Tag: Blockchain

Private blockchain technology in healthcare data management

While public blockchains such as Bitcoin and Ethereum have gained attention for their use in cryptocurrency, private blockchains have earned popularity in industries where security and privacy are critical, such as healthcare.

In recent years, blockchain technology has emerged as a potential solution to many challenges facing healthcare data management. Private blockchains are permissioned networks in which access is limited only to authorized parties. This makes them a perfect solution for healthcare, where data privacy and security are significant issues. 

Private blockchain technology can improve data management, sharing and potentially revolutionize how healthcare providers, patients, and other stakeholders interact.

 

Current challenges in healthcare data management

The healthcare industry currently faces several challenges in managing data effectively. Some of the most pressing issues include:

• Data security and privacy. With the increasing amount of sensitive patient data being stored and transmitted digitally, it is critical to provide security and privacy. Healthcare organizations must comply with regulatory requirements such as HIPAA, which imposes strict standards for safeguarding patient information. Despite these regulations, data breaches are still common in the healthcare industry, with potential consequences ranging from financial losses to reputational damage.
• Interoperability. Healthcare providers often use different systems to manage patient data, which can lead to data inconsistencies and hinder communication between different parties. The lack of interoperability between different systems can result in errors and redundancies in care delivery.
• Data sharing and communication. Sharing patient data among healthcare providers is essential for delivering high-quality care, but most current systems for sharing data often need to be more efficient and efficient. The process of requesting and receiving data can take days or even weeks, and the data may not be up-to-date or accurate. This can lead to delays in care delivery, misdiagnoses, and other adverse outcomes.

These challenges highlight the need for innovative solutions to improve healthcare data management. Private blockchain has the potential to address these challenges by providing a secure, transparent, and efficient platform for managing and sharing data.

 

How can private blockchain solve these challenges?

Private blockchain uses cryptographic techniques to ensure that data stored on the network is secure and tamper-proof. Using a distributed ledger ensures that the data is transparent and can be accessed by authorized parties in real time. This can improve the security and privacy of patient data, as well as enhance trust and confidence in the healthcare system. 

Blockchain technology can help overcome the interoperability challenges by establishing shared protocols and standards that enable different systems to communicate. This can help reduce errors, redundancies, and inefficiencies in care delivery, as well as improve the accuracy and completeness of patient data.

A private blockchain can provide a secure and efficient platform for sharing patient data among different parties, including healthcare providers, patients, insurance companies, and researchers. This can help improve the speed and accuracy of diagnosis and treatment and facilitate collaboration and innovation in healthcare.

 

Examples of using private blockchain in healthcare

Private blockchain technology has already been adopted by various healthcare organizations for different purposes. Below are some examples of the use of private blockchain in healthcare:

Using a private blockchain for electronic medical records (EMR) offers several advantages over traditional EMR systems. It can increase the security and confidentiality of patient data while enabling safe and efficient information exchange between medical facilities.

One of the key benefits of a private blockchain for EMR is that it can provide a tamper-proof and transparent record of all patient data transactions. Every transaction, such as adding a new record or update, is captured on the blockchain in a secure and immutable way. This can help prevent data tampering, loss or leakage, common issues with traditional EMR systems.

It also increases patient control over their data, enabling them to monitor who has access to the data and to grant or revoke access to their medical records when needed. This could increase patients' trust in the healthcare system.

A private blockchain can also be used for managing clinical trials and research data. The technology can facilitate secure and transparent data sharing between different stakeholders involved in the research process, including patients, researchers, and regulatory bodies. A private blockchain can also help ensure data integrity, enhance data privacy, and reduce the risk of data manipulation or fraud.

A private blockchain can improve supply chain management and drug tracking in healthcare by enabling secure and transparent monitoring of drugs from manufacturers to patients. Using private blockchain, stakeholders can track the movement of drugs, verify their authenticity, and ensure that they are not tampered with. This can help reduce the risk of counterfeit drugs entering the supply chain, enhance patient safety, and improve regulatory compliance.

 

The future of healthcare with private blockchain technology benefits.

The use of private blockchain technology can significantly improve the efficiency of healthcare systems, leading to cost savings for healthcare providers. One of the primary reasons for this is its ability to automate many administrative tasks, reducing the need for manual intervention and streamlining operations. Using smart contracts and digital identities, blockchain can automate tasks such as patient identification, medical record management, claims processing, and supply chain management, among others.

Delivering secure and efficient data sharing, blockchain can enable providers to create new partnerships and collaborations that were previously impossible. For example, healthcare providers can use blockchain to securely share patient data with research institutions and pharmaceutical companies, leading to the development of new treatments and therapies.

Furthermore, blockchain technology can also facilitate the creation of decentralized health platforms that incentivize patients to engage in pro-health activities. By using blockchain-based tokens or rewards, patients can earn incentives for participating in clinical trials, sharing their health data, or engaging in other health-related activities. This can lead to improved patient outcomes and new revenue streams for healthcare providers.

Overall, the potential for new business models and revenue streams created by blockchain technology in healthcare is vast, and the industry is only beginning to scratch the surface of what is possible. By leveraging the benefits of blockchain, healthcare providers can improve patient outcomes, reduce costs, and create new opportunities for revenue generation and innovation.

 

Inmost team experience.

At Inmost, we understand that trust is essential to healthcare, especially regarding telehealth services. Because patients don't have the opportunity to see a doctor in person, it can be challenging to build trust with the healthcare providers they are communicating with via screen.

To address this challenge for our client - a telehealth provider, our team implemented blockchain technology on a Hyperledger Fabric platform for patient medical records. Our solution provides secure storage and immutability for all patients' personal information, from registration data and diagnosis to screening and examination results and prescribed treatments.

This implementation has had a positive impact on our client's services. Now they can provide their patients with more comprehensive and evidence-based care by accessing a complete medical history. In addition, patients can be assured that their information is secure and cannot be tampered with

More information about this case: https://inmost.pro/cases/clinic-reliable-storage/

 

General business engagement

Metaverse was among the top trends of 2022 and continues to gain popularity beyond the gaming community. It will undoubtedly remain a priority for technical innovation and investment in 2023. Technologies such as AR, VR, IoT, 5G, blockchain, and cloud computing are fueling the next industrial revolution that will dramatically impact the future of business.

Numerous companies in industries ranging from education and healthcare to retail and manufacturing are already leveraging enterprise blockchain, cryptocurrencies, artificial intelligence, virtual reality, and NFTs. The technologies associated with the Metaverse have started bringing significant benefits and are gaining much attention in the business world.

 

Metaverse and Enterprise Metaverse definition

The definition of the Metaverse today is the gradual merging of the digital and physical worlds, the environment where the distinctions between our digital avatars and our physical selves are blurred. It is a world where we are surrounded by information and smart devices, interacting with data for work, education, entertainment, and more. It is a dynamic, open, and interoperable space.

An enterprise metaverse, by definition, is a metaverse that provides business growth opportunities for an enterprise. Its main goal is to connect people in a single virtual workspace, and digital twins are its foundation. Digital twins can be used to create a detailed virtual representation of any physical object, from specific items or assets to complex industrial environments, which can be extensive, such as roads, rail lines, factories, buildings, and warehouses. Once they are modeled, sensors and IoT connections can be used to bring them to life and synchronize them with the real world. 

