Gartner estimates that blockchain will generate $3.1 trillion in new business value by 2030. And digital transformation will only fuel this welcome scenario of blockchain development.
A blockchain is a digital ledger of transactions that is duplicated & distributed across the entire network of computer systems on the blockchain.
Every block in the chain contains several transactions. Each time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger.
The decentralized database managed by several participants is known as Distributed Ledger Technology. Blockchain is a type of DLT wherein transactions are recorded with an immutable cryptographic signature called a hash.
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Blockchain guarantees the fidelity & security of a record of data and generates trust without the intervention of a third party.
How? When one block in one chain is changed, it would be immediately apparent it had been tampered with. So, to corrupt a blockchain system, hackers would have to change every block in the chain. That too, across all of the distributed versions of the chain.
What is the difference between database and blockchain?
A blockchain collects data together in groups – known as blocks – that hold sets of information. When the storage capacity of a certain block is filled, it gets closed and linked to the previously filled block.
This forms a chain of data known as the blockchain. All new information is then compiled into another newly-formed block that is also added to the chain once filled.
So, while a database structures its data into tables, a blockchain structures its data into blocks that are strung together. In a decentralized setup, this structure makes for an irreversible timeline of data.
What are the benefits of blockchain technology?
Accuracy of the Chain
Transactions on the blockchain are approved by a network of thousands of computers. So, there is no human involvement in the verification process.
Thus, there is no human error and the information recorded is accurate. And even if there is a computational mistake, the error would only be made to one copy of the blockchain.
For that error to spread to the rest of the blockchain, it would need to be made by at least 51% of the network’s computers. This is a near impossibility for such a large and growing network.
Typically, consumers pay a bank to verify a transaction. Blockchain eliminates the need for third-party verification. So, there are no associated costs.
The information in a blockchain is not stored in a central location. It is instead spread across a network of computers. When a new block is added to the blockchain, every computer on the network updates the change.
Thus, it becomes difficult to tamper with such data. Also, if a hacker still finds a way to do so, only a single copy of the information would be compromised.
Transactions placed through a central authority can take up to a few days to settle. So, if you deposit a check on Friday evening, for example, you may not actually see funds in your account until Monday morning.
Now, financial institutions operate during business hours. That too, five days a week. Blockchain operates 24 hours a day, seven days a week, and 365 days a year.
Transactions can be done in around 10 minutes and can be considered secure after a few hours. This is specifically useful for cross-border trades. These usually take much longer due to time zone issues and the need for all parties to confirm payment processing.
As intermediaries are eliminated and transactions are processed automatically, blockchain handles transactions significantly faster than conventional methods.
In certain cases, it can handle a transaction in only a few seconds. Note that the speed at which a blockchain-based system processes transactions depends on multiple factors. These include the size of every block of data and network traffic. Nevertheless, blockchain typically beats other processes and technologies in terms of speed.
Once a transaction is recorded, its authenticity is verified by the blockchain network. Thousands of computers on the blockchain confirm that the purchase details are correct.
After validation, the transaction is added to the blockchain block. Every block on the blockchain contains a unique hash. When the information on a block is edited, that block’s hash code changes.
But the hash code on the next block would not. This makes it very difficult for information on the blockchain to be changed without notice.
Many blockchain networks operate as public databases. This means that anyone with an internet connection can view the network’s transaction history.
However, users cannot access details about the users making those transactions. On making a public transaction, the user’s public key is recorded on the blockchain. Their personal information is not.
Most blockchains are entirely open-source software. Anyone can view its code. This enables the auditors to review cryptocurrencies for security.
There is no real authority on who controls a cryptocurrency’s code or how it is edited. So, anyone can suggest changes or upgrades to the system.
Banking the Unbanked
Anyone, regardless of their ethnicity, gender, or cultural background, can use blockchain.
For adults who do not have bank accounts, there is no means to safely store their money or wealth. Storing physical cash in hidden locations leaves it subject to robbery or damage. This is largely the case for individuals living in developing countries.
A blockchain is a secure network to store money. The user need not worry about the digital money getting tampered with.
Possibilities of Tokenization
It is the process where the value of an asset (a physical or digital one) is converted into a digital token. It is then recorded on and shared via blockchain.
Tokenization has already caught on with digital art & other virtual assets. But it has broader applications that can smooth business transactions. For example, utilities could use tokenization to trade carbon emission allowances under carbon cap programs.
Blockchain vs. Banks
To see how a bank differs from blockchain, let’s compare the banking system to Bitcoin’s implementation of blockchain.
What are the blockchain use cases?
Supply Chains and Food Chain
Blockchain helps build trust between trading partners. It provides the traders with end-to-end visibility, streamlines processes, and resolves issues soon.
All these features of blockchain add up to create stronger, more resilient supply chains. This leads to better business relationships. Further, in the event of disruptions, participants can act sooner.
In the food industry, blockchain helps ensure food safety and freshness. If there’s any contamination, food can be traced back to its source within seconds.
