Why Do Companies Around The World Spend Millions On Blockchain Technology

Blockchain

31
Oct 2018

2913 Views 5 Minute Read

What is a Blockchain?

Blockchain technology - a network technology that allows several parties to exchange data without an intermediary. It allows activities such as automatic transfer of payment under the terms of a contract, receiving payments for insurance case without the participation of the manager. Technically, this is a database in which it is impossible to changes. Every user keeps his or her synchronized copy. Decisions based on blockchain guarantee the trust of the parties: its participants cannot changes to the database and cannot violate the terms of the protocol. It is believed that this provides a very high level of trust in the contract.

Principles and basic concepts

Breach of contract in the framework of Blockchain is impracticable. In combination with the fact that the data entered cannot be changed, this makes the blockchain system an ideal financial tool. The blockchain registry has three main qualities:

Distribution: The database is installed on every participant's computer. A traditional database can be attacked, and its media can be physically damaged. The blockchain is protected from this: the databases are stored on the computers of all system members.

Decentralization: There is no supreme censor who can change the data. To connect a new block with a new database to the chain, all participants (computers) of the block account must give their consent independently. If the block is recognized by all as trustworthy, only in this case can it be connected to the chain.

Open: The history of all operations is available to all participants and cannot be rewritten. Anyone connected to the network Blockchain can read all the data in it. The whole history of all interactions is accessible to everyone and changing, rigging, censorship is not possible. This is the cornerstone of Blockchain.

The most important concepts

The term blockchain owes its popularity to the Bitcoin network, which was originally built as a practical solution to the problem of insecure communication with strangers.

Smart-contract is a program inside the block, which adds some business rules to it. That is, it determines what should happen under what condition. For example, "two bitcoins will be transferred to a purse if all network members approve of this action." There is a great variety of smart contracts that are suitable for the different business logic of real companies: insurance, healthcare, and finance. The existing smart contract can be recorded to more fine-tune the business logic of the customer. A well-known developer of smart contracts is the Ethereum platform.

Oracle is a program that exists outside of the blockchain. It delivers data to the outside network and can influence its decisions. Oracle can "pull up" the data that is required by the network: stock reports, weather data and so on. By adding the possibilities of machine learning, one can "teach" oracles to extract data for a blockchain from more complex sources.

Application in practice

The blockchain is an instrument that helps to regulate all kinds of processes without an intermediary. The process can be any, but most often it is a transaction: one party fulfills the condition, and the other party, when this condition is fulfilled, transfers the payment. There is no intermediary since these events are regulated by the logic of the smart contract. That is why fraud is impossible

Obstacles to implementation

The use of Blockchain is expensive compared to classical databases: they require large resources, do not allow the transfer of bulk files. Many cryptocurrency platforms can’t cope with the high number of clients: they can hang for weeks. You can get some tools that you can use to slow speed of these platforms. All these are common problems for all platforms:

- Slow data exchange. Not all data can be forwarded: for example, you cannot send graphics. Advantages of the block are to be sought in reliability, not in speed.

- There is no control over the length of the network access path. However, if the block-network is popular, then this path becomes short and fast.

- The database requires large computational resources and takes up a lot of space. Information that gets into it is not deleted. And the new block download all the existing database which makes this technology is expensive.

- Blockchain has to be commanded. In order for some action to be performed that depends on the data from outside, a command from the Oracle is needed.

- The law does not recognize the "decisions" of the detachment. If due to some reasons, a certain supplier did not fulfill his obligations. Could this be the basis for judicial enforcement? No. However, for the "solutions," it is possible to create a database of unscrupulous contractors.

- The database record is slow: it is measured in seconds, and sometimes tens of minutes, so it is not suitable for all business processes. Because of the slowness of the database, this technology is not suitable for trade exchange, where the price can vary several times per second. For its slowness and resource-intensive, blockchain has high reliability when storing data:

- Data is available 24/7. It is unlikely that the server with the information the user needs will be unavailable. You can always go somewhere for the data because it's a distributed system.

- The data is securely stored. The data will never be lost: there will always be a copy, and not one, on the other servers. Cryptographic algorithms built into the blockchain system do not allow data leakage.

- The data is under control. Access to your personal data can be "selected," and it will disappear immediately from all network bases.

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