What Is A Blockchain Ecosystem?
A blockchain ecosystem is a collection of different elements, attributes, and characteristics that merge together to build a blockchain network, including the network participants, native tokens, validators, protocols, DAO, and so on. All of these elements work together to render a functional blockchain ecosystem.
Introducing Blockchain Ecosystems
A blockchain ecosystem is comprised of a peer-to-peer network, participants connected through the internet, protocols regulating its governance, and native tokens. All these elements come together to ensure that a blockchain network, a decentralized system of records, maintained by its participants rather than a centralized governing entity.
While having ingredients in common, each blockchain ecosystem is unique and has its own way of functioning. Some blockchains, like Bitcoin or Stellar, solely revolve around trading it’s native cryptocurrency, while others, like Ethereum, allow participants to build versatile decentralized applications on top of the platform.
This guide lists the elements that make a blockchain ecosystem, explains the way in which they work together to maintain and grow the network, and provides notable examples.
How a Blockchain Ecosystem Works
A blockchain network, also referred to as a decentralized ledger system is maintained without a central authority, which would normally be responsible for processing information and keeping the records updated, secure, and genuine.
In a decentralized network, these responsibilities are shared among the network participants and laid out in the protocol. The participants make use of consensus mechanisms to collectively update and verify each data entry, all of which are also protected using cryptography technologies, making the network immutable and traceable.
Elements of a Blockchain Ecosystem
Blocks — The information in a blockchain is stored in blocks, which are cryptographically sealed through a hashing function, and are timestamped. Each block contains a limited amount of transaction data, its own hash code, and the previous block’s hash core.
Nodes — Devices, or participants, of a blockchain network who run the network’s software and take part in its maintenance.
Validators — Validators assume the responsibility of authenticating transactions and creating new blocks to be added to the chain, also referred to as mining. The validating action is incentivized by rewarding an amount of native cryptocurrency. .
Consensus Mechanisms — Protocols of this sort determine the selection of validators, and how transactions will be authenticated and served for the approval of the other nodes, with the most notable examples being proof of work and proof of stake.
Smart Contracts — Popularized by the Ethereum network, smart contracts render blockchains programmable, meaning that developers can write and develop self-executing programs on blockchain networks. This paves the way for a variety of projects, most notably dapps and DAOs.
Decentralized Applications — Dapps are open-source consumer applications serving a variety of needs from finance to gaming, governed by self-executing protocols, smart contracts, rather than a single entity or corporation.
Decentralized Autonomous Organizations — A DAO refer to a blockchain community embracing a bottom-up management model where every shareholder has a say. Terms and conditions of organizations as such are codified and executed through smart contracts. A DAO may function in a variety of ways, from investment clubs to charities.
Wallets — Wallets are instrumental in allowing users to engage with dapps. Any user can set up a wallet without submitting any personally identifying information, allowing them to store and trade cryptocurrencies and interact with decentralized exchanges, applications, and more.
Use Cases for Blockchain Ecosystems
While user-centric public blockchains like Bitcoin or Ethereum takes the spotlight most times, blockchain ecosystems are also being used in facilitating cross-enterprise communications within industries, where organizations harness the distributed database technology to automate shared operations and sharing information in a transparent and secure manner.
Finboot, for example, has created a blockchain-based logistics ecosystem for airlines, fuellers, and logistics operators to participate, which created a platform through which participants can optimize the reconciliation of refuelling services. The chain benefits from both private and public architecture to ensure confidentiality of sensitive data of respective organizations.
One other example is Bumble Bee Foods, which brings together fisherman, packagers, transportation personnel, distributors, and retailers, and with the help of collection of records, the network provides an ocean to plate traceability of yellowfin tuna fish. Customers can view the information regarding the product by simply scanning a QR code.
Blockchain ecosystems of the sort are typically permissioned networks. Meaning that more often than not, they are governed by a single or multiple entities who allow participants to engage with the activities of a network.
Future of Blockchain Ecosystems
While early examples of blockchain ecosystems, most notably Bitcoin, revolve around cryptocurrency, the launch of Ethereum and following networks paved the way for developers and organizations alike to acknowledge the technologies versatile abilities and untapped functionalities.
Today, established corporations like IBM lead the way for industries and firms to harness blockchain technology to automate their workflows and integrate with similar enterprises and end-customers in a streamlined, transparent, and secure way.