Introduction to Blockchain Technology
Through the evolution of the technology more and more financial and transactions management are identified that aims at resolving some traditional transaction issues, currently there is innovation of blockchain technology which is associated with various technologies like bitcoins, factoms, Ethereum among many others.
The blockchain is type of ledger that is open and distributed, it easily captures and keep records of any transaction done between two parties or people efficiently through a way that is easily to verify and permanently.
This type of ledger however in some instances is programmable to enable triggering of any transactions done automatically through the blockchain.
The blockchain enable the embedding of services or products to some digital codes which are then stored in a transparent database which is shared in order to prevent any change of content through deleting, tampering and revisions.
Therefore the blockchain aims to ensure that each and every task, payments or processes have digitalized records and signatures which are easy to identify, validate, store and share, this will therefore eliminate any form of transaction intermediary like the banker, a lawyer and the brokers.
Therefore the introduction of the blockchain technology will enable an individual, organization, a machine, and any algorithm to freely carry out transactions and interact with each other with less frictions.
In this report there are two main types of blockchain applications which include bitcoins and fuctom that will be discussed where their features and uses will be highlighted.
The bitcoin and fuctom are the two type of block chain application that had been selected in this report and their features are discussed below.
The bitcoin is type of currency that is crypto currency in nature and is one of the world wide payments systems ,it was invented in year 2009 as the first decentralized digital currencies where it operates without the involvement of the administrators or central banks controls .
However it uses a peer to peer type of network and enables the transaction to be done directly between the two users without involving third parties as intermediaries [6].
Below are some of the purposes of the bitcoins:
- To perform the international transfers funds.
- To make the micropayments.
- Providing financial systems outside the states controls.
The factom is type of block chain technology that is used in storing and securing any type of document ,this enable the block chain technology to move beyond the finances and currencies roles used in the crypto-currencies and thus allowing storage and security of other documents which includes land title deeds, agreements and the mortgage among others to remain protected.
Researching Blockchain Applications
Purpose.
Below is some of the purpose of factom application.
- Giving transparency to the public records.
- Providing unlimited data storages spaces.
- Provision of copyrights proofs.
- Restrict the cases of counterfeiting of the documents.
- Prevent any fraudulent cases.
- Preventing any chance of failures.
- Giving appropriate the auditing solution.
- Preventing any chance of corrupting the data.
- Provides the authentications of the documents.
To be able to use the bitcoin one require a computer or internet enebled device, then the user installs a Bitcoin’s wallet on the computer or on the mobile device which then generates the initial Bitcoin address and more are created at one’s wish [7].
The bitcoin address is sent to the friends who require making the payments or the one that require receiving payments from the user.
Below is the Bitcoin working model.
- Balance –block chains. The block chain is shared to the public type of ledger that is used by the bitcoin networks which and stores the confirmed transaction and then calculate the remaining wallet balance.
- The transaction –private keys. The transaction involves the transferring of the values between the two bitcoin wallets and then is included in the block chains .After the transactions the bitcoin wallets keep the unique secret pieces of data named as private keys or seeds and thus used in signing transactions. Then in this stage the transactions are sent to all users are confirmed by the network within ten minutes using the mining processes.
- Processing-mining. The mining is a type of distributive consensus systems which are used to do the confirmation of all the waiting transactions where it includes them in the block chains ,therefore there is no chances of individuals to control the transactions that are in the block chain or even do replacement of the block chains and revert their spending.
The factom is type of application that make use of the blockchain technology in storage of data and currency across a de-centralized network that is open source in nature.This factom application uses a ledger to store the information and through the open source networks the users make reviews of ledger’s history and thus maintaining its integrity [5].
Below is the working model of the factom:
- Users do data submission to factom together with ChainIDs.This chained tell factom the subgroup of the document that they should group the entries with.
- Then the user takes the hash of that data and the rest of the data in chains to create the entries block.
- Then for every minute all entries blocks hashes are then taken in order to form a directories block.
- After creation of ten directories blocks then hash of all those directories blocks is then taken and is then linked to the bitcoin block-chains.
The bitcoin suffers from some scalability problems and this leads to the rising in the transactions fees and the prolonged confirmations time for the bitcoin transactions which out do it as an instant micro-payments system.
This is attributed to period of transaction which is seven transactions in one second and thus making it uncompetitive with other payment networks like the visa that runs more than 2000 transaction in one second.
Below are some of the bitcoin’s scalability issues.
- Low speed. One block recording is done after ten minutes and thus the confirmations take one hour or more.
- High transaction cost. In bitcoin each transaction takes 0.5 pennies and thus one uses a lot of funds while transacting thousand of transactions at any given time.
- The high bloat problems. The bitcoin block is allocated 1 megabytes and only allows seven transactions in one second and thus large number of transactions becomes unachievable using this transaction limits.
However the lightening networks and factom technologies are being employed in order to manage these scalability problems in the bitcoins.
The factom is one of the best blockchain applications which is introduced to solve the various challenges in the bitcoin application, this had made the users of block chain to be able to do transactions which has the following characters.
- Able to do faster in transactions.
- Make the transactions more cost effective.
- Enable the user to have a bloat free transactions.
