Due to the sheer newness of Blockchain technology, it can often sound like a complicated concept that has nothing to do with the average human being. Most people associate blockchain to bitcoin and use these terms interchangeably and believe its a technology only for the financial sector. However, this is far from true. While the banking and finance sectors have a lot to gain from blockchain technology, even if you do not work in the finance sector, you and your organization stand to gain a lot from this technology. In fact, the Blockchain market is expected to grow to 3.2 billion USD in the United States alone by 2021! Therefore, it is essential to understand what this technology is and how you can gain from it.
What is blockchain Technology?
A Blockchain is a decentralized digital ledger. It is a database that stores information. Now, that doesn’t sound too complicated right? Within the network, chunks of data are stored in what is known as a ‘block’. These blocks are interlinked with other blocks that have their own data. All the blocks are linear in nature (which means there is a straight chronology to them). Hence, the technology is known as Blockchain.
The following traits are what make a Blockchain different from any other digital ledger:
- Decentralization: This is perhaps the most important characteristic of Blockchain. There is no single party that can control the information stored here.
- Multiple Nodes: Multiple computers all over the world (known as nodes) have copies of this ledger. As a result, everyone who as access to the ledge must agree on the information in it. Blockchain, thus, runs of the principal of consensus.
- No Erases: Information that is in the ledger cannot be erased. However, you can add more information to it, provided it does not conflict with any other data on the ledger. Whenever any information, the entire network is updated to reflect the change instantly.
Why does decentralization matter?
As Blockchain is synonymous with decentralization, it is essential to understand this concept and its importance as well.
Let us say you subscribe to a centralized system that is run by a specific entity. Due to that entity’s authority, the information you are exposed to is can be biased. Facts and figures can be manipulated and, therefore, so can public opinion and behaviour. However, with decentralization, you do not have a single authority to bow down to. Since the system runs on the basis of consensus, everyone must agree on the information shared within that system. Not only does this ensure an even playing field for everyone, it also ensures that no one party can cheat the system.
To understand further lets look at a real life example relevant for an organisation.
How does this help organizations?
Organizations that run large supply chains can rely on Blockchain to ensure transparent communications, efficient processes, and cost-effective modes of working. There is no scope for “he said, she said” when you work on Blockchain.
If a vendor must send certain products to a warehouse in your network, the information regarding those products will be stored on Blockchain for everyone to see. If the information is wrong, the issue can be raised then and there. Now, what if the vendor wants to tamper with the information on the Blockchain network? The vendor will need to not only change the information in the specific block that holds the pertinent data, but also all the other blocks that come after (as blocks also show some information about previous blocks). These changes are far more intricate than simply editing or replacing information as they rely on in-depth calculations that are far too complex than what laymen know. The result of these calculations create unique identification numbers for each block, known as a hash. The hash changes when changes are made in a block. Then, the vendor will have to locate every single computer on the network and make the same changes on their systems too.
Applications of Blockchain Technology
Most people associate Blockchain with cryptocurrencies. This is because crypto transactions rely heavily on the kind of transparency and efficiency that Blockchain offers. However, cryptocurrencies are only one of the many applications of Blockchain. The following are a few more examples:
Government bodies: A number of government bodies can use blockchain to ensure sanctity of data. Most common application would be for ownership information of real estate or even elections! Blockchain can help creating fair elections that cannot be tampered with.
Healthcare: Medical records determine the course of treatments that a doctor may recommend. However, sometimes people do not have the right records with them. A decentralized ledger with everyone’s information can help doctors access a patient’s medical history and any other pertinent information with ease.
Supply Chains: By using Blockchain to improve the life cycles of any supply chain, organizations, manufacturers and other vendors can easily ensure that they have greater control or transparency regarding all processes.
Insurance: Smart contracts can enable consumers to make faster claims and reach quicker settlements within the insurance industry.
On-Demand Consulting: Being able to access any experts on-demand to increase knowledge can help organizations and individuals grow and better influence their productivity.
Fad or future?
As there are so many possible applications of Blockchain, this technology is certainly the future, and
not just a fad. By using Blockchain technology for financial transactions, people stand to gain through:
– Greater transparency
– Efficient and quick settlements of payments
– Lesser risk of forgery (and maybe even scams worth crores!)
– No single authority controlling the data
– Lower fees for transactions
So, the next time someone brings up Blockchain in a conversation, all you need to say is that it is a decentralized ledger than can be used for anything. Blockchain and Bitcoin are not the same thing! We will discuss Bitcoin and Alt Coins in our next blog, to show you how they function, and how they tie in with the Blockchain system.