Banking and Finance
Financial institutions replacing old processes and paperwork with blockchain have derived various benefits.
These include removing friction and delays, increasing operational efficiencies across global trade, trade finance, consumer banking, clearing and settlement, lending, and other transactions.
The industry is already riddled with data breaches. This severely impacts patient outcomes. Blockchain in healthcare improves security for patient data.
It makes it easier to share records across providers, researchers, and payers. Also, as the access control remains in the patients’ hands, there is an increase in trust.
With the use of blockchain, every movement of pharmaceutical products across the supply chain is recorded.
The resulting audit trail is such that an item can be traced from origin to pharmacy or retailer. This prevents counterfeiting and enables manufacturers to locate a recalled product in seconds.
Blockchain helps governments work smarter and innovate faster. Secure data sharing between citizens and agencies increases trust.
Blockchain development provides an immutable audit trail for regulatory compliance, contract management, identity management, & citizen services.
Insurance companies are using blockchain & smart contracts to automate manual and paper-intensive processes like underwriting and claims settlement.
This has helped increase speed and efficiency and reduced costs. Blockchain’s faster, verifiable data exchanges also help reduce fraud and abuse.
Many companies are using blockchain to verify the information on job applicants’ resumes. As a result, resumes with false information are quickly identified and removed from consideration.
Moreover, hiring managers saved a lot of time that was otherwise spent in manually verifying the information.
So, blockchain solves two issues for hiring managers; it helps them get to the truth and that too, quickly and efficiently.
The very nature of blockchain makes it resistant to fraud. That is why it appeals to educators. Institutions that have adopted blockchain primarily use it to store and share academic records & credentials.
Using blockchain, an institution accepting a transfer student verifies their record and the courses they took with a few simple clicks.
Travel and Mobility
Blockchain helps record physical assets like auto parts. It offers a neutral, tamper-proof, and resilient system to track the ownership of these physical assets.
Blockchain also helps track parts in a supply chain and weed out those that are counterfeit. The Mobility Open Blockchain Initiative, a consortium that includes automakers like Ford, Honda, BMW, and GM, has been working on a vehicle and parts tracking initiative.
The growth in the number of cities has put a lot of pressure on transportation systems. As a result, public transport is very expensive to run and usually, inefficient.
Employing blockchain technology has helped cities better understand how their residents are utilizing public transportation options.
For instance, UK-based DOVU lets users share their commuting and transit data. This information includes how they use buses, bike shares, trains, and even pedestrian paths.
The blockchain-backed app which then rewards them with crypto tokens.
Transforming a material ticket into a digital token offers a new layer of security. Using a smart contract as part of the ticket token helps airlines control the sale and use of tickets.
This provides verified experiences for customers. Blockchain
also helps create more accurate logs of aircraft maintenance and prevent overbooking.
Russia-based S7 Airlines deploys a private, Ethereum-based blockchain that reduces settlement times between the airline and its agents from 14 days to 15 seconds. In 2019, the airline announced that it had reached $1M in monthly ticket sales processed on its blockchain.
Impact of Blockchain Based on Business Size
- Benefits for Small and Medium Enterprises
SMEs account for about 90% of all businesses and 50% of all jobs across the world. In emerging economies, SMEs in the formal sector contribute around 40% of the national income, creating seven out of ten jobs.
Blockchain provides the SMEs with an affordable and efficient avenue to make and receive payments. Through its use, SMEs can access investment and savings products, and build a credit history.
Greater access to blockchain technology will foster SME growth. This, in turn, will enhance job creation and economic development.
Many of the big leagues are deploying blockchain applications to solve crucial business problems.
Shell, for example, is working with technology and finance partners on a platform for the trade and settlement of crude oil.
Facebook is using blockchain to build a cryptocurrency – Libra — which will allow users to buy and sell products from participating merchants and send payments across its platform.
Walmart used blockchain to create a food traceability system. Insurance giant AXA now offers flight insurance via blockchain technology.
What is the future of blockchain development?
Blockchain is the buzzword on the tongue of every investor worldwide. It stands to make business and government operations more accurate, efficient, cheap, and secure, with fewer middlemen.
Today, we are heading into the third generation of blockchain. And it’s no longer a question of if legacy companies will catch on to the technology—it’s a question of when.
Looking to tap into the decentralized ecosystem of blockchain?
We are already witnessing a proliferation of NFTs and the tokenization of assets. The coming decades will uncover much more that lies within the realm of blockchain.
We are always helping businesses like yours scale growth by leveraging the power of blockchain. So, if you have any queries or need to know more, don’t hesitate in reaching out to us.
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I am the CEO and founder of Blocktech Brew, a team of blockchain and Web 3.0 experts who are helping businesses adopt, implement and integrate blockchain solutions to achieve business excellence. Having successfully delivered 1000+ projects to clients across 150+ countries, our team is dedicated to designing and developing smart solutions to scale your business growth. We are focused on harnessing the power of Web 3.0 technologies to offer world-class blockchain, NFT, Metaverse, Defi, and Crypto development services to businesses to help them achieve their goals.