 

What are the advantages for business?

Global reach

The most crucial advantage is a global reach. The Internet has helped companies overcome the long journey to customers and new markets that are geographically distant. The Metaverse can quickly and efficiently connect people from all over the world. In just a few minutes, you can arrange a business meeting with the digital avatar of your business partner from another continent.

New ways of interaction

Moreover, customers and businesses can connect, communicate and participate in a new way that meets modern challenges. Not long ago, for example, pandemic restrictions severely affected the events industry when concerts, sports games, festivals, conferences, and other events were forbidden for a long time. Mass events in the virtual world do not depend on such restrictions - concerts, fashion shows, and conferences are already actively held in the Metaverse.

You can already find agencies offering the organization of weddings and parties in a virtual environment.

The MICE industry is expected to continue expanding its presence in the Metaverse. Soon, many hotels will sell virtual meeting rooms and standard services, generating new revenue.

 

Digital workspace and employees training

Even though some companies are trying to bring their employees back to the office after the pandemic, the overall trend towards remote working is only increasing.

Companies don't need to rent an office and pay for its maintenance, and employees cannot waste time and money on getting to the workplace and back home - these are just the most obvious benefits of remote work.

With the Metaverse, the office comes to you wherever you are, and you can set up your virtual workspace the way you like it. The Metaverse enables employees to be constructive and productive, even when they're thousands of miles away from their workplace.

In the Metaverse, you can meet with colleagues, have group discussions, give presentations, and communicate through personalized avatars that make you forget that you are not in a real office.

Moreover, the Metaverse is an excellent environment for employee training. Any training materials and content can be easily created here, as well as simulations of dangerous situations that allow professionals such as firefighters or police officers to practice skills without risking their lives.

 

AI assistant

A beneficial digital tool that can perform basic calculations, remind you of appointments, translate texts from different languages, transcribe your speech, find needed information and do everything a regular secretary or personal assistant can do. The digital assistant is available 24/7 and never gets tired or takes a vacation or sick leave.

And although such assistants already exist in the real world, the metaverse environment greatly expands their capabilities and allows you to create any digital appearance for them.

 

Remarkable marketing opportunities

Metaverse allows companies to create their world representing their brand in a way that no video, traditional advertising, words, or images can do. Each world can be unique and create a comprehensive experience for the customer. Customers can interact with a digital copy of your product before they buy it, for example, by checking how the piece of furniture they want to purchase fits into the interior of their house.

Hotels can offer virtual tours that allow guests to experience their services, see the breathtaking sunset view from the terrace of a suite and even hear the sound of the ocean waves.

With the metaverse technology, you can conduct activities that are difficult or impossible to implement in reality, such as organizing a party on a yacht for potential customers from all over the world, where you can impressively present your new product or service.

Before launching it into production, you can test a new design or product on your target audience in a virtual space.

Such tools are priceless in terms of competition, gaining customer loyalty, and saving your time and money.

 

How soon will the Metaverse be fully launched?

Although the Metaverse is not fully implemented yet, and in 2023 the process is unlikely to be completed, it will have a profound and lasting impact on industries and businesses before it reaches its full potential. 

With the start of 2023, virtual reality, augmented reality, and digital technologies will be more intensively integrated into our lives. They will firmly take their place in many businesses and industries. Understanding how things work is vital for successfully embracing new opportunities the Metaverse offers.

 

 

What are Smart Contracts? 

A Smart Contract - sounds promising. When we meet this term in the context of blockchain technology, it seems we deal with something extra complex and futuristic. 

Is it that complicated? Let's find out.

Smart contracts are a kind of computer program or algorithm of certain behavior integrated into the blockchain network. If the predetermined conditions, specified by the code, are followed, it triggers the performing of a particular action or sequence of actions. For example, if you put $5 in a ticket machine and press the "day ticket" button, it will print and dispense a certain - predetermined type of ticket. 

As in a paper contract, the fulfillment of the conditions is mandatory. Only in this case, the transaction will be performed, and the users will receive the conditioned result. Once the algorithm is successfully completed and the transaction is correct, smart contracts become a part of the ledger in a blockchain network.

So, we can say that the Smart Contract is a self-executing program with "if... then" logic based on blockchain. Easy enough.

However, one smart contract can include several different conditions, and one application can execute multiple smart contracts to perform a consistent set of related processes. There can be as many conditions that are necessary to execute the task successfully.

Currently, blockchain technologies supporting smart contracts are actively used for complex computing tasks that involve artificial intelligence (AI) and machine learning (ML).

This combination of technologies could be the basis for AI-enabled smart contracts and would be able to create very complex, more responsive enterprise-level smart contracts and dApps with the potential to seriously expand the capabilities of this technology, unlike simple smart contracts which can be developed manually.

 

Most popular smart contract development platforms

Ethereum was the first platform in the world where smart contracts were used and even today it is extremely popular among developers. Ethereum now is based on the PoS consensus algorithm. Its smart contracts are written in Ethereum's own smart contract programming language - Solidity. The execution environment for smart contracts is called the Ethereum Virtual Machine (EVM) and is interoperable with other blockchains such as Solana and Avalanche, allowing developers to move their smart contracts to other platforms.

Hyperledger Fabric - is an IBM enterprise-focused private blockchain platform that also supports smart contracts, or what Fabric calls "chaincode". The platform is capable of processing up to 20,000 transactions per second with no transaction fee. Hyperledger Fabric runs the code on top of Docker containers which allows a reduction in cost for smart contract applications. Fabric uses traditional high-level programming languages such as Java and Go and leverages Crash Fault Tolerant (CFT) consensus algorithm. For easier and more efficient smart contract development, it offers a set of tools, including Hyperledger Composer. The modular and versatile design of Hyperledger Fabric meets a wide range of industry use cases.

Like other next-generation smart contract platforms, Solana aims to solve scalability problems. It has a record-high speed of 65,000 transactions per second. The main reason for such high performance is that Solana uses an innovative combination of Proof of History (PoH) and Proof of Stake (PoS) consensus algorithms. A transaction fee is rather low - just $0.00025. 

Smart contracts built on Solana can be written in Rust, C++, and C. In addition, the platform is compatible with EVM, allowing developers to run Ethereum-based smart contracts in the Solana ecosystem.

 

Where smart contracts can be used now?

Smart contracts eliminate unnecessary paperwork and the cost of expensive intermediaries that are an essential part of traditional contracts, transactions, and exchanges while maintaining the transparency and traceability of the blockchain and reducing counterparty risks. These features make smart contracts a valuable tool for various use cases.

Smart contracts are an essential component of many DeFi (Decentralized Finance) applications and have already significantly influenced their evolution. DeFi applications (dApps) provide services that are alternative to the banking and finance industry - such as trading, lending, borrowing, exchange, and a range of other financial services - as well as entirely new types of products and decentralized business models that can deliver significant value to users.

Blockchain technology in the gaming industry could allow players to get more benefits from in-game purchases and asset accumulation. In games, blockchain technology is usually represented by NFTs based on smart contracts. They help, for example, to avoid developers’ manipulations to induce users to make repeated purchases. The user can be sure that the previously purchased artifact will not lose its properties or in-game value after the next game update. The immutable nature of smart contracts will not permit such mischief.

