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What is blockchain and why is it important?
Blockchain is a ‘fully decentralised’ database that stores data in blocks that are chained together. All new data that comes in is filled into a new block which is then chained to a previous block, thus arranging the data in chronological order.
Traditional databases, on the other hand, store data as tables, which makes it more cumbersome and easily erasable. Today, blockchain is being widely implemented across different sectors, particularly finance, energy and utilities.
So, why is Blockchain being talked about so much? This is because it has the power to ease financial transactions considerably, particularly because large volumes of data are involved. Also, data stored within a blockchain is permanent and cannot be erased.
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However, very few organisations have successfully managed to implement blockchain while many are still in the research phase. The main reason why most blockchain projects don’t take off, is because there is still a lot of uncertainty surrounding the technology and how it can be scaled up.
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Blockchain Implementation
With the right approach, businesses will be able to put in place a successful blockchain strategy without hindering any of their ongoing projects. Let’s look at a few successful steps to implement blockchain technology effectively:
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Understanding Blockchain
Research shows that many organisations have just a rudimentary understanding of what blockchain is. However, in order to deploy the technology for maximum impact, it is crucial to fully comprehend how it works.
Basically, blockchain makes use of a secure communication channel that collects data and stores them as a ledger in digital form. This integrity of this ledger can be checked by anyone with access to it-thus doing away with expensive third-party verification procedures.
Each block is assigned a unique digital signature that links it with the previous block, making the chain tamper-proof.
For financial transactions, blockchain helps cut costs and speed up processes in vital areas. Perhaps, the best example of this would be eliminating the need to combine company data from departments, because with blockchain, everyone involved will have access to the same digital data. In fact, everyone who is part of the blockchain network is identified by a public-private key pair, which is also called the ID or address.
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In fact, the financial sector is considered to be the frontrunner in blockchain applications.
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Developing a roadmap for Blockchain use
The key to successfully implementing a successful blockchain solution is to identify the problem you are trying to address and figuring out whether blockchain really is the best way to solve it. Here again, you need to know the technology inside out to be able to identify the holdups and explore other possibilities, if need be.
Questions such as who has access to the data, who updates all the data and how frequently, does the data need verification, can other technologies be combined with blockchain for greater effectiveness, is the data time-sensitive, etc. need to be addressed in the long-term.
Choosing the exact blockchain solution: Here, it is important to remember that blockchain technology is not a universal, one-size-fits all solution. Therefore, choosing the right option for your needs requires you to have a complete understanding of the entire blockchain ecosystem.
Again, it is easy to be carried away by the hype surrounding certain blockchain solutions. This is a dangerous trend because companies may end up choosing the wrong solution or even implementing it without understanding its potential and/or limitations.
Remember that the kind of blockchain you need will differ vastly from that of your competitor, and also from project to project. In order to understand what works best, it becomes crucial to have a blockchain expert in your team, or seek the help of a consultancy firm that provides blockchain solutions.
Must Read: How to Make a Successful Career in Blockchain
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Building a blockchain community
It is a lesser known fact that blockchain becomes most effective when there are several stakeholders. Creating a niche community of blockchain specialists can help create trust in the technology among clients, since challenges surrounding the technology can be brainstormed and addressed by everyone concerned-it then becomes a collaborative effort.
For instance, the stakeholders within the blockchain community can collectively address issues such as sharing costs and benefits equally, controlling and managing risks, auditing and verification of data, as well as general rules to ensure a smooth and seamless implementation.
Monitoring the regulatory landscape
It must be remembered that blockchain is a relatively new and emerging technology and that the regulations surrounding its implementation are still evolving. Therefore, organisations must constantly monitor the changing rules and in fact, be proactively involved in formulating them.
In fact, blockchain regulations differ from country to country and businesses must work alongside the concerned authorities to identify global best practices and monitor major trends.
In short, blockchain is an emerging technology that has so far been underrated and little understood. While uncertainties still prevail over its implementation and research is still ongoing, there is little doubt that this is a technology, which if understood and implemented well, can help organisations reap multiple benefits.
Then again, successfully implementing blockchain is a meticulous task that requires futuristic vision, long-term planning, expertise and a collaborative mindset that is constantly tuned in to the changing regulatory landscape.
Ways to Approach Blockchain Network Implementation
If an organization is considering a blockchain solution, they have to implement a blockchain network. There are two ways to implement it; both come with their own pros and cons. The business needs to evaluate its objectives, budget and time of implementation, and requirements to select the best approach.
1. Developing a custom blockchain from scratch
This approach is perfect for fintech companies or blockchain startups who want to offer unique services or products. A blockchain developer may use blockchain implementation Python to design and build a blockchain network from scratch. The other components of the architecture are built on to achieve the desired blockchain solution.
A great benefit of this blockchain approach is that the blockchain solution is completely customized according to the needs of the business. The organization can tailor it according to its requirements and goals.
A major disadvantage is that the customized implementation of blockchain networks requires high expenses for design and development.
2. Creating a new blockchain by forking an existing blockchain protocol
This approach is ideal for big corporations who are interested in blockchain implementation. It utilizes the open-source code of established blockchain protocols (such as Ethereum or Hyperledger Fabric) to design a unique blockchain network tailored to the company’s specific requirements. The modified code allows for creating a custom network with distinct features and rules, enabling independent operation and hosting of your blockchain applications.
The main benefit of using this method is the cost related to blockchain development is greatly reduced. The blockchain is also launched much faster when compared to the custom approach.
However, the company needs to be cautious about choosing the right blockchain protocol and avoid choosing an incompatible one to fork.
Features of Blockchain Technology
The first distributed blockchain implementation displayed the various features of blockchain technology and how it would benefit corporations. Some of the main features of blockchain are:
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Greater Speed and Efficiency
Manual processes are prone to errors, time-consuming and need third-party mediation. Integrating blockchain technology makes these procedures much more efficient and quick. All data can be securely stored on the blockchain, eliminating the need for physical paperwork. Forget about keeping track of multiple ledgers; blockchain makes the clearing and settlement process much faster.
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Enhanced Security
End-to-end encryption ensures data cannot be altered, which helps prevent fraud and discourages unauthorized activity. Blockchain also addresses privacy issues by incorporating permissions that are needed to access personal data. Best of all, information is not stored in a single server but in a network of computers, making it challenging for hackers to access and view information.
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Automation of Work
With smart contracts, businesses can automate their transactions more efficiently and speed up the process even more. You do not have to intervene or rely on third parties since smart contracts ensure the terms of contracts have been met before moving on to the next step.
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Greater Transparency
Blockchain network participants who have permission access can access the same information simultaneously on multiple devices since blockchain uses a distribution ledger that records data identically in multiple locations. It helps improve transparency. All participants can view the entire transaction at any time, from anywhere. It helps reduce fraud.
Read: Blockchain and Its Architecture
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As widely known, Blockchain is an emerging technology and will find its applications in almost all industries in the future. If you understand the blockchain basics and wish to become a blockchain developer or want to learn more about blockchain to make a career in this field, upGrad, in association with IIITB and IMT, provides several courses on Blockchain for working professionals to learn and upgrade their career. If you are interested in blockchain, you can visit these courses:
- Executive Certification in Blockchain from IIITB (upGrad and IIITB)
- Advanced certificate program in blockchain technology(upGrad and IIITB)
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