What is Blockchain Ecosystem?
Blockchain is a distributed ledger technology that allows the storage of data in blocks of information, with each block containing batches of transactions from one moment in time. Its open, decentralized and secure nature of it allows blockchain to disrupt traditional transactional systems.
Blockchain has the potential to transform the ecosystem by becoming an indispensable part of our daily lives. Understanding the underlying technology and its impact is imperative for those looking to capitalize on this new era. Let’s break down how blockchain is changing the world and what it means for your business.
The following topics will be discussed here in the blockchain ecosystem:
- What is Blockchain Ecosystem?
- Types of Blockchain Ecosystem
- Why Blockchain Ecosystem is Important for Organizations?
- How can Blockchain Ecosystem Benefit Organizations?
- Participants In Blockchain Ecosystem
- Components of Blockchain Ecosystem
- Steps in Forming Blockchain Ecosystem
Let’s start discussing each of these topics in detail.
What is Blockchain Ecosystem?
All over the world, people have continuously struggled with keeping their personal and business finances safe. However, the success rate for financial security goes up a few notches with blockchain technology. Blockchain is a decentralized ledger that creates an open and shared database of transactions or records which cannot be altered retroactively or distributed across multiple networks without the broad consensus of participants in these networks.
The blockchain ecosystem is the network of all the participants in the blockchain network that share the business process and business objectives. The ecosystem encompasses the different governing structures like:
- Individual participation.
- Data ownership.
- Exit and entrance criteria.
- Information and data shared with the system’s participants.
It can provide immutability, decentralization, flexibility for day-to-day operations, and scalability. The blockchain ecosystem is a boon for startups and new technology projects as it creates an interconnected network.
Types of Blockchain Ecosystem:
Below are the three different types of blockchain ecosystems:
- Single-party led blockchain ecosystem: This ecosystem is led by a single organization where all the stakeholders have a mutual benefit for participating in the network. For example, Bumble Bee Foods has created a single-party-led blockchain ecosystem to improve the traceability of the yellowfin tuna fish. This helped to improve the buyer’s confidence in the fish’s freshness.
- Joint venture blockchain ecosystem: This is also known as the Consortium blockchain ecosystem. These are slowly becoming popular and they involve two or more organizations in the ecosystem. The participating organizations have an objective of participating in a common activity or pooling their resources for achieving a common goal. For example, BunkerTrace a marine fuel tracking solution is a joint venture blockchain ecosystem between Forecast technology Ltd. and Blockchain Labs for Open Collaboration (BLOC).
- Regulatory blockchain ecosystem: This ecosystem comprises various government agencies that hare a project and have to self-report for compliance. For example, a shared project between Marine Transport International and Recycling Association.
Why Blockchain Ecosystem is Important for Organizations?
Below are some of the reasons why an ecosystem is an essential solution for organizations:
- Integration across enterprise boundaries: Blockchain ecosystems enable integration across the enterprise boundaries allowing organizations to deliver products or services that they won’t be able to deliver on their own due to the lack of technological capabilities.
- Allow organizations to overcome traditional mindset: The blockchain ecosystem helps organizations to move beyond their traditional mindset as well as the dynamic limitations of a particular supply-chain network.
How can the blockchain Ecosystem Benefit Organizations?
Blockchain technology is having a profound effect on every aspect of our lives and economy, starting with disrupting business processes. One of the advantages of blockchains, as opposed to traditional databases, is that blockchains are decentralized and transparent, greatly reducing risks while providing complete security. Below are some of the ways in which the blockchain ecosystem can benefit organizations:
- Distributed: With no centralized authority (i.e. a database administrator or single point of failure) this brings new functionalities for the employees and customers of an organization.
- Remodel complete workflow: The blockchain ecosystem will revamp the complete workflow and how projects are developed, from the starting stage to the end.
- Smart contracts: Smart contracts are essentially computer program that automatically executes agreed-upon terms in a contract when certain conditions are met. With the use of smart contracts the exchange of information is swift and can also remove intermediatory in a process that would extend the time to perform a task in a larger process. It logs transactions in a linear, chronological order, and creates an immutable set of records that are tamper-proof.