Smart contracts can protect digital artists' property rights by providing transparent royalty rules. For example, the digital environment is a great platform for musicians, especially singles or beginners, to introduce their work to audiences. But low traceability, miserable payouts due to a large number of intermediaries, and long non-transparent royalty payment processes create a lot of problems. With smart contracts, musicians could be paid a certain sum every time a user pressed the play button on one of their tracks, enabling the royalty payout process to be completed in seconds instead of months, eliminating the need for unnecessary third parties and building a direct seller-consumer interaction with their fans. 

In addition to the examples mentioned above, smart contracts are already used in real estate, insurance, healthcare and clinical trials, retail, supply chain management, and many other areas.

 

Advantages offered by smart contracts

So let’s resume the benefits of smart contracts deployment:

• Transparency - the  contract is the code, which is publicly available to view for everyone. The transparency,  traceability, and immutability of data help to create a better sense of trust;
• Security - blockchain-based smart contracts offer a very secure and transparent way to document and automate business processes. To enhance the security of storage transactions on the blockchain, data encryption can also be used;
• Cost-efficiency - processes enabled by smart contracts require less human intervention and no third parties, and therefore it reduces costs;
• Speed - the absence of intermediaries reduces economic costs as well as time. Immediate automated execution as soon as the conditions are met saves time compared to manual and third-party contracts;

 

Very soon, smart contracts will become even more complex and smarter, and much more widespread as people become more confident and trusting of blockchain technology.

Inmost team is always here to help you leverage all the benefits of smart contracts. We have chosen Hyperledger Fabric platform to provide the highest level of data protection, reduce costs and make customers' business processes smarter. 

 

Trust, security, accountability, and transparency have essentially become synonymous to blockchain these days. Especially when it comes to private blockchain, which, as we discussed in a previous article (https://inmost.pro/blog/private-blockchain/), allows you to create versatile business applications with high scalability in a trusted environment, though sacrificing decentralization.

Most companies that have already implemented blockchain technology do not consider this fact to be a disadvantage. On the contrary, allowing only authorized users access the network provides the highest level of security while taking full advantage of all the other benefits of blockchain. Private blockchains are for the businesses that want more privacy and more control over data. 

Among the companies that are already actively taking advantage of the blockchain integration are Shell, Walmart, Mastercard, De Beers, Oracle, and many others.

Let's explore some use cases for private blockchain:

 

E-commerce

As the world of e-commerce is growing rapidly, numerous parties are involved in the operational processes, including consumers and companies buying goods or services, suppliers and delivery networks, and finally e-commerce platforms. 

As a rule, participants in this complex ecosystem are located in different countries and jurisdictions and transact in different national currencies, which lead to a truly complicated transaction process. Using third-party services usually involves problems such as high costs and fees, transaction duration taking up to several days, non-transparent payment processes, and unpredictable exchange rates. 

At the same time, customers demand that purchases be processed quickly and without hidden fees. They want to rely on the security of their personal data and, of course, have a guarantee of the brand authenticity.

The integration of private blockchain technology can solve all the above problems for both e-commerce platforms and consumers. Blockchain allows companies to track products through the entire logistics chain, from manufacturing to delivery. It provides a secure, tamper-proof method of recording transactions and allows businesses to verify the identity of customers and suppliers to prevent fraudulent activity and counterfeit goods. Blockchain eliminates the need for intermediaries by providing real-time transaction speed, reducing costs for third-party services and real-time exchange rates. 

 

Internet of Things

The tremendous growth in the use of IoT technology has a snowball effect these days. Smart devices, smart homes and, subsequently, smart cities have already become a reality. 

The IoT infrastructure consists of sophisticated chips and sensors embedded in physical objects and transmitting data to the network. This network provides data transactions on multiple devices operated and owned by different organizations, making it difficult to determine the source of data leaks in case of a cyber attack. 

Moreover, the IoT generates immense volumes of data with multiple interested parties involved, and the ownership of that data is not always obvious.

Blockchain technology can solve these problems by making IoT devices more safe and efficient. Private blockchain can provide much faster data processing among billions of connected devices, as well as create an additional layer of security for IoT networks. Blockchain enables a much higher level of encryption, making it virtually impossible to overwrite existing data records and due to smart contracts sensors can transmit data without any need for a trusted third party.

 

Healthcare 

Sensitive medical records demand the highest level of protection, as their unauthorized usage leads to significant risks to fundamental patients rights. Improving data processing and storage processes, as well as optimizing workflows, is a top priority for the healthcare industry.

In 2016, Johns Hopkins University published a study showing that the third leading cause of death in the United States was medical errors caused by uncoordinated care, such as planned procedures that are not performed as intended or errors in patient records. Blockchain-enabled solutions can help enhance trust in sharing data while eliminating problems with data transparency and interoperability. 

For example, a blockchain-based electronic record system that acts as a comprehensive single view of the patient's medical history, in which every doctor's note, prescription, or test result cannot be falsified or altered. Such a complete, single source of medical record information creates a better experience for patients and healthcare providers and helps clinics significantly reduce the legal and operational costs. 

Private blockchain technology also meets high security standards in terms of data privacy, sensitivity and the control of access.

 

Insurance

The scope of insurance services and things that can be insured continues to expand and adapt to the current reality - for example, recently the number of insurance services related to the pandemic has increased significantly. You can insure not only a house or a car, but also any piece of furniture, a beloved pet, there are a large number of exotic cases, such as insurance against unrequited love. Meanwhile, insurance companies face constantly growing compliance, intense competition, fraud allegations and third-party fees.

However, plenty of them have already adopted blockchain technology to overcome these challenges. But the specific nature and sensitivity of the data, makes the use of public blockchain inappropriate here. Private blockchain, with its limited access to the network, smart contracts, immutable and trustworthy record and transactional power, is a perfect tool for streamlining processes, efficiently handling claims, automating risk modeling and audits.

Additionally, a private blockchain can significantly improve the approach to KYS (know-your-customer ) and AML (anti money laundering) compliance by creating a single blockchain-based database, allowing partner companies to use it to facilitate customer identification. 

In addition, blockchain can also streamline regulatory compliance and significantly reduce compliance costs. Insurers would not need to manually submit compliance reports, as regulators would be able to access all relevant information on the blockchain in real time.

 

Benefits of private blockchain

Therefore, taking a closer look at each of these industries, makes it is easy to identify the following common benefits that they receive from the implementation of private blockchain technology:

• Higher level of data storage and transmission security: ability to monitor and control access and any changes;
• Transparency: it can guarantee the quality of goods and serviсes and immutability of all transactions and terms of deals;
• Cost-efficiency: smart contracts that clearly define all responsibilities of the parties and the conditions for transaction validation completely eliminate the need for the expensive intermediary services;
• Higher transaction processing speed: a private blockchain uses as many resources as necessary to process transactions, which allows for faster and more efficient transaction speeds.

 

Of course, any company from any industry would only benefit from such advantages. This means that the list of use cases for private blockchain can be much wider. In the long term, blockchain will merge the currently separate ecosystems into a fundamentally new business environment with different customer-centric approaches and products.

And the question every entrepreneur should be thinking about now: Is my company ready for such a transformation?

