In recent years only a few people have heard of the word “blockchain” and even fewer have understood what it means. In 2017 the situation changed dramatically: the price of bitcoin increased around 20 times and blockchain became one of the most discussed topics in the world.
However, it is not the only significant change in the cryptomarket in the last year. Many new cryptocurrencies have appeared. Tremendous sums of money have been invested. For more statistics feel free to check our previous article.
More and more developers began exploring blockchain technologies, creating their own protocols and pondering how blockchain can be used in our everyday life. However, for many non-technical people, blockchain remains some sort of mysterious, futuristic technology.
So, what is blockchain? To make a long story short, blockchain is a sequence of encrypted pieces of information called blocks. Each block contains a cryptographic hash of the previous block and information about the transaction. It is a type of open source software, and each user can create their own blockchain by developing a new algorithm for encryption. The interest in this technology will not diminish in the near future, and enthusiasts are trying to find applications of blockchain not only in the world of high technologies but also in real life.
In this article, we shall give you a couple of ideas of how to use blockchain technology in your business.
As we have already said, blockchain is an encrypted sequence of blocks containing certain information. By making a complex mathematical calculation, the machine discovers a new block, and its owner gets the reward – a certain number of coins. This process is known as mining.
Although the interest in blockchain technology has only risen so strongly in the last year, it is not really a new phenomenon. This technology was developed in 2008 by the mysterious Satoshi Nakamoto. No one knows if this is a single person or a group of people, if this is a man or a woman, or whether Satoshi is alive or dead. The year afterwards, the encrypted sequence of blocks was introduced as a core component of the first virtual currency – Bitcoin.
In this period only the developers and a few enthusiasts were interested in the technology and discovering new blocks of the chain (mining Bitcoins), and even fewer imagined what blockchain can be used for. In 2010, after several upgrades of the technology, more users became engaged in the process and mining became more difficult. After Satoshi Nakamoto left Bitcoin, the other members of the community continued its development. Not all ideas were implemented in Bitcoin, and their authors started creating their own blockchains that became known as altcoins (coins alternative to Bitcoin).
Altcoins were easier to mine and found their followers. The first successful altcoin was Litecoin, launched in 2011. It uses the same code as Bitcoin, however, due to a difference in algorithms, it takes less time to confirm the Litecoin transaction and to discover new blocks of the chain.
In 2014, Ethereum managed to collect about $17 million during the crowdfunding campaign and, in 2015, launched a new blockchain platform that was not just another cryptocurrency. Along with generating the sequences of blocks, it serves as a platform for creating the users’ own blockchain. Ethereum is far more flexible than Bitcoin and surely has a great future. As Coinmarketcap states, it is the most capitalized cryptocurrency except for Bitcoin.
In recent years, Bitcoin’s position was strengthening along with the interest in blockchain technologies and digital money. People started investing money in mining, buying cryptocurrencies and looking for new blockchain business opportunities. Those who had the necessary technical skills started developing their own systems. In 2017, the cryptomarket attracted immense sums of money – according to the following chart, the total capitalization in 2017 increased from about $18 billion on January 1st to more than $565 billion on December 31st.
Along with the constant growth of capitalization and price, Bitcoin was criticized for outdated code, high fees and low speed of transactions. The developers of Bitcoin reacted this feedback by launching a new currency: Bitcoin cash. The block of Bitcoin cash blockchain is 8 MB (while the block of Bitcoin is only 1 MB), and this allows the transactions to be processed more quickly. Nowadays, Bitcoin cash is one of the 5 most capitalized currencies of our time. Feel free to check the statistics for more information. The other four currencies are Ethereum, Ripple, Litecoin and Cardano, with total capitalization of more than $133 billion.
Like any technology, blockchain has its strong and weak points. Let’s compare blockchain with the ordinary backend technology:
Blockchain’s capacity is limited by the memory space of blocks (in Bitcoin it is only 1mb, for example). If the limitation is exceeded, the operation is likely to fail. Backend does not have such restrictions and can process potentially unlimited amounts of code.
Due to the difference in memory capacity, the speed of processing the blockchain operations is lower than of backend ones.
You have to pay fees for each operation processed by blockchain. When using backend, it is necessary to pay only for hosting and electricity.
Blockchain is capable of processing the operations only when you launch the code directly. Backend works perfectly well in background mode. Thus, it is impossible to use blockchain for collecting and processing the information.
However, backend puts all the data on one server, and therefore appears to be far less secure than bitcoin. The server can be hacked or infected by malware and the data can be stolen. It can be knocked out by a DDoS-attack, and the service will be temporarily unavailable. Due to the decentralization of blockchain, the data is not stored in a single machine, and it is unlikely to be stolen by an abuser.
To sum up, blockchain cannot replace the traditional backend. However, using blockchain for business in combination with other technologies will increase your app’s security.
The cryptocurrency market is not the only sphere where blockchain technology applications can be used. Let’s see how the combination of blockchain and traditional backend were realized in three different projects with different functions.
Ripple is a closed protocol for data transmission for reducing the price of transactions. Unlike the other blockchain-based applications, Ripple’s network functions are on centralized servers that are controlled by one company. Although Ripple has its own cryptocurrency, which is the most utilized after Bitcoin and Ethereum, it actually differs from the other coins:
Since Ripple’s network is based more on servers rather than on blockchain, it relies on traditional backend technologies. According to publicly available information on Github, the following technologies are used for maintaining the work of the project:
It’s a blockchain-based application, where one can get an online professional consultation from an expert in a particular sphere. The expert’s work is paid according to their minute rate and after the call is completed, the corresponding sum is charged from the knowledge-seeker’s account.
The transactions are powered by Ethereum smart contracts that ensure additional security for both parties. The knowledge-seeker can be sure that he is only going to pay for the time of the consultation and that the expert will not increase their rate during the call. The expert is guaranteed that he will receive his money when the consultation is finished.
The payments are accomplished by the application’s inner currency (EXY) that can be purchased both for cryptocurrencies like Bitcoin or Ethereum and for fiat money like the dollar or euro. For fiat money, the necessary amount will be charged from a card.
The application is aimed at automating the consulting industry. Finding a professional and trustworthy specialist is time-consuming and expensive since the consulting companies take fees for this. Experty.io establishes direct relationships between the clients and the experts all over the world.
This project is an example of successful integration of backend and blockchain technologies:
La’Zooz is a transportation application aimed at decentralizing taxi services. When Uber appeared, it immediately destabilized the government’s control over taxis by allowing the clients and the drivers to find each other directly, without the dispatching department. However, the interactions between the drivers and the clients are still monitored by Uber’s algorithms and the industry still appears to be centralized.
The application offers clients the opportunity to find people traveling the same route as them. The application has its own cryptocurrency, Zooz, that can be used to pay for the taxi services. The coin can be mined by allowing the application to track your location – when you move at a speed of more than 20 km/h, Zooz is deposited into your app balance.
La’Zooz combines blockchain and backend technologies in the following way:
The examples of these projects demonstrate the unlimited blockchain business opportunities. It is a new and prospective technology that will be developed in the very near future. In the next few years blockchain will probably be applied to various fields of everyday life. Ripple, Experty and La’Zooz show us how the successful combination of blockchain and backend technologies makes the industry of online payments, consulting and transport faster, cheaper and more secure.
If you are planning to explore this technology with unlimited opportunities, here at Sloboda Studio we are always ready to help. Our skilled and experienced team of developers will help you in building a blockchain-based analytical service on Ruby On Rails, with high productivity and user-friendly interface.