The blockchain, which was initially conceptualized in the 90s has now found applications beyond cryptocurrencies.
With the COVID-19 pandemic’s ill effects looming all over the world, it is blockchain that has led many people to become immersed in the multitude of uses and its underlying technology. The technology that I’ve been writing about in previous articles is one of the safest options available and data loss is almost impossible when compared to the traditional databases. It can be deployed in every domain and is set to evolve into mainstream technology. As per a market research report by MarketsandMarkets, blockchain’s wide-ranging use cases from finance and supply chain to security systems, this market is projected to grow to $2.3bn by 2021.
Essentially, the blockchain is a decentralised database which stores data such that every single transaction is connected to the blockchain in chronological order. Its highlight is the use of the Proof of Work consensus mechanism wherein, each blockchain must be checked and validated by other users in the blockchain. The genesis of the technology goes back to 2008 when Bitcoin came into existence. However, it was only theory back then. Read on to know more about the evolution of blockchain, its past, present, and future.
The idea of the blockchain was laid down in 1994. The idea was to have a system that used a cryptographically secured chain of blocks to store time-stamped documents. In 1992, Merkle trees were added to the design to collect multiple documents into one block. However, the idea went unused and its patent expired in 2004.
When the world started losing faith in the financial markets, the blockchain came back and has stayed since then. It was theorised as an answer to the inefficiencies inherent to our prevailing monetary system. The Bitcoin application came into being in 2010. The beginning was with a public blockchain which allowed transactions in a decentralised environment. Transactions were recorded with just 1 MB of blocks of data. A cryptographic verification process ensured a well-established chain of networks.
The Blockchain is essentially about the evolution of communities on open source architectures. It is a group of developers with shared interests that develops and improves most blockchain systems As per a report by Deloitte, the number of projects on GitHub related to blockchain grew to almost 27,000 new projects as early as 2016. More business use cases such as smart contracts started emerging soon from such open source communities. The second generation of blockchain technology handled contracts and logistics which improved the traceability of transactions.
From being just a technology for cryptocurrencies, blockchain has made a huge leap. Developers have realised that the number of use cases of blockchain can far exceed Bitcoin’s use cases. This led to the Ethereum project which made several improvements to the blockchain as a platform through the concept of a virtually distributed machine. Now the blockchain can run decentralized applications.
The blockchain can now program conditional transactions and build complete smart contracts. It can also conduct micro-payments and handle small value transactions. This application is being increasingly used by large retail chains, banks for eKYC. Flixxo, uses blockchain technology to manage and distribute content without content delivery networks. Cryptocurrencies like Zeto, Modum are combining blockchain technology with the Internet of Things (IoT) via RFID technology for better mapping of the supply chain. While the applications may be multifold, only a few will emerge as winners in the long run.
Moving on, as blockchains continue to take multiple leaps forward, parallel transactions/directed acyclic graph technology, sidechains and cross-chain technology are the next big thing. Parallel transactions divide the work and speed up transactions whilst cutting down on fees and improving efficiency.
Sidechains do not record the transactions until the users return the assets to the main chain, or until recording of assets by the main chain occurs. Cross-chain technology is being built to allow users and assets to interact and trade withholdings from another blockchain. They can bring interoperability without a hard fork.
The next generation of blockchain would deal with greater scalability and possibly permissioned chains such as the Hyperledger Fabric to achieve tens of thousands of transactions per second. So, if you are still wondering if the hype around blockchain is real, then the answer is yes because these numbers are far beyond TPS offered by a permissionless chain.
With new focus on increasing traceability and transparency, the probability of the blockchain affecting your business is high and it may happen sooner than you think. It is time to make a pragmatic change with a well-adjusted approach and ensure active early engagement of all the stakeholders to leverage blockchain.