 

The most common use cases

The popularity of NFTs is usually associated with digital art. Non-fungible tokens have eliminated boundaries for creators, even those who are just starting their journey in digital art, allowing them to exhibit and sell their work all over the world. Any work of art, even the most primitive, unusual, and ugly, can find its admirers and be sold for impressive sums of money.

NFT avatars are gaining more popularity on social networks. Twitter, Reddit, Facebook and Instagram have already begun rolling out NFT technologies. 

The recent global socio-political situation caused disappointment in traditional and centralized social networks due to the lack of user data protection, government control, spread of propaganda and censorship. Decentralized social networks are increasingly in demand, and NFTs will play an important role in their development. 

However, is the use of NFT technology only limited to digital art and social media? Of course not.

Just like the use of blockchain is not limited solely to the crypto industry, NFT has stepped outside the common stereotypes and is now adopted by the progressive companies to transfer their business processes into a new reality.

 

Which industries can benefit from the integration of NFT technology?

Based on blockchain and smart contracts that provide secure data storage, allow terms to be clearly defined and agreements to be confirmed without intermediaries, NFTs can be applied in a broad range of areas. We'll look at just a few of them:

 

Fashion

In fact, the fashion industry was one of the first to embrace the potential of NFT. Fashion brands and designers quickly realized that the metaverse is a great opportunity to create, promote and sell digital outfits to the millions and potentially billions of people who want to style their digital avatars in line with the latest fashion trends.

Fashion NFTs can be offered in the form of virtual clothing and accessories that consumers buy and wear in the metaverse, or as digital copies of physical creations.

There are already design studios producing virtual 3D clothing. They have much more options than real clothing manufacturers, and create the most incredible and futuristic models. Sometimes the price of such clothes significantly exceeds the cost of real outfits from well-known brands due to their uniqueness and proof of ownership provided by NFT technology.

The fashion industry's intention to move toward digital transformation is confirmed by the fact that Decentraland hosted Metaverse Fashion Week in March 2022. The NFT fashion show featured more than 70 brands, including Tommy Hilfiger, Dolce & Gabbana and Karl Lagerfeld, who participated in branded catwalks showcasing the results of their collaboration with digital designers.

 

Gaming

More and more games allow players to create and customize their game characters. Buy unique weapons, artifacts, clothing, accessories and other game-related items. Recently, there is a growing trend among NFT players - to own their characters. You can create your in-game avatar and even export it to other games of the ecosystem or sell it on the NFT marketplace.

Purchasing in traditional games is a one-time, non-transferable investment limited to a single gaming environment. Using NFT, on the other hand, transfers ownership of in-game assets to the player rather than to the game's developers. Blockchain technology gives players the ability to save in-game purchases, sell them to other players, or transfer them to other games. This interoperability is achieved through blockchain technology - for example, two games created on the Ethereum network can support the same in-game assets, such as vehicles, armor, or even entire characters.

So, NFTs can easily exist independently from a particular gaming platform, and even if the game ceases to exist, the player still owns the character and acquired NFT assets and can use them in a different environment. In addition, blockchain-enabled game assets cannot be duplicated or forged because an immutable record is created when each NFT is released. 

 

Real Estate

With the development of the metaverse, the new type of property is becoming increasingly popular alongside traditional "physical" real estate: virtual real estate offers the opportunity to buy land, islands, houses, apartments, and even famous landmarks in the metaverse. Often, ownership of digital real estate is linked to ownership in the real world.

After a customer purchases virtual property, the transaction is recorded in the blockchain and the NFT is transferred to the buyer's digital wallet. After the wallet is connected to the metaverse platform, it authenticates the land ownership. Owning virtual property allows users to participate in the governance of the metaverse platform - for example, to vote on initiatives for its further development.

Physical real estate NFTs are created by registering a physical asset (your home, land, or commercial property) on a blockchain. The metadata of each NFT is anchored in a blockchain, which serves as verifiable proof of authenticity and ownership. It confirms ownership, identifies encumbrances on the property, and empowers more efficient processing of transactions. In addition, an NFT can only have one official owner at a time, it cannot be forged or altered. Smart contracts in each NFT automate all actions, creating faster and more efficient transactions without intermediaries and tons of paperwork.

 

Advertising and marketing

NFT provides companies with a new way to promote their business, advertise new products and reach new audiences. It connects brands with the customers by valuable and unique assets that ensure a long time loyalty. Non-fungible tokens help develop more personal and effective brand-customer interactions by enabling consumers to express their opinions and vote on future brand events, new product lines and potential services.

Offering digital collectibles can greatly increase brand awareness, allowing companies to build a community of fans and collectors around their products and services.

Numerous brands are already using this technology to attract public and media attention to their products. Collaboration of famous brands with NFT artists or marketplaces is quite a popular way of promotion these days. 

And of course, the metaverse should be mentioned again. Companies can test the demand for their future products by creating a virtual prototype and getting feedback before launching the product in reality. Virtual spaces offer the possibility to place ads on billboards, banners and even on the metaverse-radio.

Marketing industry experts believe that the most powerful strategy for brands promotion is a combination of social media and NFT technology.

 

Healthcare

Currently, healthcare providers in most cases use outdated methods of storing medical records, which leads to high costs, slow record retrieval and low security, which often leads to loss or sale of patient medical data. However, some companies have already leveraged the benefits of blockchain, keeping patient’s medical records as NFTs.

By storing medical data on the blockchain, patients will be able to own their records without third-party involvement, making all processes related to medical care more efficient and secure. Patients will be able to track their medical data and hold those who use it without their consent accountable. They will also be able to get paid every time they give the company permission to use their data for research, building marketing strategies or new products. Tools such as the decentralized software engine used by clinical trial platforms and healthcare organizations already exist to track and process patient consent for clinical trials via NFTs.

Blood donation organizations use non-fungible tokens to track a blood donation through their system. A digital "blood bank" can be created by registering blood through its NFT, with the blockchain system tracking demand for specific types of blood to deliver them quickly to where they are needed.

 

Some final words

The use of NFT technology is certainly not limited to the areas mentioned above, and there is no doubt that with the development of Web-3, despite all the concerns and hype, NFT will continue to be integrated into various aspects of our lives, perhaps even in the most unexpected ways.

We are ready to help companies that recognize the need to build the foundation for their presence in the new digital reality, where there is no more room for paperwork and old-fashioned document flow, boring and monotonous presentations and non-transparent transactions. The Inmost team has a successful track record in developing NFT, and blockchain is one of our core competencies.

 

There are probably no people left who have not heard of NFTs yet.

Being a vital component of Web-3: the next iteration of the Internet, along with the Metaverse and De-Fi, NFTs evoke, perhaps, the most contradictory feelings in society - from enthusiasm, sometimes bordering on insanity, to outright hostility and harsh criticism.

NFT - a non-fungible token - is a unique unit of data that is verified and stored in the blockchain and can be linked to digital or physical assets to provide immutable proof of ownership. Blockchain technology allows NFTs to be tracked in an immutable digital ledger that provides a history of assets and can be verified at any time. So, NFTs cannot be replicated, destroyed, or counterfeited.

NFTs are primarily created on Ethereum, but other blockchains support them as well.

