Blockchain Technology: Understanding Smart Contracts, Benefits, and Challenges

Hello everyone!

In today's world, I assume that most of you have encountered at least a snippet of information or overheard conversations about Blockchain technology. This transformative innovation has spread its roots across numerous sectors.

From finance to healthcare, supply chain management to digital art, Blockchain's versatile applications are reshaping industries and sparking conversations about the future of trusted digital interaction.

In the previous week, we initiated a poll aimed at collecting insights regarding Blockchain technology. We posed the question, “Are you familiar with Blockchain technology? Is it truly a game-changer or does it require more research? 🔍

The majority of respondents voted "🚀 That's the future" while a smaller percentage voted that "🔍 More research is needed"

In this article, we will cover the basics of Blockchain technology, including Ethereum Blockchain, Smart contracts, how they work, and their benefits and challenges. Finally, we will discuss how our company is making strides in the Blockchain game.

If your curiosity is piqued, let's dive right in and get started! 🤓

What is Blockchain?

Blockchain technology is a revolutionary concept that has gained significant attention in recent years. It consists of a chain of blocks, each containing a list of transactions. These blocks are linked in chronological order, forming a secure and hack-resistant chain of data.

At its core, a blockchain is a decentralized and distributed digital ledger that records transactions across a network of computers.

Unlike traditional centralized databases, where a single entity controls the data, a blockchain operates through a consensus mechanism that ensures data integrity and security.

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Ethereum Blockchain

One of the most notable implementations of blockchain technology is the Ethereum Blockchain. Ethereum extends the concept of blockchain beyond just recording transactions by introducing the concept of "smart contracts." The Ethereum Virtual Machine is a runtime environment that executes smart contracts on the Ethereum network. It ensures that code execution is consistent across all nodes in the network, making the execution of smart contracts deterministic and secure. These contracts are self-executing agreements with predefined rules and conditions, enabling automated and trustless interactions between parties.

Gas is a concept within the Ethereum protocol that represents the computational work required to execute operations on the network. Every operation, including sending transactions and executing smart contracts, requires a certain amount of gas. Users pay gas fees to incentivize miners to process their transactions and smart contracts.

Ether is the native cryptocurrency of the Ethereum network. It serves multiple purposes within the ecosystem, including paying transaction fees, compensating miners for their work, and participating in certain decentralized applications.

Smart Contracts

Smart contracts are a pivotal feature of certain blockchain platforms like Ethereum. These self-executing contracts enable automated actions when predefined conditions are met. For instance, a smart contract could automatically release payment to a customer once flights are delayed and verified. Smart contracts enable trustless and automated interactions between parties without intermediaries.

How does Blockchain work?

Blockchain operates on a distributed network of computers, often referred to as nodes. When a new transaction is initiated, it is grouped with other transactions into a block. Before this block is added to the chain, it must undergo a validation process. This validation is typically achieved through consensus mechanisms like Proof of Work (PoW), Proof of Authority (PoA), or Proof of Stake (PoS), ensuring that the majority of nodes agree on the accuracy of the transaction.

Blockchain technology offers numerous benefits

Blockchain technology offers numerous benefits that have garnered interest across various industries. One of the most prominent advantages is its transparency. Once a transaction is added to the blockchain, altering trust among participants becomes nearly impossible, promoting trust. Additionally, blockchain's decentralized nature eliminates the need for intermediaries, reducing transaction costs and increasing efficiency. Security is another major benefit, as the cryptographic techniques used in blockchain make it highly resistant to tampering and fraud.

What are the challenges that Blockchain faces?

While blockchain holds immense potential, it also faces significant challenges. Scalability is a critical issue as traditional blockchains can struggle to handle a large number of transactions simultaneously. Energy consumption is another concern, especially in PoW-based blockchains, where extensive computational power is required for mining new blocks. Interoperability between different blockchain networks and existing systems is also a challenge that needs to be addressed.

Does Insurwiz utilize this technology? Yes.

At InsurWiz Technology Ltd. When we receive the insurance policy parameters from our partner, we convert them into smart contracts and put them on-chain. We deploy those contracts on our private, Ethereum-based network. In case a contract meets a predefined condition, the claim settlement is automatically triggered, the state of the smart contract is updated and the payment gets released. This technology enables us to promptly and securely automate the claiming process and make it transparent, and unalterable.

For example, after receiving a new contract request, we verify its data using our cloud services. If everything checks out, we then proceed to transfer it to the blockchain. Once the contract is added to a new block, we monitor for specific conditions outlined in the contract. If these conditions are met, we will promptly initiate the compensation payout.

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I really hope you enjoyed reading this article and that you've picked up some seriously cool insights on Blockchain Technology. 😎

So, now the whole blockchain thing is looking way clearer in your mind, right?

If you're nodding along and all your burning questions have their answers, then our mission here is totally accomplished! 🎉

If you have any thoughts or perspectives, feel free to share them in the comments below.

Stay curious and keep exploring! 🚀


Thank you to our guest writer! Valentin Márton