- Improve ongoing operation: The blockchain ecosystem should be viable for an organization when it can improve the ongoing operation that existing solutions can’t do. For example, an organization where data sharing among various departments and individuals occurs at a higher rate could benefit from the blockchain structure of validating data among nodes or peers as fast as possible.
- Facilitate cross-enterprise collaboration: It can facilitate cross-enterprise collaboration with the benefit of decentralization, flexibility, distribution, and traceability.
- Transparency: All transactions are visible to all users of the network. Data can be traced back to its source, making it almost impossible to forge a digital item or transaction.
- Consensus: The participants in the blockchain ecosystem use the information they receive to make calculations and verify new blocks, using a consensus-based system. This makes it difficult for fraudulent transactions or duplicate items to get through.
Participants in Blockchain Ecosystem
Participants are the most important components of the blockchain ecosystem. Below are the five participants in the blockchain ecosystem:
- Leaders: Leaders take control of everything happening on the blockchain network. They are the organizations that have a vision of the future of the blockchain ecosystem and its business values. These are the creators of the project and are the main beneficiaries of the work in the ecosystem.
- Core group: The core group refers to the group of active or leading organizations in the network that gives shape to operational activities in the network. They are responsible for controlling, streamlining, and managing the blockchain ecosystem actively.
- Active participants: These are the group of primary network participants that take on the responsibility of contributing to workflow, governance, and data management.
- Users: They don’t get any responsibility for the active management of the network. Their only responsibility in the ecosystem is to obtain desired benefits from the network alongside accessing their own data.
- Third-party service providers: They are important participants in the network and offer different types of services on the network. They could offer desired services like IT support services or infrastructure and applications services in exchange for specific fees.
Components of Blockchain Ecosystem
The important logical components in the blockchain ecosystem are as follows:
- Node application: It is a particular internet application that every internet-connected computer must download for participating in a blockchain ecosystem. After node application installation, a user becomes a participant in the blockchain network. Once one has a node application installed, it can participate in the ecosystem.
- Distributed ledger: this is the logical component and the data structure that is managed inside the node application. Once the node application is installed, one can view the respective ledger contents from that ecosystem. One can run as many node applications as likes and is permitted to use, and each will participate in their respective blockchain ecosystems.
- Consensus algorithms: The consensus algorithm is implemented as a part of the node application in the blockchain ecosystem. They provide the rules of the game for how the ecosystem will arrive at the single view of the ledger. Different ecosystems have different ways of attaining consensus. There are different consensus algorithms like PoW, PoS, etc, each method qualifies nodes as honest in their own way before participating in the consensus-building process.
- Virtual machine: It is the representation of the computer environment created by a computer program and operated with instructions programmed in a language. The virtual machine implementation happens alongside the node application. For example, in the Ethereum blockchain ecosystem, the EVM resides inside the node application.
Steps in Forming Blockchain Ecosystem
The key steps in building and scaling the blockchain ecosystem are:
1. Ecosystem value proposition: This step includes defining the fundamental purpose of the ecosystem actions. some of the questions that should be asked in this step are:
- What business problem is addressed by the proposed solution for the ecosystem?
- How would the blockchain ecosystem impact each of the participants?
2. Expected participants: This step involves brainstorming for the expected participants to determine why they want to join the blockchain ecosystem. Some of the questions that should be considered in this step are:
- Who are the expected participants and why do they want to join the ecosystem?
- What are the incentives for each of the expected participants to engage in the blockchain ecosystem?
3. Ecosystem model: Organization will decide to have an idea on which collaboration model will be the best fit for their purpose. The organization should consider the following questions:
- Which single-party led, joint venture, or regulatory blockchain ecosystem s the best model?
- How model might need to change over time?
4. Ecosystem governance: This is the most important step as it is very important to consider who will operate the network and how it will be governed. Below are some of the questions that should be discussed in this step:
- What governance will be required to bring the ecosystem to life?
- How will value and cost for the blockchain ecosystem be fairly allocated?
5. Organizations’ preparation: Each organization must have an idea about what benefits it can derive from joining the ecosystem. The organization should consider the questions like:
- What are the risks associated with the blockchain ecosystem?
- Is the proposed blockchain ecosystem lawful?
- What are the necessary capabilities and resource requirements for the development of the ecosystem?
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