For selling NFTs, they must first be minted. Minting an NFT means converting a digital file into a digital asset that can be published and stored on the blockchain, making it available to potential buyers. The minting process is not free - you need a crypto wallet and a certain amount of crypto currency to cover the Ethereum "gas fees." The most popular NFT marketplaces on the Ethereum blockchain are: OpenSea NFT, Rarible, and Mintable.

Today, almost anything can become an NFT: paintings, photos, videos, music, gifs, memes - any kind of unique art that can be represented digitally. Or it can even be real estate, collectibles, event tickets, website domains or tweets.

Famous auction houses Christie’s and Sotheby’s have already made sales of NFT artworks for several hundred million dollars.

The first experiments with NFT started back in 2013, but the wave of hype rose only in 2021, and sometimes it looked like real insanity. So, the creator of the Nyan Cat meme received $580,000 in cryptocurrency for a gif with the famous cat meme, and the digital artist Beeple sold the token of jpeg collage - Everydays: The First 5000 Days, for $69.3 million.

NFT technology is actively used by both well-known and not yet recognized artists. The main factor in the growing popularity of NFT is the opportunity for a beginner to present his or her work to a wide audience. A few years ago, a new artist had to work hard for several years before reaching the first serious exhibition, and still success was not guaranteed. Today it's enough to convert your painting into a digital format, create a corresponding NFT token (it's not that complicated) and sell it for real money.

Actually, NFT technology can be used for transactions with any digital assets, however, the recent trends show a growing interest in selling real things as NFTs. These can be, for example, sculptures, antiques, a coin collection, etc. But if converting paintings into a digital format is a common thing today, how can a real physical object become an NFT?

The first way is to create a 3D digital copy of the object. Technologies that allow the average person to create such copies are becoming more and more available. And of course, it attracts a lot of interest from businesses and corporations that have been already using and investing in 3D technologies to promote their brands and products not only in the real world, but also in the virtual world of the metaverse. In addition, NFTs of 3D objects are expected to replace our favorite real-world things, objects, and assets in the metaverse, making it even more similar to our everyday environment.

But what if we take objects that are difficult to digitize? Last month, for example, a three-bedroom house in South Carolina was sold as an NFT for $175,000. The buyer indicated that he was able to make the transaction for that property with just one click. How does it work?

In simple terms, the selling company creates an NFT that represents ownership of the house. Those who buy this NFT become the owner of the property. Despite the fact that the purchase is made digitally, the ownership is considered absolutely real - whoever owns the NFT owns the house in the real world.

Although such transactions are still viewed with suspicion by the majority, there are serious reasons to believe that NFT technology could open the door to a decentralized economy without intermediaries such as banks or a government. In the future, it may completely change the rules of the markets.

Today, besides the arts and real estate, the most potential for NFTs have gaming, education,  healthcare, supply chain and logistics industries. NFT tokens can be used to confirm any important document: a diploma, health records, a marriage registration certificate, etc.

A serious barrier to NFT adoption into the mentioned areas is the lack of government regulation. And it is very likely that in case of a fraud or hacker attack, the affected party will not be able to recover its losses.

Moreover, NFT technology faces many other challenges today. For example, one of the main arguments against NFT is its huge energy consumption and extremely negative impact on the environment. However, after Ethereum has switched from a power-intensive Proof-of-Work protocol to a mining-free Proof-of-Stake, it is possible that NFT will become more eco-friendly and increase its audience.

Since NFT has both - the devoted fans and haters, it remains one of the most hype-boosting components of web-3, and is mentioned every now and then in the news and social media, either along with the figures containing impressive number of zeros, or along with facts that cause a no less impressive number of questions and misunderstandings.

 

“Our virtues are generally but disguised vices” – La Rochefoucauld

 

Why at all do we need a private blockchain?

One of the blockchain types supported by Amazon is HyperLedger Fabric. There is a special Amazon Managed Blockchain service for Hyperledger Fabric on the AWS platform, that simplifies the work related to setting up blockchain networks and reduces the time to deploy solutions based on it. Hyperledger Fabric is a private blockchain, so let's first look closer: what tasks can a private blockchain perform in general?

As you know, a public blockchain has three main properties:

- Decentralization - there is no single node or a dedicated group of nodes that store any information separately - information is duplicated in an amount equal to the number of users in the system;

- Transparency - every user has access to the entire database and can track all changes;

- Reliability - all the records form a chain, and each new record is linked to previous ones by a special mathematical function that depends on the data in the previous elements of the chain. This ensures that the data cannot be changed retroactively.

 

All these components together allow you to build an information storage system where each individual element (user) is untrusted, but in combination, they form a trustworthy repository.

Why is this concept not suitable for an enterprise environment?

First of all, the lack of user identification. This is especially critical when performing financial transactions in an enterprise environment. In 2016, the concept of KYC (Know Your Customer) appeared in the official documents of the Department of the Treasury to combat financial crime FinCEN USA, which requires financial institutions to identify their customers before allowing them to conduct financial transactions.

In addition, in 1989, the FATF introduced the principles of AML (Anti-Money Laundering) - measures to combat money laundering. And these principles require user identification. Thus, there are powerful arguments why an enterprise blockchain should be private but not public.

Is this the only difference? If we create a blockchain network with access to only authenticated users, then is it possible to use other items available in the public blockchain architecture for an enterprise system? No, it is not.

On a public blockchain, we use various consensus mechanisms to validate a transaction that adds a new block of data to the chain. All of these mechanisms rely on all network users participating in the validation process and receiving reward for this participation in one way or another.

And to pay this reward, each public blockchain invents its own cryptocurrency. Cryptocurrencies and public blockchains cannot exist without each other. Currently, there are over 10,000 different cryptocurrencies in the world. This amount significantly exceeds the number of fiat currencies, the value of which is guaranteed by the states that issue them. It is quite difficult to release a new cryptocurrency that has at least some value to the public.

This idea is not suitable for a corporate network. For two reasons:

- First, keeping a complete copy of the entire database on the computers of every employee with access to the corporate network in order to participate in the consensus will not cause enthusiasm among the security services in any corporation, no matter how powerful encryption algorithms are protecting information;

- Second, the idea of ​​introducing an internal cryptocurrency in the corporate network also seems strange.

 

This leads to the conclusion that a private blockchain needs a consensus mechanism based on a centralized algorithm.

So, what is left of the original idea? First, we consistently abandoned decentralization, although the decentralization level of public blockchains based on the Proof-of-Stake consensus mechanism is very doubtful, and then transparency was dropped. In the end, only “all records form a chain and each new record is linked to the previous through a special mathematical function that depends on the data in the previous elements of the chain. This ensures that the data cannot be changed retrospectively.

 

In fact, this is really not so few. We have obtained reliable data storage located in the corporate network and the information in it cannot be faked, no matter what the access rights of the person who wants to do it. And due to the fact that there is a central node or a set of nodes responsible for confirming transactions, the recording of information is significantly accelerated compared to public blockchains. There are many applications for such reliable storage with fast access in corporate networks. We will look closer at some of them soon, and will talk about how Hyperledger Fabric solves this problem.

 

We have mentioned the decentralized finance system - DeFi, talking about the trading metaverse - Metafi (http://www.inmost.pro/blog/metafi-first-social-trading-metaverse/). 

As one of the hottest topics in the crypto world over the last few years, Defi is definitely worth a closer look.

