Why is Blockchain Important?

We examine the design aspects of centralized and decentralized systems and understand the technical advantages of decentralized systems over centralized ones in this blog.

Blockchain is a decentralized, distributed, and public ledger that records transactions between two parties efficiently and in a verifiable and permanent way. Blockchain has the potential to change the world as we know it by changing the way people do business.

Also Read: What is Blockchain?

Blockchain is important because it provides a way for people who don’t know or trust each other to share information with one another without having to go through a third party. It can also be used to secure sensitive data, such as medical records.

Remember, it’s not a panacea for every problem area in the world, but in some cases, it’s an hour’s worth. In some cases, the blockchain of existing solutions makes it more robust, transparent and highly secure. However, it can also lead to disaster if done incorrectly! Now let us analyze the blockchain keeping in mind the business and functional point of view.

Blockchain is Important Because of the Limitations of Centralized Systems

If you take a quick look at software development environments, you’ll see that many software solutions are designed to be centralized. This is not only because they are easy to develop and maintain, but also because we are used to such designs in order to trust the system.

We always need a trusted third party to make sure we don’t get scammed or fall victim to a scam. It’s hard to do deals or even scale up with anyone without a prior business relationship. You probably won’t do business with people you don’t know. Let us take an example to understand it better. When we order from Amazon today, we feel safe and secure that the item will arrive.

The producer of the products is someone and the buyer is someone else. So what role does Amazon play here? It acts as a facilitator, acts as a trusted intermediary, and handles parts of the transaction.

The buyer trusts the seller when the trust is actually imposed by a trusted third party. What blockchain proposes is that in the modern digital age, we really don’t need to intervene in a third party to impose a trust, and the technology is mature enough to handle this. In the blockchain, trust is by default an integral part of the network.

Let’s take a quick look at some of the disadvantages of traditional centralized systems:

• Trust issues
• Security question
• Privacy concerns – selling data destroys privacy
• Cost & Time Factors of Transactions

Some of the advantages of a decentralized system over a centralized system may be:

• Eliminate intermediaries
• Easier & more realistic verification of transactions
• High security at a lower cost
• More transparent
• Decentralized & immutable

Blockchain Adoption Along With Bitcoin

Blockchain emerged alongside Bitcoin, a digital cryptocurrency in 2009. Soon after its launch, people could see its true potential, not just a cryptocurrency. Some companies have developed different types of blockchain products such as Ethereum, Hyperledger, etc.

Microsoft and IBM have developed SaaS (software as a service) offerings on their Azure and Bluemix cloud platforms, respectively. Various startups have been formed, and many established companies have adopted blockchain initiatives focused on solving some business problems that were not easily solved before.

It is too late to simply say that blockchain has enormous potential to disrupt almost every industry in some way. The revolution has begun. It has greatly impacted the financial services market.

It’s hard to name a global bank or financial company that doesn’t explore blockchain. Outside of financial markets, areas, where measures have been/are being taken, including media & entertainment, energy trading, prediction markets, retail chains, loyalty rewards systems, insurance, logistics & supply chains, medical records, and also government and military applications.

As of this writing, the current situation is that many startups and companies can see how blockchain-based systems can really solve some problem areas and benefit in many ways. However, developing the right blockchain solution is quite a challenge.

There are some great ideas for blockchain-based products or solutions, but they are just as difficult to develop or implement. Some use cases can only be built on public blockchains.

Designing a self-sustaining blockchain with a proper mining ecosystem is difficult, and for existing public blockchains for building non-cryptocurrency applications, nothing beats Ethereum.

Whether a blockchain technology is to be in-built the Application Layer only & use the underlying layers as they are, or the application needs to be built from the bottom up, is something difficult to make a decision.

There are some technical difficulties, too. Blockchain is still maturing, and it should take a couple of additional years for adoption. Nowadays, there are multiple propositions to handle the scalability problems of blockchain.