Blockchain is a database or a ledger. It is made up of blocks. Blocks are kind of like storage units for digital information. So every transaction carried out using cryptocurrency results in a unique block with information about that transaction. And when another transaction is carried out it is added to that one and this forms a chain of blocks aka blockchain. This blockchain database or ledger is shared among many computers on a P2P (peer to peer) network.
The advantages of the technology are many. For example, the fact that it is shared on a P2P network means cases of fraud or manipulation are very less likely. The fact that transactions are carried out using blockchain powered cryptocurrencies are P2P also means that there are no middlemen aka credit card issuers and banks. This means lower or no transaction fees in some cases.
The technology is best known for its use in the financial industry where it supports Bitcoin and similar cryptocurrencies. However, it has many other uses. Its increasing popularity and benefits have seen scholars and analysts refer to it as one of the best technological advances in the 21st Century.
How did blockchain come about?
The blockchain technology was first heard of in the early 1990s. However, it was not until the year 2008 that a guy or a team using the pseudonym Satoshi Nakamoto made it popular. Satoshi Nakamoto using it to create Bitcoin – perhaps the world’s most popular cryptocurrency. He or she or they used the blockchain technology as a public ledger for the cryptocurrency. It is because of the technology and its benefits that Bitcoin became very popular as time went by.
The popularity of Bitcoin led to more cryptocurrencies being developed using the same technology. It also led to many more scholars and researchers taking an interest in the technology. Years down the line, much more is known about the technology and many more uses for it have already been developed or are in the development stage.
What are some of the popular uses of the blockchain technology?
According to a good number of reputed researchers, blockchain is already revolutionizing the world as we know it. The researchers argue that the technology has unlimited applications. That it can be used to support digital voting, tax regulation, tax compliance, data storage, food safety, data sharing, real estate management, digital IDs, money transfer, supply chain management, online retail, and so on.
What technology exactly does blockchain use?
The blockchain technology is based on multiple technologies. The objective of the technologies is to guarantee two things: privacy/ anonymity and transactional integrity. Two very important technologies are needed for this objective: asymmetrical cryptography and a shared ledger:
Asymmetrical cryptography is a special type of encryption technology. You are probably using this technology but you don’t know about it. This is true if you have WhatsApp installed on your smartphone. The App uses the technology to encrypt messages between two people communicating and prevent third parties from viewing them.
Asymmetrical cryptography is kind of like 2 individuals carrying specific keys – one carrying a private key and the other a public one. Through combining both keys on an online platform, the individuals produce a digital identity that is secure and only readable by them. This is the idea behind asymmetrical cryptography.
Asymmetrical cryptography is very key to blockchain technology. The combination of two separate keys yields a digital identity or signature which can be utilized to verify a block that makes up the blockchain. The digital identity can then be combined on a peer-2-peer distributed technology network. The peers interact in various ways and also validate the information. The validation is mathematical and, therefore, ensures network security.
Basically, because of this encryption, the only thing that can be linked to the user is the digital signature or identity. This ensures personal anonymity.
This is also an important technology that is a part of the blockchain network. The shared ledger is a database that is distributed on a peer-to-peer network of computers. The database has information about the blocks that make up the blockchain and is synchronized on all computers with access to it.
The shared ledger technology is an important part of blockchain because when a transaction is done, the block or blocks that get added to the chain have to be recorded. And they are recorded on the ledger. And as the name suggests, the ledger is shared with everyone across the world on the peer-to-peer network. The fact that the ledger is shared and synchronized means everyone with access to it is kind of like a witness to every transaction performed on the chain.
Through allowing individuals to be witnesses to each change made and to get a “copy” of every transaction, the ledger discourages the manipulation of data or hacking.
Think of the shared ledger as a shared Google Doc document. When any changes are made to the document, the owner of the document plus any other person who has access to it can see the changes and who made them. This is the same as the shared ledger. When any changes are made to the blockchain, everyone with access to it sees them. So no one single person can secretly make changes without being found out and being held accountable.