DeFi is a global blockchain-based financial system built to meet the needs of the new Internet iteration - Web-3. It is an alternative to tightly controlled traditional systems with outdated infrastructure and processes. It allows you to control and have direct access to your money. DeFi eliminates the fees that banks and other financial institutions charge for using their services. People store money in a secure digital wallet and funds transfer takes only a few minutes. It also provides access to global markets and creates alternatives to local currency or banking solutions. Any traditional services provided by financial institutions can be expected to be offered through DeFi. 

While not everyone has the ability to open a bank account and use traditional financial services, anyone with access to the Internet can use services offered by DeFi products. Currently, tens of billions dollars in cryptocurrencies have flowed through DeFi programs, and the number of transactions is increasing every day.

DeFi markets are always open and there is no centralized authority limiting their working time, blocking payments or denying access. This decentralization aspect is considered to be one of the main advantages of DeFi.

To provide services without third parties, DeFi uses cryptocurrencies and smart contracts, transferring trust from intermediaries to machine algorithms.

A smart contract is a self-executing contract where the terms and conditions are defined and applied through automation and approved autonomously and efficiently on the blockchain. No one will be able to change a smart contract once it is launched: it will always work as programmed. Smart contracts are public, so anyone can view and monitor them. This means that the community will be able to quickly detect a compromised contract and react accordingly.

Security, privacy and transparency of DeFi services also base on fundamental advantages of blockchain as the records of information in chain blocks cannot be changed or controlled by any authority.

Even though most DeFi services are now built on Ethereum, Bitcoin was the real DeFi pioneer, giving the ability to own, control, and send assets anywhere in the world. Bitcoin is open to everyone and no one can change the rules. Its concepts really differ from the traditional financial world, where governments can print money and devalue your savings, and companies can shut down markets.

Now, Ethereum is the ideal foundation for DeFi. Most of DeFi products are actually powered by Ethereum. Therefore, many of them can be easily configured for interaction. You can borrow tokens on one platform, and exchange them on another market and in a completely different program. Tokens and cryptocurrency are written into the Ethereum blockchain, and a shared ledger that tracks transactions and ownership is one of Ethereum's unique features.

Like every other system DeFi is composed of different parts. Its infrastructure consists of layers that are responsible for various processes and guarantee the smooth functioning of transactions and contracts:

1. Settlement Layer: also called Layer 0. Based on Ethereum blockchain it serves as a foundation for all DeFi transactions, writing code or building applications. This is the vital component - the DeFi system can not exist without blockchain.

2. Protocol Layer: defines rules and standards for all DeFi transactions, it is a description of the specific conditions necessary for the code to run accurately and fulfill its tasks. All the protocols are interoperable and can be used to create any application in the DeFi ecosystem.

3. Application Layer: consists of decentralized applications or dApps - products created on the basis of two previous layers that serve as a kind of front-end in the DeFi ecosystem, enabling consumers to use DeFi services. With dApps you can buy, sell, trade, lend, and borrow cryptocurrencies on a decentralized network.

4. Aggregation Layer: at this layer third-party vendors create end-to-end solutions by bringing together existing decentralized applications and offering users and investors a wide range of financial services in one place.

 

The list of DeFi services is constantly growing, here are some of them:

• Money transactions around the world

• Access to stable currencies

• Loans

• Deposits

• Trading

• Investments

• Insurance

However, despite the great financial freedom offered to users, serious challenges regarding DeFi still exist. For example, a lack of consumer protection. DeFi is free of rules and regulations. But it means that users often have no legal protection if something goes wrong. There are no government reimbursement systems for DeFi and no laws requiring capital reserves for DeFi service providers.

The problem  is that all the rules and restrictions which could potentially protect the user do not apply to the decentralization concept. So, the path forward may be unclear, but it will certainly be important for DeFi investors to monitor the evolution of the regulatory environment for this new financial sector.

Despite all the concerns and the so far insufficient resistance to hacker attacks, DeFi would gradually break the monopoly of traditional financial institutions and decrease the cost of traditional financial services by removing barriers and giving everyone equal access to the financial infrastructure.

 

 

Remember Tamagochi - a digital pet from the past? Perhaps, the popularity of this toy, which seems quite primitive today, lies in the possibility of adopting a pet, even for those who are unable to do so for whatever reason.

For example, many people like dogs, but few of them have enough time to spend with the pets and are able to create all the necessary conditions for their care. Soon this problem can be solved by a quite realistic and colorful petaverse - Dogami.

Players (Dogamers) can adopt virtual dogs, play games and compete with others. It will be possible to interact with the pet through augmented reality using the Dogami app, available for any type of smartphone on iOS or Android.

According to developers, Dogami petaverse roadmap includes the implementation of lands saling and the dogs crossbreeding - there will be an opportunity to mint a new puppy NFT with a random gender from two virtual pets NFTs.

The game is built on the Tezos blockchain which provides low gas fees, fast data processing and, as the developers assure, clean NFTs - having very low carbon footprint due to the most energy-efficient blockchain technology. The utility token of petaverse ‘$DOGA’ can be used to raise your dog, buy event tickets, consumables and to create your digital wardrobe purchasing virtual accessories and luxury items such as caps, bucket hats, varsity jackets, bandanas, beds, bed pillows, hoodies and belt bags in the marketplace. 

By the way, Gap Inc. - American worldwide clothing and accessories retailer teamed up with  Dogami to launch the first fashion collaboration in the petaverse. Each item of the collection will be available in the game to create an individual style for your virtual pet. 

And, of course, it's worth mentioning the play-to-earn concept of Dogami. You can earn  ‘$DOGA’ completing day challenges and being rewarded for multiple days of consistent play. The amount of earnings strongly depends on your game level - at level 1, you can only earn a maximum of 5 $DOGA a day, but by level 10  it is already up to 50 $DOGA.

On September 14, first 100 Dogamers got the chance to participate in the early stage of the game and support Dogamí development. 

Even though Dogami was not yet fully launched, it already has a huge amount of attention and positive feedback, since the theme of the game has a really large audience. In this case you can only imagine the potential of the Metaverse for cats!

 

We have already written a lot about metaverses. We talked about metaverses where you can discover new lands, farm, live in a giant skyscraper, and even about a pet metaverse. We have mentioned that the fashion, entertainment, and sports industries are actively investing in their meta-future. After all, they understand the opportunities of brand promotion in the virtual world, because the metaverse is not just a realistic 3D virtual game, but a huge ecosystem with immense potential and a rapidly developing economy. According to industry experts, the Metaverse will far surpass the real world economy in the coming years.

The metaverse economy is built on cryptocurrencies - decentralized digital money based on blockchain technology. Decentralized Finance, or DeFi, is a platform that allows investors to trade financial products over a decentralized blockchain network.

Transactions do not require intermediaries such as banks or brokers. DeFi accepts investors who do not have a government ID, brokerage or bank account, proof of residency, or social security card.

What happens when you combine the Metaverse and DeFi? Welcome to MetaFi!

The developers of MetaFi claim that the current market products are not able to make Web3 truly decentralized: it is actually being traded, and talked about, on Web2. MetaFi changes this forever by making trading truly social on Web3.

The MetaFi World is divided into futuristic trading zones focused on each kind of asset -  you can trade tokens, NFTs, tokenized stocks, commodities, bonds.  

