The first association that most people get when they hear blockchain is Bitcoin. It is fair to say that blockchain became popular among the masses by virtue of Bitcoin. However, almost all cryptocurrencies are blockchain technology based, and this partially explains the importance of blockchain for the financial systems.
To begin with, blockchain is a decentralised peer-to-peer network that protects and stores digital data and records in chronological order. The network can be accessed by multiple users, however due to the encrypted nature of the data, it cannot be modified or forged, which makes it a super secure digital technology. The network is free of any centralised authority and the network participants approve all transactions, making the process transparent and safe.
Blockchain encompasses three core technologies: a peer-to-peer network, a digital ledger and cryptographic keys. Every transaction goes through mathematical verification in the network, where the network participants act as authority and agree on transactions.
All data on transactions are stored in a digital ledger that resembles a spreadsheet, containing the history of all transactions made in the past. The beauty of this ledger is that everybody can see the data stored in the ledger, but nobody can corrupt or compromise it.
Cryptographic keys, consisting of public and private keys, create a digital signature, which is the core aspect of blockchain technology in terms of security as every transaction is authorised by the digital signature.
In order to understand why blockchain is important, let us have a look at the key benefits of this technology.
1. Revolutionary security
Blockchain uses hashing encryption technology. Each block of data has a hash value serving as a digital fingerprint that cannot be forged. Using tricky mathematical algorithms combined with PoW (Proof-of-Work) mechanism, the cryptography tool efficiently secures systems and data in blockchain network. The decentralization feature allows participants having a copy of the exact same data, providing better security compared to other databases or systems.
There are various types of blockchain networks. Public blockchain by nature is a transparent network where all participants can validate transactions. This type of blockchain is a useful tool for improving numerous aspects in the society. Businesses can benefit from this technology to improve user experience enabling users to participate in various processes either fully, or partially.
3. Digital freedom
Blockchain gives the freedom of owning and making transactions at participants’ discretion since there is no centralised authority to approve the transactions. Network participants are in control of their possessions and financial records and have the ultimate right to dispose of their funds. They are the only owners of their assets and are free to make an immediate transaction any moment.
Blockchain is mainly known to the masses through crypto market. However, this is not the only area, where this technology can make a difference. Blockchain is so versatile in its use, that it can be used for the good of society – from healthcare and education sectors to government and banking.
Blockchain is a decentralised technology, which means that there are no intermediaries to pay fees for using the network. With the level of security, blockchain is a much more cost-effective technology compared to others.
How can you use blockchain in business?
Blockchain goes far beyond cryptocurrencies. This technology allows bringing down paperwork and, thus, saves on operational expenses for businesses. Blockchain reduces number of contacts and speeds up transaction process, which improves business efficiency and boosts growth. Businesses can benefit from this technology greatly.
At the moment, there are four industries where blockchain has been successfully applied.
Decentralised databases make a huge difference to the efficiency of cybersecurity. Blockchain technology allows recording transactions and storing data in a transparent and secure manner and any attempt of cyberattack will be immediately identified by blockchain protocols. Blockchain can turn a business into a decentralised autonomous organisation, whose guidelines and policies run on smart contracts.
2. Banking and finance
The expensive, time-consuming and complicated banking and financial services are no longer relevant. Blockchain technology with no centralised authority can make payments immediately, providing the highest security at minimum fees. Any peer-to-peer transaction can be done with an app in a glimpse of an eye.
3. Supply chain management
Due to the complexity and a number of parties involved in one supply chain management project, this area of business truly benefits from blockchain technology. The entire supply chain multitasking spreading on to multiple departments can now be coordinated and monitored through blockchain protocol. Auditing and verifying partner transactions is also possible with blockchain.
Dealing with huge volumes of data, healthcare experienced regular delays and sensitive data leakage in the past. With blockchain technology, patients can connect to the hospitals and get instant access to their medical records. Their data is protected and kept in order. Doctors, on the other hand, can focus on their direct functions bringing paperwork to a minimum.
Blockchain technology, of course, has its challenges too. The main two are scalability and extensive adoption. Blockchain may be expensive to implement, as it requires a team of dedicated professionals and resources to maintain the infrastructure. However, using blockchain as a service is an excellent option for businesses with thinner budgets. Instead of implementing blockchain, they can use it as a service for a fee and the rest becomes the provider’s job.
There are several BaaS (Blockchain as a Service) providers at present, including Amazon Blockchain, Azure Blockchain, SAP Blockchain and Oracle Blockchain.
It is amazing how blockchain technology transforms various industries and expands past the cryptocurrency market. It is without a doubt important for the further development of our society, and we are positive that the new use cases are soon to come.