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Blockchain | Part 2

In Part 1 of this article, we talked about how blockchains work. But when, where, and how should it be used?

The first types of blockchain solutions ー what could be called ‘generation 1.0’ ー include cryptocurrencies like Bitcoin, Dash, and Zcash. They were (and still are) excellent for performing financial transactions, but that’s where they’re limited. What could be called ‘generation 2.0’ of blockchain tech ー Ethereum, Hyperledger, and Corda ーnot only encourage financial transfers, but allows users to create what are called Smart Contracts .

Think of blockchain 1.0 as a famous actor. It did some movies, it’s well-known, but all it can do is act. Relatively, generation 2.0 is the next best thing. Sure it can act too, but you should really hear it sing! Smart Contracts are where blockchain is really finding its voice.

Blockchain ‘Generations’
Blockchain Generation 1.0 - Bitcoin, Dash, ZCash; Blockchain Generation 2.0 - Ethereum, Hyperledger, Corda
Generation 2.0 brings with it the Internet of Value (IoV). IoV solves the problem of storing, moving, and transacting assets of value online without a powerful intermediary. It allows us to establish trust between parties without middlemen, and move assets freely.

Let’s say you find the perfect apartment.

The landlord has agreed to rent it to you, but the lease only becomes valid if you pay first month’s rent by a certain date. If you don’t pay, you need to start looking again. With a Smart Contract, these conditions can be hard-coded into the blockchain, so once you pay for your rent, the code automatically makes your lease valid, and there’s a non-modifiable record of the transaction in a block.

Real-world use cases for Smart Contracts include:

  • Eliminating the need for guarantors in stock exchanges
  • Interbank transfers
  • Verifying the validity of luxury goods
  • Unlocking hotel rooms and rental properties
  • Music sales, licensing, and distribution

Blockchain application platforms like Ethereum can be used to for this purpose. Thanks to vast support from the Enterprise Ethereum Alliance [a group of Fortune 500 Companies that have a greed to build applications on Ethereum], it’s becoming increasingly more accessible with each passing moment.

With the proper support behind it, blockchain is gaining the security, stability, and standardization it needs to move into the world of enterprise. Companies such as Microsoft are presenting solutions like CoCo Framework and Blockchain as a Service (BaaS) in order to enable users to build applications more easily than ever thought possible, and establish trust between enterprises.

As revolutionary as it is, blockchain can’t be used for everything. When determining if a blockchain-based solution is necessary, it’s helpful to use the decision tree below to figure out what conditions need to be met before jumping on the bandwagon:

Do you need a database? No - blockchain isn’t the solution Yes - next Do many people need to write to it concurrently? No - blockchain isn’t the solution Yes - next Do those people trust each other? Yes - blockchain isn’t the solution No - next Do they have one person in common they trust? Yes - blockchain isn’t the solution No - next If you’ve made it this far, then a blockchain-based solution is what you’re looking for

If you’ve met all of these conditions, then congratulations! A blockchain solution may be just what you need. The next step is to determine what kind of blockchain to implement. The fact of the matter is there’s no one way to implement a blockchain – there are many methods that can suit different needs.

Public
Trustless

  • Designed to cut out middlemen during asset exchanges
  • Blocks are verified and synced with every node
  • Accessible to the public
  • Slower due to volume of transactions and devices
  • Users retain anonymity

When to use it?
When a network needs to be decentralized

Private
Trusted

  • Faster than a public blockchain
  • One party writes and verifies each transaction
  • Selected individuals can see transfers for increased privacy
  • More affordable for governments, financial institutions, etc.

When to use it?
When security and privacy are primary concerns

Consortium
Semi-Trusted

  • Partially private: a hybrid between public and private
  • Not completely public, uses a few pre-selected users & nodes
  • Almost equally efficient to a Private blockchain
  • Does not give full control to one party

When to use it?
When collaborating between multiple parties

There are a number of diverse ways to implement a blockchain-based solution, and with a team of industry experts to guide your way it couldn’t be easier. If you’re interested in learning how to create a blockchain-based solution for your business, or you’re looking for a innovative tech partner, contact us via cloud@lixar.com.


 

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