The $METAFI token is hyper-deflationary by design: the deflationary mechanism is based on the fact that as more users enter the metaverse and trade, more fees will be generated that will be used for activities that reduce MetaFi's circulating supply (buying and burning, providing liquidity, placing bets).

To enter the MetaFi world, you will need to create your virtual avatar - MetaFi Citizen and connect it with your crypto wallet.

One of the most  important features of MetaFie is the ability to communicate - participants can chat, exchange text and voice messages, images, share  knowledge and show their trades in real time. In this world, everyone is trading together and trying to beat the market using collective thinking, research and technical analysis.

“Most trading platforms compete with nearly identical products. MetaFi reimagines the trader’s experience: making trading fun, engaging, and social. With the Trading World, MetaFi will aggregate major decentralized protocols with deep liquidity, wrapped in a new gamified trading environment, designed to be a seamless onramp for non-crypto audience.”- Matt Danilaitis, Founder of MetaFi said. 

This month, MetaFi announced the successful completion of a $3 million funding round. So, now  ​​the company with its web-3 virtual trading platform is valued at $25 million.

The booming interest in cryptocurrencies and metaverses, as well as the opportunity to improve trading skills, communicating and exchanging experience with other participants, make MetaFi very attractive to the crypto community. Currently there are over 100,000 participants on the waiting list.

 

What is a consensus algorithm in the blockchain? Since decentralized networks require tools to agree on decisions and to ensure overall reliability, a mechanism for coordinating system processes has been developed. This mechanism is called a consensus algorithm. It is a decision-making procedure aimed to prevent a network from centralized control and to ensure that everyone follows the rules.

One of the main differences between various cryptocurrency networks is the type of consensus algorithms used.

In the article about Ethereum Merge (http://www.inmost.pro/blog/ethereum-merge/), we talked about the two currently most commonly used algorithms: proof-of-work and proof-of-stake. Both have their pros and cons, their supporters and opponents. And while the crypto industry rapidly evolves, developers will continue to come up with new solutions searching for the perfect one.

Let us now take a look at what alternative consensus algorithms exist, although they are less popular than proof-of-work and proof-of-stake.

 

Proof-of-Burn (PoB)

Unlike the proof-of-work, this algorithm is not very energy consuming. Miners do not need to invest in physical resources - powerful hardware. Instead, they invest cryptocurrencies (coins) to be selected for mining and validation of a new block. Coins sent for burning can no longer be returned. The more coins burned, the higher the chance of being selected as a validator. The system provides a reward for miners to cover the initial cost of the burned coins within a certain time.

One of the main drawbacks of this algorithm is that it does not really reduce energy consumption, since in most cases bitcoin coins mined with proof-of-work are used for burning.

Also, this algorithm lacks speed, and since it is not yet widely used, its efficiency and security still need to be tested.

 

Proof- of- Authority(PoA)

This algorithm is based on a reputation concept that uses a limited number of block validators. Blocks and transactions are verified by pre-approved participants with confirmed identities who act as system moderators. These system moderators validate blocks and transactions.

To be selected as a validator, a candidate must be trustworthy and have no criminal record. Reputation is a major investment here, as confidence in the identity of the validator ensures the security and reliability of the entire network.

It is clear that this approach, in addition to disclosing access to the identity of the validator, has another significant flaw - centralization. However, this factor makes PoA attractive for large enterprises and private use.

 

Delegated- Proof- of- Stake (DPoS)

DPoS consensus is achieved by voting of the delegates (third parties) authorized by the stakeholders, with voting power proportional to the number of coins each user holds. We can admit that the mechanism of this algorithm also relies on the reputation of voters. In case of suspicion of manipulation or rules violation, the community can replace the delegate at any time.

Delegated-proof-of-stake was designed to be more efficient than the proof-of- stake and proof-of-work consensus algorithms, especially in terms of speed of transaction processing.

One of the main problems with DPoS consensus is the possibility of collusion between delegates. This can lead to centralization of the network and increase vulnerability to attacks.

 

Proof-of-Elapsed-Time (PoET)

This  is an algorithm that prevents high resource usage and high energy consumption. Its concept was invented by Intel. 

Determining the node that gets the privilege of adding a block is a kind of lottery in which all participants of the network have equal opportunities. Each node in the blockchain generates a random wait period and goes asleep for this specified amount of time. The node with the shortest waiting time "wakes up" first and includes a new block into the chain, passing the necessary information to the entire network. The same process is then repeated to find the next block.

The cause of concern regarding PoET is a recently discovered vulnerability in Intel's technology, which serves as a foundation of the protocol. In addition, the reliance of consensus on third-party technologies - Intel, runs against the paradigm that cryptocurrencies are trying to implement with blockchain networks - removing the need for trust in intermediaries.

 

Proof-of-Capacity (PoC)

It allows mining equipment to use the available hard drive space on the network to determine mining privilege instead of using the computing power of the device. The larger the hard drive, the more possible solution values ​​can be stored on it, the higher is the chance for the miner to match the required hash value from his list, providing a better chance of achieving a reward.

Despite the fact that the mining process is part of this protocol, it is considered to be less energy consuming as there is no need for super powerful hardware.The disadvantage of this protocol is insufficient security and vulnerability to malware attacks.

This is far from a complete list of existing consensus algorithms.The listed algorithms are used quite infrequently. They have good potential, but there is still a lot of room for improvement. 

Even though proof-of-work is still the most commonly used algorithm today, Ethereum's recent move to proof-of-stake looks like a bit of a gold rush among companies looking for the perfect consensus algorithm to move the industry forward.

 

The Ethereum upgrade - one of the most impressive achievements in the blockchain industry, finally has been finished.

"And we finalized it!... Happy merge all! This is a big moment for the Ethereum ecosystem," said Ethereum co-founder Vitalik Buterin in a tweet. 

So, what has changed since Ethereum switched to Proof of Stake, except that ETH costs have dropped 20% in the last 7 days.

Since the preparations for the Merge in the Ethereum community have been ongoing for several years, it is currently unlikely that the event itself will cause significant changes in the overall development of Web-3.

There are prerequisites for a positive trend in the NFT segment - as many artists and users have had antipathy towards blockchain technologies due to the environmental impact of high energy consumption. By switching to proof-of-stake, Ethereum became much more eco- friendly. In fact, less than an hour after the Merge was completed, a user spent 36 ETH - about $60,000 - to mint the first NFT on the proof-of-stake network. It is a panda face image called "The Transition."

At the same time, the eco-aspect had a crushing effect on the miners, who appeared to be the most suffered side of the Merge. It is possible that some miners will choose to mine on another chain instead of selling the gear.

Of course, the biggest concern and criticism of the past-merge Ethereum is that it is moving toward centralization. Proof-of-stake depends on users buying, holding and staking large amounts of the network's cryptocurrency.

And while control of the Ethereum network will no longer be concentrated in the hands of a few publicly traded mining syndicates, critics insist that previous powerful players will simply be replaced by new ones. Lido, a kind of community of validators, controls over 30% of the stake on the Ethereum proof-of-stake chain. Coinbase, Kraken, and Binance - the three largest crypto exchanges - own another 30% stake in the network.

