03 August 2022 | ZebPay Trade-Desk
Although Bitcoin (BTC) is the most well-known application of a decentralized ledger or blockchain, there are a variety of other applications for blockchain technology. For example, the technology of blockchain may be utilised in diverse monetary services, such as remittances, virtual assets, and online bill payments, because it permits bills to be processed without going via a financial institution or different intermediary. In addition, the following technology of Internet interplay systems, such as smart contracts, recognition systems, for public services, the Internet of Things (IoT), and security services are among the most promising applications of blockchain technology.
A non-crypto blockchain refers to a distributed ledger that tracks the state of a database shared by numerous users. For example, the database may contain the history of crypto transactions or sensitive voting data related to elections, which once added cannot be updated or deleted. Therefore, the technology of blockchain is not only relevant for crypto assets. However, blockchain is primarily concerned with the decentralized storage of information and consensus on specific digital assets, which may or may not be crypto. Hence the question arises, can blockchain be used for anything? Ideally, blockchain technology has the potential to replace business models that rely on third-party trust and centralized systems. For example, NFTs were first introduced to the Ethereum network in late 2017 and are one of the many disruptive blockchain-based innovations beyond crypto. However, please consider the risks and benefits associated with NFTs before making any investment.
Public and private blockchains are the two main categories of blockchains. Public blockchains are permissionless, so anyone can join the network and participate in the blockchain. On the other hand, private blockchains are not decentralised and invite-only networks operated by a single organization. Permissionless blockchains, such as the Bitcoin blockchain, reward network participants, so-called miners, for solving a complex mathematical puzzle. This incentive, often rewarded in the form of a network’s native token, is a motivator for the system as a whole and particularly as a means of consensus building. Since bitcoin mining incites its participants, thousands of computers are currently involved in it. The removal of crypto rewards reduces the motivation to run a node and participate in the consensus mechanism, increasing the risk of crypto heists.
Read about: What Is Blockchain Layer?
Examples of private blockchains are Hyperledger and Corda. The Linux Foundation created the Hyperledger project, which uses private blockchains to create distributed ledgers to support sensitive business transactions. Another permission blockchain project developed by R3 is called Corda and is intended for companies that want to build interoperable distributed networks with private transactions. There is no mandate or requirement for crypto to power and incentivize network members as these private blockchains are managed by centralized companies.
The blockchain industry offers many opportunities as users and organizations seek to streamline business operations, speed up transactions, improve security and transparency, and leverage blockchain as a service (BaaS). One can invest in companies that offer BaaS like IBM or Microsoft to understand blockchain technology. In addition, you can buy shares of a company that develops blockchain solutions to indirectly access distributed ledger technologies without investing in crypto. This means that blockchain has many benefits in addition to supporting crypto.
The supply chain is an area where blockchain is having a significant impact. For example, you can trace a crop back to the farm that grew it, with an immutable public record of every transaction. The manufacture, transportation, and delivery of a recycled item from a recycler to a recycling facility or station can be tracked using a distributed ledger. One can invest in the companies that are active in these fields. Regardless of whether you invest directly or indirectly in blockchain-based startups, you should be aware of the risks such as technical failures, hard forks, or human error. When investing, never risk more than you can afford to lose.
Blockchain technology is necessary for smart contracts to work as it enables automated trades without third-party involvement. Like smart contracts, database systems can have self-executing components such as triggers and stored procedures. Still, they can’t enforce immutability since anyone with admin privileges can roll back any transaction, clear transaction logs, etc, and make it look like it never happened. Therefore, the blockchain is always needed for smart contracts that need to be secure and tamper-proof. Unfortunately, Bitcoin, the most popular cryptocurrency, does not support complicated smart contracts.
Without blockchain, no other modern technology would enable the widespread use of smart contracts. However, smart contracts require blockchain oracles to request off-chain data to be sent to the distributed ledger at set times. Oracles provide an easy way to access off-chain resources, but this requires parties to contract with a new party, which can erode the decentralized benefits of smart contracts. It also creates a potential source of error. For example, an oracle may find a bug in the system and be unable to distribute the required information, provide inaccurate data, or halt operations. Therefore, smart contracts need to address these issues before they are more widely adopted
Disclaimer: This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation, or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness, or reliability of the information, opinions, or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in cryptos viz. Bitcoin, Bitcoin Cash, Ethereum, etc. are very speculative and are subject to market risks. The analysis by Author is for informational purposes only and should not be treated as investment advice.