What is Blockchain?
Blockchain is about setting up a decentralized structure that constantly adds new links to the chain. Each block generated is based on the previous block.
Blockchain is very similar to an accounting system in which all transactions are built on each other. The decentralized structure allows a large number of market participants to take part in the transaction. What is counted is irrelevant, so that many different applications can build on the blockchain technology. All that matters is that the transactions that are made later are build on previous transactions and this chain can be fully traced. This means that previous transactions can not be manipulated or deleted anymore.
Most cryptocurrencies, such as Bitcoin and Ethereum, are based on the blockchain concept. Without blockchain there wouldn’t be any bitcoins because new bitcoins are always calculated on the basis of the previously generated coins. The blockchain of bitcoin is the first blockchain ever and the one that is mostly used.
Advantages and disadvantages of Blockchain
Benefits of blockchain technology include encryption, easy verification of subscribers and, most importantly, business reduction of transaction costs. The disadvantages are the low data throughput, lack of authorization levels within the system and difficult integrations in legacy systems.
Further applications and IoT
Blockchain can be used for much more than just cryptocurrencies. You could also control content such as art, music, texts or photos. Above all, Blockchain is used in many security applications, specifically for identity management and encryption providers.
EDC predicts that by 2019 blockchain will have a significant portion of 20 percent overall in IoT application landscape. Especially the authentication of IOT devices among each other, which is important for decentralized structures, is made much easier with blockchain. With so-called smart contracts, data of a delivery can be completely reconstructed to prove that e.g. certain temperatures were met during a transport or that certain participants were involved in refining a product. Major IT vendors such as Microsoft, HPE, IBM and Alibaba have already recognized the benefits and are experimenting with blockchain in security, identity management, supply chain or provide blockchain as a service.
Decentralized networks have great relevance for IoT, as it is paramount for the connection of billions of devices directly to each other without a central server. It is particularly important that every actor can be identified safely. Peer-to-peer communication between sensors, devices and data exchange among autonomous participants is also a base case for blockchain. Above all, the technology allows a secure way to track transactions and all involved participants. Blockchain is publicly available and can be used universally, so this technology will play an important role in IoT as well as in many other areas, including culture.