This technology increases transparency and removes the need for a central figure or authority to keep on checking the authenticity of data to ensure no fraud or manipulation.
The combination of cryptographic keys and shared ledgers is what has created blockchain technology as we know it today that can be used for smart contracts, identity verification, digital voting, and asset ownership.
How does a blockchain transaction occur?
Below is the typical lifecycle of a blockchain transaction:
Stage I: Someone who wants to use cryptocurrency uses fiat or standard money to buy a cryptocurrency such as Bitcoin. The purchase of cryptocurrency can only be done on cryptocurrency exchange platforms like coinbase.com.
Stage II: The person who wants to use cryptocurrency obtains the public wallet address of the person they want to send cryptocurrency to. The wallet must be able to accept the currency that the sender wants to send to it; otherwise, the transaction will be impossible.
Stage III: The person who wants to use cryptocurrency then sends the Bitcoin or whatever cryptocurrency they have to the public wallet address and confirms that they want the transaction done.
Stage IV: The transaction along with many other similar transactions are automatically stored in a special data storage unit aka block. All the transactions in the block need to be validated or verified and then distributed to all computers with access to the blockchain. This act ensures or guarantees that a transaction has satisfied all the special rules.
Stage V: The transactions in the block are combined upon verification and every block verified has its own special hash number that is generated utilizing a special algorithm. The information contained in each block includes the block’s unique hash number, the previous block’s unique hash number, and the digital identities or signatures in the current block that are pending.
Stage VI: This is a very important stage. It is at this stage where each device/ computer utilized to verify network transactions compete against the others to solve a very complex arithmetic puzzle that is derived from the unique hash of the block. The puzzle is utilized to validate or verify if a transaction satisfies the requirements set by the P2P cryptocurrency network. In this case, the network is the Bitcoin network. The verification is called proof-of-work.
The puzzles that have to be solved to verify or validate every block are usually very complex. This is why multiple computers or mining nodes usually have their computing power combined to solve the puzzles. The massive computing power usually requires many computers and therefore uses a lot of power.
So why are people mining or setting up computers to solve hash puzzles? Well, it is because when a computer or a mining node solves a hash puzzle, it shares the “news” with all other nodes on the network. This makes the rest of the mining nodes to abandon trying to solve that hash puzzle and to jump to attempting to solve the next hash puzzle. Every mining node that solves a hash puzzle gets rewarded in Bitcoins for the effort. Right now, solving a hash puzzle attracts a reward of 12.5 Bitcoins. A today’s Bitcoin price, these are worth 35,000 Sterling Pounds. This is why people are mining.
Stage VII: The moment a block’s hash puzzle is solved, every blockchain node or blockchain network-connected computer will get the successful block shared with it and will add it to its shared ledger or blockchain.
Last Stage: The Bitcoin that was sent will appear on the public wallet of the person it was sent to.
How blockchain integration is changing e-commerce
Over the last couple of years, more and more people and organizations have become interested in blockchain technology. Big multinational companies such as Visa, IBM, Microsoft, and Facebook are among the ones interested in the technology and looking for ways to integrate it into their businesses. This is not surprising especially considering the many potential benefits of the technology.
Below is how exactly blockchain integration is changing e-commerce as we are speaking:
Blockchain is making transactions cheaper
Blockchain-supported transactions are cheaper than those supported by traditional payment systems. For example, public blockchains such as those supporting popular cryptocurrencies charge only 0.01 USD per transaction, while private blockchains charge even lower per transaction. This is in contrast to the exorbitant fees usually charged by credit card issuers or banks for digital transactions.
Therefore, blockchain-supported transactions are much cheaper than digital transactions. Already some e-commerce companies such as tradezy.io have started accepted blockchain-supported cryptos. This is making transactions cheaper. And the cheaper transactions means that the e-commerce companies or their sellers/ merchants can pass on massive savings to their consumers by lowering their product prices.
Blockchain is making transactions faster
Blockchain-supported transactions are much faster than traditional payments. A survey recently carried out found out that money sent through traditional digital payment systems sometimes needs to move through sixteen different stages to get to the destination.