Therefore the factom do not suffer from the scalability issues but instead it resolves all the scalability issues in the blockchain applications.
A bitcoin is type of blockchain applications which uses the encryptions technique in the regulation of generation of currency units and also performs the verification in the fund transfers and acts independent from the central banks.
Below are some features of bitcoins.
- It is decentralized in nature.The Bitcoins was developed to ensure the users are free an independent from the governing authority and instead the transaction includes ever user,businesses and machines in transactions verifications.
- It is anonymous in nature.This is where the bitcoin is not linked to the user’s personal identifications details like the bank institution do where they use the information to track the financial history of their clients.
- It has transparency.All the transactions made are stored in the blockchain and thus the users are able to tell the amount used through blockchain study but it becomes hard to trace the specific bitcoint addresses of a specific person.
- It is very fast.The payment that is made in the bitcoin network process is very fast and instantaneous and takes little minutes for the recipient person to get the payments made.
- It is non repudiable in nature.The bitcoins that are sent cannot be retrieved back by the sender unless the receiver is willing to send back to the respective senders and thus eliminates the scamming issues [4].
The bitcoin on the other side suffers from some weaknesses which includes the following.
- Legality issues. There are some countries that encourages use of BTC while others discourages its use and there is bun and outlawing of it use.
- Low level of recognitions. The bitcoins is legal in some countries but some governments have no regulation about it but in other countries BTC is fully banned.
- Risk of losing keys. The key are the password details of the bitcoin wallet and thus will make the users to lose their BTC wallets, however some users need to set up the back ups and restoration mechanisms.
- High volatility issues.There are some cases when the price of bit coin changes while it either moves up or down wards and there are unpredictable change in its value that tends to change rapidly and in drastic way affecting the investors.
- There is continuous developments.It becomes quite hard to predict the future of the BTC since the governments and the banks has no control over it and thus it turns to be unregulated.
The Factom make use of blockchain technologies in storing data which is currency and other forms of data across an open source network that is decentralized in nature where it stores all records in a ledger form [3].
Blockchain Applications: Bitcoin and Factom
Below are some of the features of factom.
- It has open source networks to allow the reviews of ledgers history by the users and thus maintaining the integrity.
- Factom do secure its data through encryption and assignment of unique type of fingerprints.
- The factom stores many varieties of data that includes financial transaction,documents or some computer files.
- The factom maintains data security through existence proof,processes proofs and audits proofs and the combination of all these proofs end up forming a ledger that is secured.
- The factom however has some built-in security layers.
- Finally the factom allows the users in setting up the profiles in orders to contribute the server or the computing powers and this used as means of confirmation of transactions.
The factom despite of overcoming the main block chain challenges it has some challenges which include:
- It is relatively new to the market .Therefore to make it develop a lot of mobilization resources are required.
The bitcoin is form of application that enables their users and any of their advocates enjoy the disintermediation from the banks and the state and thus it is not controllable by any party where it also frees from political manipulations.
The Bitcoin is a unique type of currency where it supplies is controlled and governed by the use of technology which transforms qua monies to gold money.
However through use of the technology the bitcoin has horizontal –de-centered or distributed modes of organization, where the power however is uniformly distributed through the networked computers which facilitate the distribution of the records of any transaction to the entire network using the blockchain technology.
The factom is a type of protocol that was invented with aims of solving the main constraints indentified in the blockchain technology ,however it was designed to be used by the applications that has many functionalities and features apart from currencies transaction [2].
The factom works along with the bitcoin blockchains to enable the users of the applications to use personal ledgers that are immutable, however the users of the factom application are given the ability of defining the type of information to be stored in the ledgers and thus enabling this application technology embrace more fields beyond the digital currency which includes businesses and law.
The factom is an application protocol that forms a decentralized ways of collecting, packaging and securing data into the Bitcoins block chains,this is achieved by use of networked federated server that mainly do delegates various responsibilities to various system’s aspects [1].
Therefore in factom there is no single server that controls the entire system neither there is a server that controls any part of the system but the functions and responsibilities of each system section revolves around all server each and every minute of transaction.
Conclusion
The block chain technologies uses various applications that utilizes the technology ,these technologies had improved the transaction processes through the creation of virtual currencies and also better way of record management ,however this technology had reduced the transaction cost ,boost security and eliminates the intermediaries in any type of transactions.
Reference
[1] J.Pagliery, Bitcoin and the Future of Money. Chicago:Triumph Books, 2014,pp. 256-368.
[2] N.Popper, Digital Gold:Bitcoin and the Inside Story of the Misfits and Millionaires Trying to
Reinvent Money. New Canada:Reprint edition, 2016,pp.1-432.
[3] C.Barski, Bitcoin for the Befuddled. California:No Starch Press,2014, pp.1-256.
[4] B.Guttmann, The Bitcoin Bible. New York:Books On Demand,2013,pp. 252.
[5] P.Champagne, The Book of Satoshi. London:e53 Publishing, LLC, 2014, pp. 325.
[6] D.Frisby, Bitcoin: The Future of Money?. Kansas:Unbound Digital, 2014, pp. 265.
[7] M.Swan, Blockchain-A Blueprint for a New Economy. California:O’Reilly Media, 2015,
pp.152.
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