Blockchain technology 2020 – Everything you want to know !!

What is blockchain technology?

The concept behind blockchain technology is that data is recorded in a way that prevents it from being changed, hacked, or cheated. Blockchains comprise digital ledgers of transactions that are duplicated and distributed over a network of connected computers. Blockchains contain a chain of transactions, and all participants’ ledgers are updated when a new transaction is recorded on the chain. Distributed Ledger Technology (DLT) refers to a decentralized database managed by multiple participants. Blockchain, also known as distributed ledger technology, records transactions using immutable cryptographic signatures called hashes.

Therefore, if one block in one chain were to be changed, it could be seen as soon as it had been modified. It would be impossible for hackers to corrupt a blockchain system without changing all blocks in the chain, across all distributed versions of the chain. The security of blockchain-based ledgers such as Bitcoin and Ethereum is significantly increased by the addition of blocks to the chain on a continuous basis.

By using cryptographic hashing and decentralization, blockchain, sometimes called Distributed Ledger Technology (DLT), enables unalterable and transparent recording of any digital asset history. To understand blockchain technology, consider a Google Doc. The document is distributed instead of copied or transferred when we share it with a group of people.

Everyone can access the document at the same time through this decentralized distribution chain. Rather than entrusting their changes to someone else, everyone is able to see all modifications to the doc in real-time, ensuring that the changes are completely transparent. Blockchain technology is a revolutionary and promising tool for reducing risk, stamping out fraud, and bringing transparency in a scalable way for myriad applications. Artificial Intelligence and Blockchain technology are hot topics in the current market.

Blockchain technology is all the rage right now, so why is it so hyped?

It has been attempted many times before to create digital money, but they have failed. Trust is the predominant issue. Can we trust that someone who creates X dollars won’t steal your X dollars, or give themselves a million X dollars? Blockchain, a type of database used by Bitcoin, was invented to solve this problem. The person in charge of the database (e.g., someone who gives themselves a million X dollars) is able to modify the entries in normal databases. There is no authority in blockchain; it is run by the people who use it. Additionally, bitcoins cannot be faked, hacked, or double spent, so users of bitcoins can be confident that they own something valuable.

The Blockchain: How Does It Work?

The whole idea behind using a blockchain is to let people share valuable data in a secure, tamper-proof manner, especially between people who do not trust each other.
To understand blockchain technology, there are three main concepts in blockchain technology: blocks, nodes, and miners.
Block

Chains consist of multiple blocks, each of which has three basic elements:

• The block of data.
• Nonces are 32-bit whole numbers. When a block is created, a nonce is generated randomly, which generates the block header hash.
• Hashes are 256-bit numbers coupled with nonces. This must be an extremely small number (i.e., start with a lot of zeros).
Cryptographic hashes are generated by a nonce every time the first block of a chain is created. If the block is not mined, the data is considered signed and forever linked to the nonce and hash.

Miners

Through a process called mining, new blocks are added to the chain. A blockchain is a linear chain with each block having its own nonce and hash, but each block also refers to the previous block in the chain, so mining a block isn’t simple, especially on large chains. The complicated math problem of generating an accepted hash is solved by special software by miners. Due to a nonce’s size of 32 bits and a hash size of 256, there are roughly four billion possible combinations of nonce and hash that need to be tested until one is found. It is said that when that occurs, the miner has found the “golden nonce,” and their block is added to the chain.

When modifying any block earlier in the chain, you must mine not only the block that has been modified but all blocks that follow it. Blockchain technology allows no manipulation of the previous blocks. Golden nonces require a lot of computing power and time, and therefore are “safety in math.” The miner is rewarded financially after a successful block is mined and accepted by the network as a whole.

Nodes

Blockchain technology emphasizes decentralization as one of its key concepts. Blockchains cannot be owned by anyone organization or computer. Through the chain of nodes, it functions as a distributed ledger. In a blockchain network, nodes are electronic devices that maintain copies of the blockchain and keep the network operational. The blockchain is distributed among each node, and each newly mined block must be algorithmically approved before the chain can be trusted and verified. Every activity in the ledger can easily be checked since blockchains are transparent. An alphanumeric identification number is provided to each participant that shows their transactions.

The blockchain’s integrity is maintained and trust is established among users by combining public information with checks and balances. The blockchain is essentially the scalability of trust through technology.

What is blockchain and why is it important?

Blockchain technology

These are three reasons why you should be familiar with Blockchain:

• It is not necessary for blockchain technology to be public. In addition to existing publicly, it can also exist privately, where nodes just act as points on a private network, and the Blockchain acts as a distributed ledger. In particular, financial institutions are under tremendous pressure to prove compliance with regulatory requirements, and many are now utilizing Blockchain technology. Reduced compliance costs are possible with secure solutions like Blockchain.

• Blockchain technology transcends the financial sector. Any multi-step transaction requiring visibility and traceability can be implemented with it. Managing contracts and auditing product provenance are notable uses of Blockchain in the supply chain. Other uses include voting platforms, titles, and deed management, among others. Due to the convergence of digital and physical worlds, Blockchain will have ever more practical applications.

• In the future, Blockchain will experience exponential growth due to the convergence of public and private Blockchains into an ecosystem in which companies, customers, and suppliers can collaborate securely, auditable, and virtually.

It must be more complicated than that, right?

Understanding and learning blockchain technology’s complicated implementations and achieving value from them come with both implementation and implementation-related challenges. For some, this example is overly simplistic – but for others, it might serve as a starting point. The role of trusted third parties as intermediaries in traditional settings is to facilitate financial transactions. A bank or other intermediary is usually involved when sending money overseas.

