Blockchain is an on-line ledger, similar to that of a telephone book, which helps people communicate. The term “blockchain” comes from the Greek word “kronos” which means change. By changing the balances in the blockchains, it allows users to make transactions instantaneously. In a traditional database like that used by banks, the change to a new database could require a major overhaul. Not so with a protocol like the one called “blockchain”.
What is the advantage of having a way to make instant, secured and transferable payments? One of its most striking features is the fact that it is not susceptible to spam. Unlike email or other internet transaction methods, the transactions are real-time and secure. Another advantage is that it helps in reducing costs. Today, the benefits of a single block chain, which are numerous, can be applied to several financial technologies like Distributed Ledger Technology (DLT), which is ideal for automating financial transactions and reducing errors and wastage of time.
A Distributed ledger, also called a digital ledger, is an electronic database that records the entire transactions made in the currency market. The most popular and widely used ledger are the Blockchain, which was created in 2009 by a Canadian company. The name” Blockchain” was taken from the Greek word meaning “a network”. The main goal of the Blockchain project was to create a global digital ledger that would be accessible to everyone and that would eliminate the need for banks to keep separate ledgers for their domestic and private transactions.
However, there are some disadvantages of a Distributed ledger technology compared to that of a Blockchain. The first major disadvantage is that it does not help to prevent fraud. Unlike the Blockchain, most leading financial technologies such as PayPal do not rely on the Blockchain system to protect their transactions and credit card users to avoid fraudulent activities. A second disadvantage of the Blockchain is its high costs and maintenance fees. These costs are considerably higher than the costs involved with a Distributed Ledger Technology and the time required to install the system is considerably longer.
A third major disadvantage of the Blockchain is the high risk of security breaches. Unlike most public networks such as those of Facebook and Twitter, which have a large number of participants, the blockchain has a limited capacity to handle large volumes of transaction. If a mistake is made in transferring funds, the entire balance will be lost. Since the distribution of the work to a group of participants is one of the main features of the Blockchain, if something goes wrong, the whole system may be affected.
To address these issues, developers have developed what is known as the distributed ledger smart contract technology or the Blockchain as a Service (BaaS). This concept allows users of the public distributed ledger to interact with each other using an internet-connected network instead of having to initiate each transaction. Transactions are processed by a set of self-executing smart contracts, which eliminate the need for a central administrator. This is in contrast to the decentralized design of the original Bitcoin that relied on a user’s own computer for verification and processing of transactions.
The distributed ledger technology underlying the Blockchain is called the Distributed Ledger Technology (DLT). The aim of the DLT is to provide a superior online payment solution using the latest payment protocols such as PayPal. However, since its launch in 2010, there have been several improvements to the way the DLT operates. One of these improvements is the use of the Proof of Validity (POV) mechanism, which requires users to prove that they own certain digital assets such as digital currency or real estate before they can approve a transfer of funds. This proof of ownership is usually achieved by signing up for a DLP provider’s service, which automatically provides all the required proofs.
Another improvement to the way the Blockchain works is known as Lightning Network. It is designed to increase privacy and decentralization by allowing users to transact without relay downtime, allowing data to be decentralised across the internet without the knowledge of the users. Although the Lightning Network still in development and undergoing various enhancements, it is already proving to be a major improvement over the peer-to-peer networks like bitcoin and thorium. With the increasing popularity of the Ethereum network, it would also be interesting to see if it could be used to replace theICO platform.