ICO or the adoption of innovative technologies, like Blockchains, is the need of the hour. It is observed that ICO or the usage of the blockchains technology for trading purposes has increased dramatically and also demonstrates the urgency for every company to adopt this cutting-edge technology. According to the latest Global Data Study, ICO has declined by nearly 20% as compared to the last years. The main reason being many companies are now preferring to adopt traditional approaches for their future stage projects instead of going ahead with the innovative technologies of blockchains.
What Exactly is a Blockchain?
It is defined as a shared database or ledger that works together as a trust-less ledger. The nodes in the network are called participants in a transaction of the chain. The concept of distributed Ledger has emerged due to the improvement of blockchains technology which allows users to transact in real-time. Unlike the traditional databases, which facilitate only record-keeping, blockchains allow users to trade in real-time.
Transactions are fast, secured, and fully redundant. A user of this new technology needs not wait for confirmation of the transactions in the traditional ledgers. He can check the status of his transactions immediately and perform any number of operations in his account without any third-party intervention. In short, using Blockchain technology reduces the complexities of money transfer.
The major advantage of using this innovative technology is its capacity to inter-operability. Transactions are fully secured, fast, and inter-currency. A very good example to illustrate this point is the bitcoin wallet. Transactions are safe from any third-party intervention, unlike the traditional blockchains. The bitcoin wallet maintains a strict no-transaction limit, which acts as a security feature for the users.
As mentioned earlier, the distributed ledger in the blockchains acts as a database where the blocks are arranged in an order called the proof-of-work. Only with the help of the miners can the work be performed and a new ledger is generated. The mined blocks include the latest information. With the help of the proof-of-work, nodes cooperate together and update the ledger. The network of peers enables users to execute their transactions without relying on a third party. Thus, users can take advantage of the latest features of Blockchain technology without any hindrance.
As it is evident from the use of the term “blockchain”, the ledger system works as a ledger. However, unlike traditional ledgers, a ledger in the blockchain does not have centralized control. It is controlled by users themselves through a process of peer-to-peer marketing. Thus, there is no single entity controlling the ledger itself. This characteristic provides the blockchain with many advantages, most importantly, the absence of a central point of failure or outages.
Another important feature of the blockchain is its Consensus mechanism. The consensus principle in the blockchain is a crucial feature that provides users with financial security and other incentives to use the chain. Consensus is achieved through a process called the Byzantine Agreement. The Byzantine Agreement is a series of agreed-upon statements by the explorers of the new block along with the nodes.
In short, blockchain technology acts as a distributed database for recording transactions that occur between a specific virtual currency and one or more parties. Put simply, in this case, blockchain is a replicated transaction database that maintains exact copies across every member machine within a network. This means that every member machine will have a copy of all the past and current transactions across the network. This is the main purpose behind the distributed nature of the technology; by making the entire system run in a consistent manner, every node on the network is able to act as if it is acting in its own personal capacity, without being affected by the other nodes that might be acting outside of its capability.
One of the most common characteristics of the system is that it acts as a permissionless ledger. Unlike the traditional transaction records, where the buyer and seller must first agree on the terms of a transaction before it can be approved, the transactions on the blockchain are authorized and recorded without the involvement of these third parties. This reduces the incidences of fraudulent use of funds, where an innocent purchaser may unknowingly give money to a malicious seller, causing both parties great financial loss.
In order for transactions on the blockchain to go through, they must be authorized by a user, which is referred to as a node in the network. Nodes in the system are computers that are programmed to accept and relay requests for cryptographic tokens that make it possible for users to transact with one another. There are several ways in which this authority can be gained, such as by being an account holder, being a member of a node, or having a participating computer in the network. However, the most popular way is by being a consumer of the decentralized nature of the ledger itself. Transactions performed on the blockchain are subject to the approval of the network, which is controlled by a self-governing entity called a hash mint, which is also called the miners.
Risk of Fraudulent:
The miners work to make it possible for transactions across the entire ledger to be approved and processed without involving other users, reducing the risk of fraudulent use of funds. As well as being a moderator, the hash mint is also responsible for ensuring that each block on the ledger is valid and not a duplicate. By doing this, blockchain technology is able to avoid the problem of centralization, which occurs when one company controls the distribution of the ledger. The decentralized digital ledger, rather than relying on one company to control it, allows multiple users to have access to it at the same time, increasing security measures.
The process of getting an offer accepted onto the ledger can take place through the use of a protocol called the bitcoin protocol. The bitcoin protocol provides the means for a user to approve an offer before it gets placed onto the global exchange. Once the offer has been approved, this then makes the transaction possible between buyers and sellers across the world. This is the main benefit of the decentralized ledger technology compared to that of the traditional peer-to-peer securities market. Because the transactions are all conducted electronically, this makes the process instantaneous and completely risk-free.
Besides providing an alternative to the traditional securities market, blockchain technology is starting to provide an alternative to the traditional accounting process. Traditional transaction methods such as billings, escrow, and ledgers are no longer required. Because the transactions are all occurring electronically, there is no need to keep proper records. This makes the distributed ledger technology more useful for businesses that don’t want to burden themselves with maintaining a system for proper accounting. Since all of the transactions are encrypted, there is no risk of hacking. The speed and efficiency with which the transactions occur also increase the productivity of the business.
As you can see, there are multiple benefits to using the technology behind the blockchain. Because it allows for safe, instant transaction speeds, the speed of the ledger can help to increase productivity. This also decreases the risk of fraudulent transactions because the transactions cannot be tampered with once they get into the chain of command. For businesses, this lowers the cost of operating the business since there is no need to have a traditional accounting system or hire professionals to perform administrative tasks. The proof of this pudding, in the form of increased transaction revenue, can be seen in the increased profit figures for some companies using innovative technology.