Dubai: Originally designed to power Bitcoin, blockchain is gradually looking to disrupt almost every industry, but it’s not yet clear how best to take advantage of this disruptive technology.
However, as millions across the globe are utilising blockchain technology as means to make a fortune, here is a detailed look at how the entire system actually functions.
Blockchain is simply put, a highly-cryptic digital ledger of transactions, and like mentioned above is the central technology behind most digital assets like cryptocurrencies.
Its purpose is essentially to makes the history of any digital asset transaction unalterable and transparent.
So in other words, blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
The access is shared between its users and any information shared is transparent, immediate, and ‘immutable’.
Immutable means anything that blockchain records is there for good and cannot be modified or tampered with – even by an administrator.
How does a blockchain work?
‘Blocks’ on the blockchain are made up of digital pieces of information. When a block stores new data it is added to the blockchain. Blockchain, as its name suggests, consists of multiple blocks strung together.
The blockchain is distributed across an entire network of computer systems. It is digitally distributed instead of copied or transferred, creating an irreversible record.
Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participants’ ledger.
So essentially, blockchains are shared databases. Each party on a blockchain has access to the entire database and its complete history. No single party controls the data or information.
Every party can verify each transaction against its own copy of the blockchain, making it nearly impossible to forge records.
The result is a trustworthy system without third parties that’s suitable for all transactions involving assets, goods, money or content.
What are the different types of blockchain?
The first thing to know about blockchain is that there are many different types. Each type has a slightly different use case and fits into a slightly different area of business operations.
Two of the most popular types are public blockchains, which are entirely decentralised (without the need for an intermediary) and transparent, and private blockchains, which can be centralised but still provide some advantages over other data storage systems.
There is also a third type of blockchain called a consortium blockchain, in which multiple organisations share access to one blockchain platform.
Blockchains: Understanding the perks and risks
The blockchain has already demonstrated a number of advantages over traditional financial technology. For example, transactions made with cryptocurrencies are secure: it is impossible to make an unauthorised transaction or double-spend funds because all purchases are recorded on a public ledger.
This means that blockchain-based systems can be used in scenarios where security is of utmost importance, such as resource distribution after natural disasters. Security is also incredibly important for cryptocurrency exchanges because they carry large quantities of assets on their balance sheets.
Due to its distributed nature, a blockchain database is more difficult to manipulate. To hack into it, you’d have to infiltrate every copy of that blockchain simultaneously.
In other words, using blockchain technology makes it easier for businesses to run a secure network over which they don’t have complete control.
This is not true for all blockchains: Blockchains built for peer-to-peer payments are less vulnerable because there is no single place where transactions can be manipulated or controlled.
(Peer-to-peer transactions are electronic money transfers made from one person to another, typically referred to as a P2P payment application. These payments mostly allow the transfer of funds between two parties using their individual banking accounts or credit cards through an online or mobile app.)
How is blockchain disrupting industries worldwide?
There are currently more than 10,000 other cryptocurrency systems running on blockchain. But it turns out that blockchain is actually a reliable way of storing data about other types of transactions as well.
Some companies that have already incorporated blockchain include global giants like Pfizer, Siemens, Unilever, and a host of others.
Using blockchain gives brands the ability to track a food product’s route from its origin, through each stop it makes, and finally, its delivery. If a food is found to be contaminated, then it can be traced all the way back through each stop to its origin.
Not only that, but these companies can also now see everything else it may have come in contact with, allowing the identification of the problem to occur far sooner and potentially saving lives. This is just one example of blockchain in practice, but there are many other forms of blockchain implementation.
• Banking
By integrating blockchain into banks, consumers and lenders can see their money transfers processed in 10 minutes, which is the time it takes to add a block to the blockchain, regardless of holidays or the time of day or week.
Given the size of the sums involved, even the few days that the money is in transit can carry significant costs and risks for banks.
• Currency
A user’s data and money are technically at the hands of their bank. If a user’s bank is hacked, the client’s private information and wealth is at risk.
If the client’s bank collapses or the client lives in a country with an unstable government, the value of their currency may be at risk. These are the worries out of which Bitcoin was first conceived and developed. Blockchain forms the foundation for cryptocurrencies like Bitcoin.
• Healthcare
Healthcare providers can leverage blockchain technology to securely store their patients’ medical records. When a medical record is generated and signed, it can be written into the blockchain, which provides patients with the proof and confidence that the record cannot be changed.
These personal health records could be encoded and stored on the blockchain with a private key, so that they are only accessible by certain individuals, thereby ensuring privacy.
• Property records
The process of recording property ownership details on any county’s central database has often been time-consuming, while also being prone to human error, where each inaccuracy makes tracking property ownership less efficient.
Blockchain has the potential to eliminate the need for scanning documents and tracking down physical files. If property ownership is stored and verified on the blockchain, owners can trust that their deed is accurate and permanently recorded.
Say, for example, that a potential tenant would like to lease an apartment using a smart contract. The landlord agrees to give the tenant the door code to the apartment as soon as the tenant pays the security deposit.
Both the tenant and the landlord would send their respective portions of the deal to the smart contract, which would hold onto and automatically exchange the door code for the security deposit on the date when the lease begins.
If the landlord doesn’t supply the door code by the lease date, then the smart contract refunds the security deposit. This would eliminate the fees and processes typically associated with the use of a notary, a third-party mediator, or lawyers.
• Supply chains
As in the above example of IBM, suppliers can use blockchain to record the origins of materials that they have purchased. This would allow companies to verify the authenticity of their products.
As reported by Forbes, the food industry is increasingly adopting the use of blockchain to track the path and safety of food throughout the farm-to-user journey.
Key takeaways
Blockchain technology is often referred to as an accounting method for cryptocurrency transactions. While that may be true in one way, there are so many other potential uses for blockchain technology.
With blockchains capable of recording any kind of transaction or information, they’re extremely convenient solutions to a wide range of issues businesses face today.
Blockchain is expected to improve efficiencies in almost every industry because these digital ledgers enable secure record-keeping across multiple sites and users with minimal reconciliation needed —not just limited to banking.
Some of the key features of blockchain technique is fraud prevention through widespread sharing of information, effective tracking of digital assets, transparency and traceability, fast transaction time (virtually instantaneous) and low cost of implementation.
The number of live blockchains is growing every day at an ever-increasing pace. As of 2022, there are more than 10,000 active cryptocurrencies based on blockchain, with several hundred more non-cryptocurrency blockchains.
With many practical applications for the technology already being implemented and explored, blockchain is finally making a name for itself largely because of Bitcoin and cryptocurrency.
While it’s no longer a question of if more companies will catch on to the technology, because we already see a proliferation of NFTs and the tokenisation of assets.
