated means by which startups raise funds for their ventures on the blockchain
  • Multi-sig accounts – programs that ensure a transaction takes place after a certain number of people agree to it
  • “Libraries” for other smart contracts (this function is somewhat similar to how a software library works)
  • Means to manage agreements (for example when an insurance purchase happens) and enforce obligations on the parties involved

Blockchain predictions

  • High-profile financial institutions (pension funds, asset managers, payment providers) will enter the blockchain space.
  • Since blockchain is already being considered by more than half of the world's top corporations, at least two-thirds of them will integrate the technology into their systems by the end of the year.
  • Large companies will launch test products and services on public chains (AXA group has already done so by offering flight delay insurance on Ethereum).
  • Major social Media platforms such as Medium and Reddit will start rewarding top content creators with cryptocurrency. (We’ve seen this becoming a thing with the Kik messaging app which has launched it own token).
  • One blockchain dominance will cease to exist; there are hundreds of new tokens being launched and traded and therefore we expect chains to become interoperable in 2018.
  • SEC will come down hard on fraudulent Initial Coin Offerings and the popularity of ICO token will drop at once. ICOs will end up morphing into a new form of IPOs.
  • Hybrid blockchains will start appearing. Much like extranets, they will combine the features of both public and private networks.

Blockchain Applications in Business

Blockchains, especially those of a private/consortium type, are being increasingly propagated for business purposes. Organizations such as Enterprise Ethereum Alliance (EEA) are seeking to combine enterprise-grade level governance with the open-source development and, in doing so, they will allow companies to get the best of both worlds.

However, despite its massive media coverage, the blockchain technology is still veiled in mystery for many an entrepreneur - partly because the subject is inherently complex and partly due to the overwhelming hype which currently surrounds it.

The true worth of decentralized ledgers is hard to distinguish in the see of bogus claims and a lot of business owners are still clueless as to the means of unlocking the vast power of blockchain.

Our free ebook is aimed to change that. We’re posting it to raise awareness about blockchains among business owners who perhaps have not themselves a programming background.

Download the free eBook to learn in detail

  • What blockchain is and which industries it is most likely to disrupt
  • The distinction between public and private blockchains; the ways your company can leverage the later to streamline business processes
  • How smart contracts work and why Initial Coin Offerings are something you should be wary of
  • The concepts of decentralized exchanges and an Internet of Blockchains Many more.

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