Vol 11: Types and Applications of Blockchain Technology. Why they matter?
Blockchain! Popularly known as the foundational support for Bitcoin, it has evolved beyond supporting the digital currency, although, still an emerging technology that is currently experiencing very rapid evolution. Within the space of just five (5) to seven (7) years, it has gone through changes in its technical implementation and our understanding of how useful it can be to us. It is essential we have an accurate understanding of the options available for blockchain structures, not all types of blockchains are appropriate for all the solutions we might want to deploy them for.
However, the main idea behind Blockchain is being a digital distributed ledger, a decentralized immutable database where all transactions are replicated and shared based on consensus and spread over various geographical locations. But many people commonly regard it as a single technology, without being aware that we have several types of blockchain.
TYPES OF BLOCKCHAIN
Public Blockchain and Private Blockchain are the two most common varieties, they are used majorly among cryptocurrency networks and private enterprises. The rest are; Hybrid Blockchain and Consortium Blockchain.
Public Blockchain: They are called public blockchain because they are publicly accessible. They have no restrictions on the participants and the validator, also the main advantage of this type of blockchain is the uncontrollability of the blockchain which means that nobody will have complete control over the network, hence it ensures that the data is secured and helps in the immutability of the records.
Furthermore, all the nodes connected to this public blockchain will have equal authority and the data about transactions becomes fully distributed. The most common examples are Bitcoin, Ethereum etc. These cryptocurrencies are areas where public blockchain is utilized in the real world, both of these cryptocurrencies are created with open-source computing codes, which can be seen and used by anyone. A public blockchain is about being accessible, and this is evident in how it is used.
N.B. In Blockchain, Nodes are computers connected to each other, they follow a set of predefined rules and share information’s together. They play a very significant role on the network.
Private Blockchain: As the name suggests, this particular blockchain requires the participant to be invited before they can be part of the blockchain and must be validated by either the network creator or by a set of rules put in place by the network creator. Even though the idea behind blockchain since its inception was to create an ecosystem designed to operate democratically without interference from any central authority, blockchain technology can still operate within closed perimeters, this means a private organization like a bank or supply-chain company could still implement their blockchain and control transactions that are added to the chain.
Here, all the transactions are visible only to the people who are part of the blockchain ecosystem, they are centralized and are much better controlled than public blockchain. Only trusted parties in an organization are in the network and perform the transactions.
Hybrid Blockchain: It is controlled by a central authority and created based on various business requirements and is customized to industry needs. This blockchain can be divided into two different types, where some nodes are private while others are public. Let us consider this example of banks; it is possible that the banks may be required to keep their ledgers publicly readable, but the customers may demand privacy and control of sharing the data of their accounts or wallets.
Public and Private blockchain have their merits and demerits, that is why Hybrid blockchain is focused on combining the benefits of both public and private blockchain while trying to limit the disadvantages and optimize the process. An example of Hybrid blockchain is Ripple, a blockchain-based digital payment network and protocol with its own cryptocurrency token called XRP.
Consortium Blockchain: Also called Federated blockchain, this type of blockchain is controlled by a group or group of organisations, it is more similar to a private network, even though it is built as a permissioned network, Consortium blockchain still offers a decentralized structure. Each organization in this network receive similar treatment, which keeps things transparent and fair among all parties involved. Also, it’s a platform where all the companies involved, collaborate, share data and maintain records together.
The Similarities between All Types of Blockchain
All of them are decentralized peer-to-peer networks, where each participant on the network can share information and resources directly without the interference of a third party.
They all rely on numerous users to authenticate transactions although that is not to be said of Private Blockchain. Thus, providing a considerable level of immutability.
Every network node in all these blockchains has a complete replica of the primary ledger, which gets updated timely.
Each node in a network can verify transactions, initiate or receive transactions and create new blocks.
APPLICATIONS OF BLOCKCHAIN
Web 3.0: Also known as the Semantic Web, one of the biggest areas where the technology behind blockchain will be applied is Web 3.0 because it serves as its foundation. Web 3.0 is a new version of the web that enables a decentralized economy, as it removes the dependency on a central authority for managing the network, instead, replacing it with a distributed consensus managed by many. Let’s think of it, currently, all our data on the internet is stored on a computer that is owned by a private body, which poses a serious threat to our privacy.
