Every year, businesses have to make bold decisions to ensure a profitable future. The proper technological investments can give each company the driving force to gain market advantage and eliminate the risk of lagging behind the competition. Technology is the key to unlocking future return on investment in this rapidly evolving business environment. Experts from different industry sectors predict that Blockchain technology will be one of the most significant technological advancements of the next decade. Coupled with the technological benefits of 5G networks, 5G Blockchain will play a vital role in shaping the future of business and society.
Blockchain Technology
To date, much of the blockchain debate has been limited to the rise and fall of Bitcoin. In the near future, however, it is expected that blockchain technology will serve as the solution for many business areas, from financial transactions to smart contracts and land registries. Of course, these changes will not happen overnight. Nevertheless, a significant number of effective business applications will emerge during the next several years. For example, it is expected that some companies will use blockchain technology to execute smart contracts, simplify accounting management, and facilitate secure cross-border payments.
A prime example of Blockchain technology in financial transactions is the case of bitcoin. When you run a specific software, you connect with others running the same program. These users are also known as nodes, and they start sharing a file with you. This file is called a blockchain and is an extensive list of transactions in the form of an electronic ledger.
Every new transaction is transmitted from computer to computer until every node keeps a copy of it. On average, in bitcoin, every 10 minutes, a random computer (node) updates the blockchain file with the latest transactions, creating an extensive network of nodes that communicate by transmitting a file that is constantly updated with new additions.
Over the next decade, however, the technology will move beyond the initial investment in cryptocurrencies (ICOs) and begin to create business value in many areas. Blockchain-based smart contract applications have already been formed on the horizon, and their use is expected to grow exponentially in the years to come. These decentralized applications will allow people and companies to trade by communicating instantly with each other, without the need of a third party like the existing bank to verify and withhold the transactions.
Smart contracts
The role of Smart contracts is to eliminate the need for intermediaries and the associated costs involved, allowing day-to-day transactions to run smoothly on a decentralized platform. In addition, smart contracts will allow organizations to leverage blockchain technology in productive ways, such as improving workflows and processes. For example, smart contracts can help to introduce blockchain into ordering, billing, or payment processes and more generally, in all individual data transactions.
As the regulations and security that support these smart contracts become more robust in the next few years, their adoption is expected to increase rapidly. In turn, this phenomenon will allow companies to become increasingly decentralized autonomous organizations (DAOs), a model that aims to create a higher level of transparency. A DAO is essentially an organization whose operating procedures and protocols are automatically implemented by encoding them in a computer program.
Utilizing the same organizational principle that governs the Bitcoin blockchain network, DAOs will operate by scheduling complex rules in advance. These rules will determine how the business functions, such as the time and amount allocated to a project based on budget.
Blockchain benefits
Even without blockchain, it was possible to create transactions and transfer them to a computer network. However, the problem was that you could potentially make two transactions that spend the same number of coins and send them to the network simultaneously. This issue is known as the double-spending problem.
Blockchain, however, forces computers to keep all the transactions they receive in their memory before a random computer updates the blockchain file. The process of adding the latest trades on the blockchain is called mining. Mining is essentially a contest between miners (nodes) on who updates the chain with the latest block. The node that manages to add transactions to the blockchain will start sharing it with others. Others will confirm that this specific computer did the work and accept it on the blockchain. This new block is verified as the correct one and is shared across the nodes, making it extremely hard to fool the network, at least with existing technology.
Mining principles
Each computer in the blockchain receives the latest transactions and adds them to the memory pool, which is just a computer cache. Then all nodes try to mine the transactions from the memory pool to the blockchain. During this process, all the transactions from the memory pool are gathered into a single block of data, and processing power is used to update the blockchain and start sharing it. In bitcoin, processing power is needed to mine each new block.
Mining is a verification process that uses a hash function. The hash function uses an algorithm that converts any text into a series of random numbers and characters. This way all information is encrypted and it is irreversible in its original form. Each miner is trying to match the hash algorithm of the new block and be the one that updates the blockchain. As an incentive, the network rewards the miner who manages to put the last block in the chain.
Proof of Work Vs Proof of Stake
The above mining process is known as Proof of Work (PoW). The advantages are that everyone can participate, building a strong decentralized network. However, there is some criticism on the high power consumption of this procedure. There are also further concerns on the rise of the mining difficulty with new and expensive equipment needed to be able to compete with other miners. Finally, even the system vulnerability is in question, since the chances of controlling 51% of the network which would result in a total network takeover are rather slim, however, still present.
That is why are other types of mining have also been developed. One such alternative is Proof of Stake (PoS). With proof of stake, only those who already own coins can mine. In this case, the reward is proportional to the number of coins held, not proportional to the work being done. This procedure essentially rewards the investment and not the project. Advantages of PoS include low electricity consumption and a scarce probability of a 51% takeover. On the other hand, a common criticism of the proof of stake mechanism is that essentially the rich get richer without necessarily participating. These types of systems are deemed for reduced participation creating small communities with an increased possibility of DDoS and other types of attack.
Blockchain security
Transactions do not enter the blockchain individually. Instead, they gather in the memory pool, and miners try to “solve” them and update the blockchain, sharing their success with the whole network. Each of these blocks is built on top of a pre-existing one creating a chain of blocks. Hence the word blockchain.
Every network node will always consider the largest chain of blocks it receives as the authentic blockchain. This means that miners will try to build their blocks in the largest chain. Any block that does not belong to this chain will be considered invalid and finally be discarded.
Therefore, if somebody wanted to rewrite the history of all the transactions that have taken place, they would have to build a larger chain than the one that already exists. In that sense, to change a transaction in the chain, one has to restructure the mined block and rebuild all the previous ones simultaneously. In the case of bitcoin, one would have to sum all the blocks or control at least the 51% of the network processing power. The more miners are involved, the harder it will be for someone to build a bigger chain and fool the system.
5G & Blockchain
5G networks will serve as the core of a new digital environment. Combined with AI, Cloud, AR, VR, IoT, Robotics, and Blockchain will create the framework for the new digital, interconnected economy. In turn, this will create a series of services and applications that will change both our personal and professional lives.
5G will enable a telecom infrastructure marketplace where blockchain technology can create a more flexible, agile environment, with on-demand business and procurement models, digital currencies, payments through mobile wallets, device identification, online registry, and others.
With 5G IoT, more and more people and devices will be connected and there will be more growth for new innovative applications in the digital world and economy. Blockchain technology will enable 5G network users to interact and transact (by storing and retrieving data) with ensured data provenance, authenticity, accountability, and immutability for every user. Blockchain technology seems to be the next frontier of our digital world.
