Blockchain technology is reshaping the backbone of the internet by allowing digital information to be distributed without the need to be copied. While originally created for the digital and cryptocurrency markets, Blockchain has now found a wide range of applications for the technology.
What is Blockchain?
Blockchain is a technology that can allow individuals and companies to make instantaneous transactions on a network without intermediaries. Transactions made on blockchain are completely secure, and, by the function of blockchain technology, are kept as a record of what happened. Encryption algorithms ensure that no record of a transaction on blockchain can be altered after the fact.
The basic definition of blockchain is that it is an ever expanding list of records that are linked by cryptographic ties to the previous block of records. Every block contains a cryptographic hash representation of the previous block, thereby permanently linking the records. Additionally, the block contains a timestamp and associated transaction information.
In its most basic terms a blockchain is a growing database containing linked blocks of information stored in a decentralized manner across millions of nodes (computers). The key is that once the block is created, and the information is stored in the blocks using cryptography, it cannot be altered or the link broken, thus forming the chain.
How Blockchain Works
While blockchain is complex in its implementation, there are several basic conventions that underpin the technology.
Communication occurs directly between peers instead of through a central node. Each node stores and forwards information to all other nodes. They all run the protocol and hold identical copies of the transactions history ledger. This enables the value of transactions without any middleman or central systems processing.
Every transaction and its associated value are visible to anyone with access. While blockchain is exceptionally private, it offers complete transparency in the form of a wholly auditable ledger of all transactions on the blockchain. This key feature is core to the blockchain network, and reduces any need for checks and balances because all nodes on a blockchain have a unique address that identifies it. This allows users to remain anonymous or to provide proof of their identity to others. All transactions occur between these blockchain addresses.
The Distributed Database
While all blockchain databases are distributed, not all distributed databases are blockchain based. Decentralization is the key factor of blockchain along with security and scalability. All parties on a blockchain have access to the entire database and its entire transaction history; however, no individual company or person controls the data or the information. Parties have the ability to verify the records of their transaction partners directly, without an intermediary.
When a transaction is accepted and entered into the blockchain database, its accounts are updated and the records cannot be altered. The reason is because they are mathematically linked to all transactions that came before them. The mathematical algorithms are set up to ensure that the transaction is perpetual, recorded in timestamp order, and then made available to others on the network. The digital nature and use of algorithms and rules will automatically control and verify all transactions between nodes.
Who Will Use The Blockchain?
With the basic understanding of how blockchain networks work, you can easily see how it provides internet users with the ability to not only authenticate digital information but to create value from the ability to do so. So, the question is, what types of business applications will benefit from the use of blockchain? The answer is, an almost endless number.
Here are some of the most common and talked about uses and potential. Some already implemented and some are planning to.
Sharing service companies like Uber and Airbnb provide an intermediary service for their users. The ability to use secure, peer-to-peer transactions with blockchain allows for direct interaction between interested parties. This will create a real decentralized economy, eliminating transaction fees.
In the current political environment, the securing of fair elections is foremost in everyone’s mind. The absolute authentication of a voters’ identity, the ability to secure record keeping to track votes, and ensuring that vote tallies are accurate are critical. The structure of blockchain tools is perfectly suited to serve as the accurate infrastructure for casting and counting votes with a secure and verifiable audit trail, providing absolute certainty of the outcome.
One of the biggest challenges in the academic community is the verification of student credentials. At all levels of education, verifying academic records is still for the most part a manual process with significant amounts of paper documentation and a lot of reliance on manual labor to do the checking. Using a blockchain solution in education would potentially streamline administrative tasks, make learning materials more accessible through decentralization, and capture learning-related data verification procedures. This would significantly reduce fraud related to un-earned educational credits.
The experience of purchasing a new or used vehicle, whether buying, or selling is an extremely fragmented process. This is true for buyers and sellers alike; however, blockchain could change all of that. Several POCs have shown that you can successfully allow a consumer to do everything from choosing a vehicle to signing purchase documents and insurance forms right from the driver’s seat. It’s completely plausible to imagine that the process could be extended to registration as well.
The need for more secure identity management is at the forefront of every commerce provider on the internet. The ability to verify your identity is the lynchpin of all online financial transactions; however, identifying and mitigating security risks that come with web commerce are far from perfect. Blockchain’s distributed ledgers offer significant enhancements for providing and managing identity, including reputation management.
Blockchain ledgers make all kinds of Real Estate record-keeping more accurate and efficient. Probably the example that stands out in real estate is Property Titles management. Title management is highly susceptible to fraud, and is very expensive and labor-intensive to administer. There are a number of countries undertaking blockchain-based title management POCs. Other pain points that are in the works for real estate transactions are around making the large number of paper-based records involved more accurate, secure, faster to process and significantly reduced cost to process. This includes smart contracts, titles, deeds, mortgage documents and tax filings but the possibilities are many.
As with other industries, the number of potential positive impacts to Healthcare organizations is endless. Starting with the supply chain, the ability to trace products to ensure authenticity or uncover signs of potential tampering, extreme environmental conditions, or careless handling will have a huge impact.
Equally important, healthcare institutions struggle to securely share data across platforms. Data drives the ability of providers to better collaborate, which will mean more accurate diagnoses, better change of the correct and effective treatments, and enhance the ability to deliver cost-effective care across the entire Healthcare ecosystem. Ultimately the use of blockchain technology will allow hospitals, payers, and other third parties to share access to their data without compromising security and integrity.
Entertainment Rights Management
The fair and equitable validation and management of creative rights has always been a challenge for the industry. The entertainment industry is exploring how to make content more equitable for the content owners using smart contract technology, allowing revenue based on their creative work to be accurately and automatically distributed according to their specific licensing agreements. Ultimately, the goal is to have a platform that allows content creators to convert their repository including the rules associated with the rights into intelligent content that can automatically manage the transactions through the blockchain platform.
The True Value of Blockchain?
The acceptance and use of Bitcoin proved the potential and significant benefits of Blockchain. There are key reasons we learned on how the use of Blockchain can greatly improve the way many businesses operate.
Blockchain will remove the need of third-party organizations as well as middlemen from almost everything in business today; from payment gateways all the way to advertisements. This increases trust and reduces costs. So, if you haven't thought about how Blockchain will impact your life, it's about time.