“Since the successful completion of the Merge, the majority of the blocks — somewhere around 40% or more — have been built by two addresses belonging to Lido and Coinbase. It isn’t ideal to see more than 40% of blocks being settled by two providers, particularly one that is a centralized service provider (Coinbase)”- explained Ryan Rasmussen, crypto research analyst.

Since decentralization is the main component of Web 3 concepts, this problem should be solved for the successful development of Ethereum and keeping ahead of competitors in the future.

Therefore, the Merge cannot be considered as the final transformation of Ethereum. The challenge is in keeping upgrading the network to adapt it to the decentralization concept and to increase security and speed.

As Buterin admitted, the Merge is just the beginning. "To me, the Merge just symbolizes the difference between early stage Ethereum, and the Ethereum we've always wanted to become," he said. "So let's go build out all of the other parts of this ecosystem and turn Ethereum into what we want it to be.

No matter how much the traditional financial sector resists the advance of cryptocurrencies, they will inevitably take a dominant position in the future. And there is no doubt that the evolving Ethereum is one of the main pillars of this industry.

 

The whole crypto community holds its breath waiting for the most grandiose event that is about to happen. Ethereum is on the edge of the most significant event in its history. A large-scale update called The Merge is planned for the Ethereum network, which involves changing the consensus algorithm from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

The goal of the upgrade is to make this blockchain platform more scalable, secure and decentralized.

The actual activation of the Merge will happen with the "Paris" update, around September 15th, when the cumulative Terminal Total Difficulty (TTD) reaches 58750000000000000000000. TTD specifies the final Proof of Work block, after which the Proof of Stake consensus takes over.

With the change of consensus the era of mining will finally be closed. After the transition of Ethereum to PoS, miners in the network will be replaced by validators. They will confirm new transactions with the help of stakes and receive a reward in Ethereum coins (ETH) for this work.

To clearly understand what is happening, let's take a closer look at the basic concepts of the blockchain and figure out what consensus algorithms are and what are the pros and cons of PoW and PoS algorithms.

Each blockchain has its own protocol as a set of rules and actions, aimed at transferring data. Protocol is a critical component of Blockchain technologies that allow interaction of network nodes, transmission of data and block mining confirmation. A node is one of the many devices that runs the blockchain protocol software and usually stores a history of transactions. Nodes are connected to each other in a decentralized network. 

The consensus algorithm ensures that the rules of the protocol are followed and that all transactions are authentic. In other words, it is responsible for ensuring that all the nodes of the network agree with the adding of a new block. In this way, the consensus algorithm maintains the integrity and security of the network.

Proof-of-Work and Proof-of-Stake are currently the most used and well-known consensus algorithms. In fact, there are many more consensus algorithms, but for now we will consider only these two.

 

Proof-of-work (PoW)  is used widely in cryptocurrency mining, for validating transactions and mining new tokens. It is a mechanism that allows the decentralized Ethereum network to come to a consensus or agree on things like account balance or the order of transactions. This prevents users from “double spending” their coins and ensures that the Ethereum network is extremely difficult to hack or to fake.

To participate in a transaction, network members need to solve an arbitrary mathematical puzzle to find the hash and publicly prove the work done in order to avoid cheating the system.

A hash function is a function that converts an array of input data of arbitrary length into a bit string of a fixed length, performed by a certain algorithm. The conversion performed by the hash function is called hashing. The result of the conversion is called a hash.  The hash calculation process requires a lot of energy, which only increases as more miners join the network.

The first miner who is lucky to find a solution gets the right to add a block to the chain. Moreover, it gives the  ability to receive a reward for the work done and this is the main motivation for mining. All nodes are competing with each other, increasing the capacity of computing resources in order to be the very first node to receive a reward.

The main disadvantages of PoW:

• Mining requires an enormous amount of energy. Nodes in the network are competing with each other, constantly performing complex calculations. But as a result, most of the work is done for nothing, since the reward goes to only one node. Bitcoin mining consumes more energy than countries like Switzerland or Greece;
• Low speed and poor scalability. PoW blockchains are sorely lacking in speed. For example, the maximum throughput of the Bitcoin network is only 7-10 transactions per second. Such low rates are not suitable for mass and everyday use;
• Users have to pay fees to miners for the verification of transactions. The more users in the network, the higher the commission. For the small transactions, commissions can even exceed the amount of the transfer itself;

 

Proof-of-Stake (PoS)  reduces the amount of computational work required to validate the blocks and transactions that keep the blockchain secure. Computing power (block validation) is replaced by staking. Staking is the process of blocking cryptocurrency assets in order to earn rewards or interest.

This algorithm gives the right to create the next block in the blockchain to the node that has more balance - the amount of resources, for example, cryptocurrency coins. The node does not receive a reward for the creation of the block. The reward is paid for the transaction. 

The main advantages of the PoS algorithm:

• Low power consumption compared to PoW algorithms;
• No special equipment needed;
• High speed and scalability. For example, the transaction amount increases up to 2000 per second;
• Low commissions;
• Participation in the evolution of the project. Validators are taking part in voting on the future development of the project;

 

But aside from the fact that Proof-of-Stake is younger and less tested compared to Proof-of-Work, the biggest concern about the PoS algorithm is the risk of centralization. The validators, who have the larger amount of coins, will eventually control the majority of the network. Therefore, blockchain developers have been working on new versions of the PoS algorithm in recent years to solve this issue.

So, what will happen when the cumulative difficulty of Ethereum mining  finally exceeds the assigned TTD value? After crossing this milestone, there will be no more mining here. Network users (wallets) will stop accepting blocks from miners and will be waiting to get them from PoS validators.

The updated version of the protocol after the transition is called “Paris” and will continue the line of European capitals after: “Berlin” and “London”. On the evening of September 11, almost 84% of wallets were ready for the transition.

To become an Ethereum validator, you need to have at least 32 ETH as a deposit. In order to optimize the calculations, staking participants are divided into committees -  groups, the members of which are determined randomly. They include from 128 to 2048 validators. 

Time in Proof-of-Stake Ethereum is divided into slots (12 seconds) and epochs (32 slots). A randomly selected validator proposes blocks in each slot. This validator is responsible for creating a new block and sending it to nodes in the network. A committee of validators votes to agree on the validity of the block that was proposed. Committee members are shuffled after each epoch. 

By June 2022, the energy consumption of the Ethereum blockchain was 112 TWh per year. As a result of replacing mining with staking, this amount will decrease by 99.95%. This will not affect the operational processes of the protocol and the economics of projects, but it will allow Ethereum to avoid criticism from the “greens”. In addition, Ethereum will become more attractive to investors who take into account environmental issues. The developers claim that after PoS implementation, each node will require no more electricity than a regular PC.

The Ethereum roadmap includes the implementation of a technology called sharding, which is necessary to increase the scalability of the blockchain. Sharding is the division of a common database into fragments and distributed storage of information by nodes. This update will allow the Ethereum network to grow in line with the increasing load.

Sharding will reduce hardware requirements and allow the node to run on laptops and smartphones. The update is planned to be integrated in 2023, but the final date depends on the effectiveness of the Merge - transition to Proof-of-Stake.

There is no doubt that the Merger is one of the most significant events in the history of cryptocurrencies, which may have far-reaching consequences, from unpredictable fluctuations in the price of Ether to global changes in the crypto industry at all.