The blockchain never leaves the headlines. But it turns out that the blockchain may not be the same as in the Bitcoin network, energy-consuming and ineffective. Could blockchain be a companion for sustainable development? Yes, if it is a special type of network.
At its core, blockchain is a distributed ledger, a safe way to store data in verifiable copies on different nodes. Traditional databases typically have one user responsible for it who decides who has access to the data and who can contribute, edit, and delete it. In the blockchain, no one can change or delete data, it is possible only to enter and view it.
Blockchain has many varieties and options for application. The largest cryptocurrency Bitcoin is built on the public blockchain, where any member of the network can act as a node, and all data at the same time are publicly available. All transactions ever made are available for review in the block browser. This digital currency allows users to transfer money without the participation of the bank. Miners process transaction requests and closes them in blocks. To add transaction blocks to a public blockchain, miners have to make a difficult calculation. When miners switch to more powerful equipment and the time to find an answer is reduced, the complexity of the task automatically increases. All these complex math problems require huge amounts of energy. The two largest blockchains in the world, Bitcoin and Ethereum, currently consume the same amount of electricity as Austria
The prevalence of information about blockchain for fintech leaves most people in the non-acquaintance about other uses and types of blockchain. In addition to fintech blockchain, other applications are expanding the key function of this technology. For example, the Ethereum network has smart contracts mechanisms. Smart contracts track the fulfillment of individually set conditions for a transaction. It allows building automated tracking and data recording systems.
Significant advantages of this approach are transparency and reducing costs. Protocols can replace entire departments of organizations and eliminate middlemen. Such systems exclude corruption and fraud.
The widespread public form of blockchain with the PoW consensus is proving to be energy-intensive and inefficient. At the same time, the security and decentralization
of the anonymous network remain unreliable. Miners within the public blockchain network can cooperate and influence the blockchain. Such cases are called “51 % attack
” when attackers take over most of the computing power in the network and gain control. It can harm the business if assets are stored on such a blockchain and are stolen or destroyed.
Therefore, to launch a blockchain project in business, companies are developing private and combined blockchains. Private blockchain
does not need to consume as much electricity as a public PoW model. When a company uses trustworthy nodes, it does not worry about a "51% attack". Transactions can be confirmed quickly. There will be no problems with the queue of transactions and the growth of commissions. Several high-performance nods are sufficient to confirm transactions on the network. It means that the commissions in the network will be much lower.
An example of such a case is the FCE blockchain
, in which access is possible only for authorized and verified participants. The FCE blockchain uses a complex of algorithms with extremely low energy consumption compared with Bitcoin or Ethereum networks.
According to the latest Grandviewresearch
report, the global blockchain market is estimated at $3.67 billion in 2020, and is set to expand at a compound annual growth rate (CAGR) of 82.4% from 2021 to 2028. Recently, blockchain projects are developed in the finance, management, logistics, insurance, and law sectors. The technology can speed up and automate processes, make them transparent and improve quality control. All this allows companies to save money and time, be more resilient and eco-friendlier.
But essentially, when companies develop blockchain projects, they seek to solve the problem of trust
. Addressing the issue of trust can help companies maintain and increase their market share. One way to maintain growth against the backdrop of increasing competition is to combine competencies with other players. For a successful partnership, it is essential for all parties to trust the data.
The coronavirus crisis has become a catalyst for the most applied and utilitarian projects in the field of telecommunications and remote work - understandable and traditional solutions. Given that an extremely limited number of organizations can afford the costs of significant innovation that blockchain brings with it, during the pandemic, many companies focused on quick results from utilitarian applications, and innovative areas such as blockchain were largely frozen.
Another obstacle to integrating distributed ledger technology is a lack of understanding of its capabilities. Besides, blockchain implementation often requires restructuring of business processes, and the market is a shortage of professional integrators. However, large players and analysts are eager to gain blockchain benefits and gain technological trust using private versions of the blockchain.