Blockchain is the powerhouse that has made revolutionary fintech innovations like crypto possible! Learn more about fintech at fintech-insight.com and get a better understanding of crypto, stocks and more.
Encryption and blockchain technology has been used in finance for many years, but they are starting to catch on in other areas. It is now being applied by major corporations like IBM (NYSE: IBM), Microsoft (NASDAQ: MSFT), JPMorgan Chase & Co. (NYSE: JPM), and others. These companies recognize the benefits of encryption to secure information in supply chain relationships.
This type of encryption technology is still early because it has only been around for about a decade. The tech market is starting to catch on, however. Major tech companies adopted it because of its ability to increase security and transparency in digital relationships.
Blockchain technology can secure information through encryption and other networking protocols. With this technology, only those with permission can access the data stored on a blockchain network. Furthermore, creating blocks occurs continuously and automatically through algorithms encrypting each block with a distinct signature from previous blocks.
How is blockchain different from traditional databases?
As previously stated, blockchain technology relies on encryption through consensus algorithms to protect this information from potential cyber-attacks. While traditional databases can be an effective way to keep information secure, they could be more effective at reducing the cost and complexity of business relationships because of the need to rely on other intermediaries.
The process works by allowing any peer in the network to request transactions. The benefit of this kind of technology is its ability to create trust between peers without relying on intermediaries for verification. Creating blocks is also much more efficient than traditional databases because it does not require much processing power or time.
Blockchain technology is decentralized and distributed across participating nodes within a peer-to-peer network using Public Key Cryptography and digital signatures to verify identity. Any node in the network can read and write information to the blockchain ledger. This process is similar to how data is verified and stored using a traditional database.
How does blockchain technology work?
Different companies are developing diverse applications of blockchain technology to accommodate other industries. In addition, some industries are generating interest in the use of this technology. For example, IBM has a system that allows digital assets to be traded across supply chains.
Although blockchain technology does not have a single use case, it is recognized as an effective solution for many industries. For example, this type of encryption technology is used by corporations to secure information and reduce the cost of complex business relationships.
Reasons why blockchain technology works well
Blockchain technology also reduces the transaction time for initial transactions between companies that are part of a supply chain relationship. For example, IBM found only a 15% increase in transaction time with this type of encryption system compared to traditional databases.
Blockchain technology is also very secure because its users constantly update it. This way, there is no way for a malicious user to forge information if the entire network of computers is using the same software. In addition, the consensus algorithms used with this technology make it almost impossible for a single node to control the information within a blockchain network.
Potential disadvantages of using blockchain technology
There are no disadvantages to using blockchain encryption in global trade relationships. However, there may be some drawbacks when using this kind of system for other data types. For example, it may be difficult for those unfamiliar with cryptography to decipher what information is encrypted or decoded. It may also be challenging to secure the information from the public if it is not encrypted.
Some companies may use blockchain technology to secure information that is not sensitive and could be helpful for those who cannot access this kind of data. For example, a database that contains non-sensitive details on a company’s shareholders could remain public but still be encrypted for added security.
Although it is highly secure through consensus algorithms, hackers may find ways to exploit its weaknesses to obtain sensitive data. In addition, in other cases where hackers have attacked traditional databases, some damage has been done to the reputation of those affected by the cyber-attack.
What is the difference between permissioned and permissionless blockchains?
A permissioned blockchain is a system that is only accessible to the specific people who have permission to access it. It permits parties to agree on the validity of a transaction and exchange encrypted digital data in real time.
The permissionless technology allows parties to transfer their assets without trusting another party for both sides of the transaction to conduct business. In addition, the information that is stored within a blockchain ledger is not confidential, which means that any private information can be used without restrictions by others.