This is in contrast to blockchain-supported transactions that are peer-2-peer or person to person if you like. The fact that blockchain transactions are so direct means they are faster. It also means lower fees as “middlemen” are eliminated.
In summary, the speed of a blockchain transaction only depends on the capacity of its network. Not on multiple intermediaries and how their systems are responding on a given day.
So amongst e-commerce companies that have adopted blockchain, the technology is already making transactions faster.
Blockchain is improving data security in e-commerce
Most blockchain networks usually have nodes/ computers in excess of one million. The data acquired is always shared with all these many nodes. This means that the information is very reliable and cannot be easily altered without any detection.
The sharing of data or information with the over a million computers is decentralization at its best. So instead of a central figure or entity holding the information in secret, the data is shared. This means it is very unlikely that the shared information which is in the open can be altered.
Because the information that is decentralized is also encrypted and is verified by many nodes on the network, it is very difficult to breach into the network since all the nodes would not allow it. The only way it is possible to hack and change a ledger is by breaching into most of the nodes across the world at the same time, which would be practically impossible.
In short, the data stored on the blockchain technology is very secure and protected from hacks and breaches. This is a benefit that e-commerce companies already using the technology are now enjoying.
Blockchain is improving supply chain tracking in e-commerce
Many e-commerce stores are utilizing questionable strategies to reduce supply chain costs. And this is making supply chain tracking difficult and, therefore, making customers unsure about some of the products they are being sold.
However, the blockchain technology is open, transparent, and immutable. This means that if implemented well, it makes supply chain tracking easier. It makes it easier to track goods right back to their origin. Thus, in cases where it is being used by e-commerce companies for supply chain tracking, it is making customers confident that whatever product they are using can be genuinely tracked back to its origin.
Blockchain is supporting badly needed new digital payment methods in e-commerce
As mentioned earlier, the most popular use of the blockchain technology is in supporting cryptocurrencies. And these are changing e-commerce already. This is because the currencies offer solutions to the problems associated with the use of traditional payment systems.
Using the cryptocurrencies is cheaper, faster, and more secure. Words that are not really associated with traditional payment systems.
Tradezy.io is one of the few e-commerce companies already accepting payments via cryptocurrency. Customers using the e-commerce platform are already enjoying the benefits of using crypto payments rather than traditional payments.
Examples of e-commerce stores and other businesses already using blockchain
Businesses that succeed in the e-commerce environment are those that are constantly innovating. Those that fail to innovate usually die quickly. This is why a good number of retailers are not wanting to get left behind on matters blockchain technology. Many are either developing or already implementing blockchain-powered solutions.
Some of the retail giants already implementing blockchain solutions include Unilever, Nestle, and Walmart. These companies are working with IBM to implement a blockchain network that will make it easier for them to do supply chain management and improve food trust. Thus, with the help of this technology, it is very unlikely that any of these companies will face food fraud any time soon. Every food these companies sell can be easily tracked all the way with confidence using the technology.
Tradezy.io is a newish e-commerce marketplace and is also implementing blockchain in such a big way to help improve both merchant and customer experiences. The e-commerce platform has used blockchain to decentralize the marketplace and make it better than other monopolistic marketplaces. The marketplace has also created its own cryptocurrency that is making transactions cheaper, faster, and more secure.
Maersk is also implementing the blockchain technology. The company is the largest shipping organization in the globe. It is using the blockchain technology to improve shipping processes and minimize human error. Its implementation of the technology is expected to reduce the cost of shipping.
The future of blockchain technology
Blockchain is disrupting various industries as we speak. As mentioned, it has many applications in the e-commerce industry. Companies in the e-commerce space that do not take advantage of it are likely to fall behind when those that have implemented it such as Tradezy.io start seriously reaping the benefits.
The technology is still at a nascent stage. But analysts and research organizations are predicting that it will improve e-commerce and other businesses significantly over the next couple of years.
This is truly one of the best technologies of this century yet. And hopefully, it will continue to improve to make online shopping better and to change our lives for the better.