Smart Contracts: Smart contracts are just like contracts in the real world, the only difference is they are completely digital. They are software programs that are stored and executed automatically on a distributed and decentralized blockchain network. In layman's terms, smart contracts are a piece of code designed to remove human errors and issues, it allows transactions and agreement to take place among anonymous parties without a central authority, legal system or any enforcement system.
The code stored inside the blockchain controls the implementation of the contract, and the transactions are trackable, permanent and immutable. At the moment there are only a few blockchains that support smart contracts, but the common smart contracts are written on Ethereum using a programming language called Solidity, Ethereum was specifically designed and created to support smart contracts.
Decentralized Applications (DApps): Just as any Software Developer can build apps for the App Store on either iOS or Android, developers can also build DApps on the Ethereum blockchain infrastructure. These apps aim to give their users more control over their finances and data. Being built on the blockchain means users don’t have to go through a third party, they don’t have to give up their data to someone else, all data and records generated by these apps are stored on an immutable public blockchain.
In most cases, the entire code base is open source, this means other people can access the code and build on it, nobody owns the application because they run on peer-to-peer networks, they are free to use and can be improved by anyone in the community. This space is still new and improving, however, new DApps are being built every day. There isn’t one correct definition for them, but they share these major characteristics. They;
Are Open source
Are Incentivized
Run-on Blockchain
Are Decentralized
Use Smart Contracts
Popular DApps are; Uniswap, CryptoMines, MakerDAO, OpenSea, Dogs Of Elon, AAVE, Sorare, Wink etc.
Decentralized Finance (DeFi): DeFi is the term for the next generation of digital financial services and products that are being built on the Blockchain that uses Cryptography and Smart Contracts. Anything you would go to a traditional financial institution for like savings, borrowing, lending, investing etc. Those are all the things you can easily do with DeFi.
The goal of DeFi is to use technology to remove intermediaries between parties in a financial transaction and create an ecosystem of financial applications and projects built on top blockchain technology. Most DeFi projects are built on Ethereum because it was one of the first programmable blockchains that can handle smart contracts. DeFi promises to be faster, more interoperable, more transparent and global, meaning, anyone around the world with an internet connection can use these financial products and services.
Government: The Blockchain idea will be best suitable for my home country Nigeria because finding the right use cases of this technology can help us create a digital government that will protect our data, streamline processes, reduce waste and corruption while simultaneously increasing trust and accountability. The Distributed Ledger Technology on Blockchain will help solve the issue of transparency in government whereby, public sectors like financial institutions, land registration, identity management, elections, supply chain traceability, health care, corporate registration, taxation etc. can prove the integrity of their data or the ordering of events to the citizens, it’s very easy on blockchain and if anybody should manipulate it, there is a trail of that already on the blockchain.
Countries like; UAE, Netherlands, Malta, Estonia, Georgia are already implementing blockchain in their system of government.
OTHER AREAS OF APPLICATION
Cryptocurrencies
Supply chain management
Energy management
Real Estate
Patents Protection
Cross Border payments
Online Music
Having health and educational records on the blockchain
This is by no means the complete list of the applications of Blockchain, there is still a lot happening in this space as it cut across all sectors.
CONCLUSION
Blockchain Technology is an innovation in computer science, however, I think we need to start preparing ourselves because we are about to face a world where distributed, autonomous institutions have quite a significant role. As a technology we need it because it saves time, money and it reduces risk, it also increases trust and we don’t need any central authority for all that. Blockchain is not the answer to all world problems, but if we allow this innovation to grow in all these areas, deploying a huge amount of resources for that, it will help in creating an egalitarian world where people are equal and deserve equal rights and opportunities.
Tomorrow is not here yet, despite that, we are actively building the future with our actions, whether it is Blockchain, Cryptocurrencies, Metaverse, AI, IoT or any other technology, or perhaps something that has not even been invented yet.
We humans as a race on this planet with our abilities to question things and explore our mind for answers, creating paths to do things differently has always led us to make this world a better place and challenge the status quo.
This is perhaps one of the most incredible times we have ever seen because the amount of change that has happened over the last 30 years and that potentially will happen over the next two decades will redefine our generation as change-makers and dreamers.
Until next time, Happy Learning.
Enjoy the weekend.
Faith.
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