The initial concept of Blockchain as an Information Technology term for how to structure and share data has now transformed into a modern approach to the distributed database. These distributed databases are meant to store and share information and are controlled by a group of individuals. There are various types of blockchain applications integrated across hardware and various platforms across the globe.
Types of Blockchains
There are many types of blockchains such as Public blockchains that are run through a token and have open-source code. Bitcoin is an example of public blockchains. Another type is permissioned blockchains which are large distributed systems and may or may not be open source. Both public and permissioned blockchains use native tokens whereas Private Blockchains do not use a token and are smaller in structure. Their membership is controlled as they tend to have members who can be trusted with trade confidential information. Another type is Sidechains which run parallel to the main chain to allow moving digital assets between two different chains.
All these types of blockchains utilize cryptography for safely managing ledgers. This eliminates the need for central authority which is the most dominant aspect of blockchains. Blockchains create a history of transactions that are difficult to change or remove. If a user wants to add an entry or transaction to the Blockchain, it first needs to be verified by someone who has validation control to verify the proposed record.
Difference between a Typical Database and Blockchain
One significant difference between a typical database and a blockchain is the data structure. A blockchain collects information in groups called blocks that contain sets of information. These Blocks have some storage capacity and they are linked to the previously filled block once they are filled. The chain of data thus formed is called a blockchain with data structured into chunks that are strung together as a chain of blocks. This data structure intrinsically makes an irrevocable timeline of data when applied in a decentralized nature. Each newly added block in the chain is assigned a precise timestamp.
The objective of blockchains, also known as Distributed Ledger Technology (DLT) is to record and distribute digital information without any editing. This makes blockchain the foundation for indisputable ledgers or records of transactions that cannot be changed, erased, or destroyed.
Blockchain allows the data held in a database to expand amongst numerous network nodes at different locations. If an attempt is made to modify a record at one occurrence of the database, the other nodes would remain unchanged and so would avert a perpetrator from doing so. If one user tampers with a record of transactions, all other nodes would cross-reference each other to identify the node with the incorrect information. This system helps in establishing a precise and crystal clear order of events. This way, no one node within the network can modify the information it contains.
Uses of Blockchains
Companies like Walmart, Siemens, Pfizer, Unilever, and many others have incorporated blockchain to trace the passage their products pass through to reach their locations. Financial institutions are also integrating blockchains to exchange funds securely and more quickly, Healthcare industry is also leveraging blockchains to secure the medical records of their patients and encoding them with private keys that can be assigned to certain individuals for limiting access and warranting privacy. Blockchains are also used in keeping the record of property transparent by establishing clear timelines of ownership of property.
Benefits of Blockchain
One of the major benefits of Blockchain is its accuracy. As there’s no human involvement in the verification process in blockchain transactions, the record of information is accurate with low chances of computational mistakes. It requires 51% of the network computers to make the same mistake for the error to spread from one copy of the blockchain to the rest of the blockchain making it almost impossible for the error to occur. Blockchains also reduce costs by excluding the need for third-party verification and processing fee. It is also the most secure form of a database as it is difficult to be compromised because of its decentralized structure.
Why Startups Should Use Blockchain Technology
Startup businesses can use blockchains to put themselves ahead of their competition. With blockchains, startups can ensure that all their transactions are transparent, safe, and reliable. Startups can use blockchains to improve their business processes with improved accounting systems, seamless data sharing, and eliminating the middleman. Blockchains can also shorten the supply chain by directly selling to the final consumer thus lowering prices and increasing profit margins. Blockchain technology also allows startups to expand their audience and market their products globally without worrying about exchange rates. Above all, blockchain technology also makes it easier for startup companies to raise capital by evading many obstacles that slow down the fundraising process.
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