This usually does not take place immediately (it can take up to three days) and the intermediary will charge for this either through exchange rate conversions or other methods. An alternative to the traditional intermediary for transferring Bitcoin is the open-source Blockchain technology, which offers an alternative to the original blockchain. An ecosystem of collective verification replaces the intermediary, guaranteeing a high degree of traceability, security, and speed.

Using the example above (the “public Blockchain”), there are multiple “nodes” acting simultaneously as executors of transactions and miners in the network. The Blockchain is then updated with new blocks. Each Bitcoin miner receives a reward according to the time it takes to determine a) the validity or b) the mathematical key linking the block of transactions to the appropriate location in the open ledger. With each transaction, more Bitcoins enter the virtual money supply. Bitcoin mining will cease eventually (although estimates indicate that it will not be until 2140) when the amount mined will decrease every four years. In spite of the original intention to maintain Bitcoin, other virtual currencies, like Ether, can also be handled by Blockchain.

How to invest in blockchain technology?

If you want to invest in blockchain technology is to buy shares in any publicly traded company that’s either using or building blockchain technology, or that works with or invests in cryptocurrency.

Companies on the blockchain: individual stocks

These are some of the most prominent publicly-traded companies that use or have worked with blockchain technology:
• Intel
• IBM
• Mastercard
• AMD
• Nvidia
• DocuSign and many more

Crypto-related stocks: individual blockchain stocks

As an alternative, there are publicly traded companies that offer services related to cryptocurrency or have direct exposure to it:

• In addition to offering bitcoin payments, Square also holds bitcoin.
• Commodity Futures Trading Commission (trades bitcoin futures)
• The Intercontinental Exchange (operates the Bakkt crypto exchange)
• Bitcoin is accepted by Overstock (digital retailer)
• A bitcoin investment fund is operated by Grayscale Bitcoin Trust
• (PayPal accepts bitcoin payments)
• The MicroStrategy Group (invests in bitcoin)
More crypto firms are likely to be publicly listed in the future as cryptocurrency becomes more mainstream.

Blockchain funds

A blockchain investment isn’t limited to buying individual stocks. There are funds that offer exposure to blockchain technology, which are largely in the same line as traditional funds. Mutual funds and exchange-traded funds, which let you hold a portfolio of assets, are usually the preferred instrument for individual investors, offering diversification – and therefore less risk – at a relatively low cost. The sector they work in, however, has a special advantage.

The best ways to invest in blockchain technology

While blockchain technology offers great promise, the industry remains immature and has not yet proven to be viable. There is nothing unusual about blockchain being a new technology, as there are no differences between quantum computing, electric aviation, or spatial computing, which all involve taking a risk to innovate. So, when it comes to investing in blockchain technology, you have a number of tips worth considering. Unlike Long Blockchain, a number of companies claim to be involved in blockchain technology these days, but some are pursuing the technology more seriously than others. This is why it is particularly crucial to research a particular company and its fundamentals.

Be aware of the risks associated with investing in blockchain: Just like tech stocks, blockchain stocks are a high-growth sector that exposes investors to many risks. The usefulness of blockchain for a broader range of purposes has not yet been fully proven, so investing a small percentage of your capital in blockchain companies is advisable, as well as diversifying your investments in other fields.

Researching individual companies can prove just as critical as keeping up with new laws and regulations, especially since the blockchain industry is so young. There is a possibility that government officials could pass legislation that significantly disrupts blockchain-focused companies.

An understanding of the regulatory landscape is another useful indicator, and both the UK and EU are investing time into drafting laws that are relevant to digital assets. Thus, both administrations are looking to the underlying blockchain technology as a growth engine.

Consider the bitcoin connection: Blockchain investments are much better than bitcoin investments. Some analysts advocate fixing on firms that primarily use blockchain technology to deal with bitcoin, however, since it is still the most successful use of the technology to date. Consider investing in companies that leverage bitcoin to work with blockchain technology. Square, Paypal, Coinbase, Silvergate Bank, Galaxy Digital, Hive, Voyager are all companies that own bitcoins on their balance sheets or are building businesses around bitcoins.

The financial takeaway

The technology behind blockchain is an exciting innovation that now cuts across many industries. Since investing in it promises higher growth than average, it has piqued the interest of investors all over the world. In addition to cryptocurrencies, blockchain technology has also been gaining traction due to the popularity of cryptocurrencies like bitcoin, whose price has risen 300% in 2020 alone.

Therefore, investors seeking to invest in ‘blockchain tech’ should pay particular attention to companies that provide crypto services or invest in crypto, rather than just looking at companies that use blockchain. A blockchain ETF might also be a better investment than investing in individual companies since these ETFs cover a wider range of companies.

WHAT DOES CRYPTOCURRENCY DO?

In order to secure and record every transaction, cryptocurrencies rely on blockchain technology. It is possible to use cryptocurrencies (such as Bitcoin) as a digital form of cash for anything from everyday items to larger purchases (such as cars and homes). When it is bought using a digital wallet or trading platform, it can be digitally transferred after purchase, with the blockchain recording it and letting the new owner know who it belongs to. Cryptocurrencies are appealing due to the fact that they record everything in a public ledger and use cryptography to ensure the authenticity of every transaction.

A SHORT OVERVIEW OF BLOCKCHAIN

• The Blockchains are databases that store encrypted blocks of data & chain those blocks together to form a single-source-of-truth for those data
• Distributing digital assets rather than copying or transferring them creates an immutable record
• Due to the asset’s decentralization, the public has access to it in real-time and at all times.
• Document integrity is preserved by keeping a transparent record of changes, which in turn builds trust in the asset.
• Almost every industry uses blockchain technology due to its inherent security measures and public ledger

 

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