Blockchain is the technology on which most cryptocurrencies are built, and it is now also being used in many other applications. Below is how blockchain technology works, where it started, and how both large and small companies can utilize the technology today and in the future.
Blockchain Basics
Blockchain is a decentralized public network that allows individuals and companies to securely and instantly store and transfer information and currencies.
Note: The term blockchain also refers to how data is stored in “blocks” of information and then linked together in a permanent “chain.”
Components of Blockchain
There are three key parts to every blockchain:
1. The Ledger: This can be any type of information.
2. The Block: A bundle of different records.
3. The Chain: Contains all the blocks linked together.
History of Blockchain Development
The idea of blockchain technology was first introduced in 1991 by researchers Stuart Haber and W. Scott Stornetta. In their white paper “How to Timestamp a Digital Document,” Haber and Stornetta explained the use of a continuous chain of timestamps to securely record information.
However, the technology was not implemented until the creation of Bitcoin in 1998. Bitcoin was created to be a form of decentralized money, as opposed to money controlled and issued by the government (what is referred to as fiat money). To create a working and trustworthy decentralized system, the founder of Bitcoin (an unknown individual or group known as Satoshi Nakamoto) developed the decentralized ledgers known as blockchain.
Steps in the Blockchain Process
Every blockchain process, regardless of the industry in which the blockchain is utilized, goes through the same steps:
1. The transaction or process is recorded in the ledger. The ledger of the trade lists the digital signatures from each party and other relevant details.
2. The trade is validated to ensure it is a legitimate transaction. Computers in the network review the trade to confirm it is a real transaction. This centralized process occurs among different nodes in the network.
3. Once each transaction is validated and accepted as a legitimate transaction, it is added to a block. Each block contains a code called a hash that is unique to that block. The block carries its own hash and the hash of the previous block so that users always know where the block is in the chain.
4. Once the block is completed – blocks can contain many transactions – it is added to the chain. The hash carried by the block ensures it is in the correct chronological order.
What Blockchain Means for Small Business Owners
Regardless of what you think about cryptocurrencies, the underlying blockchain technology has many different applications, and companies are experimenting with its implementation at a rapid pace. Some small business owners, such as tech startups, may develop blockchain technology themselves. Other small business owners may use blockchain technology developed for the wider market.
Blockchain technology is similar to how credit card processing facilitates small businesses, as blockchain technology can make running small businesses easier and smoother. This benefit can occur in three ways:
1. Smart Contracts: Blockchain technology can be used to create and verify contracts between users. It can be utilized to pay bills and employees, issue invoices to clients or customers, create insurance documents, manage inventory fulfillment, or any other business activity. Companies like dApp Builder have developed the infrastructure for creating smart contracts that businesses can use in their own operations.
2. Data Compliance: With new rules and regulations regarding data compliance and data breaches, blockchain technology provides the ability to verify transactions without needing to know the user’s identity. This can create a more secure user experience that is less prone to hacking.
3.
Digital Asset Transactions: If a small business is considering accepting payments in cryptocurrencies or creating digital assets like NFTs for their small business, they will need to rely on blockchain. Opening the doors to cryptocurrency payments may also help expand the company’s customer base beyond traditional geographical boundaries.
Conclusion
Blockchain was originally developed as a platform to build Bitcoin upon. Now, it has become more transparent, decentralized, and secure as it has grown and evolved into new areas of business, such as banking and supply chain management. Blockchain technology can drive innovation for new ways of doing business and may be particularly beneficial for companies that consider transparency and security to be important.
In particular, small business owners can benefit from blockchain-based platforms to streamline operations and payments. There are already some companies providing this type of technology now, so expect to see more and more in the future.
Frequently Asked Questions (FAQs)
Why is blockchain important for businesses?
Both large and small companies can benefit from using blockchain technology. Blockchain provides a way to securely store corporate data, helps in digital asset transactions, and increases automation through smart contracts. For large companies, blockchain can help enhance transparency, track data in real-time, and improve efficiency. For small businesses, blockchain can open the door to various payment systems and different customer geographies.
How can blockchain help small businesses?
Small business owners can benefit from engaging with blockchain technology in three main ways. Blockchain helps secure data, meaning they can keep transaction and customer data safe. Blockchain can open the door to cryptocurrency payments and digital asset transactions that can help attract customers from around the world. Smart contracts, which are programs executed on the blockchain, can be useful in contract enforcement.
Source: https://www.thebalancemoney.com/blockchain-explained-4773366
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