Blockchain technology needs no introduction in the world of technology. The lack of clarity around the term has led to most people associating it with the digital currency, Bitcoin. However, this is not the case. Blockchain technology span over diverse sectors. To get a better grasp of these benefits, let’s look at how it works.
Blockchain technology needs no introduction in the world of technology. Since the Internet boom, very few technologies have brought about radical and disruptive changes like blockchain. Most people knew about blockchain technology after Bitcoin surpassed the $17000 mark in 2017. But recently, blockchain is a frequent topic among top tech companies.
The lack of clarity around the term has led to most people associating it with the digital currency, Bitcoin. However, this is not the case. Blockchain technology span over diverse sectors. To get a better grasp of these benefits, let’s look at how it works.
How Blockchain Technology Works?
Blockchain technology is a distributed digital ledger that is peer-to-peer. This means that each participating node/computer in the blockchain network has a copy of the entire blockchain. Each block comprises a set of data; the hash value of the block, the transaction details, and the previous block’s hash.
A good example is the Bitcoin blockchain. It stores the hash value of the current block, the previous block’s hash, the sender and receiver’s details, and the number of coins transacted. The blockchain creates new blocks by hashing the current and previous hash values. This enhances blockchain’s security as once a block is created, its hash is calculated, and changing anything within the block alters the hash value and makes all following blocks invalid.
Before any block is appended onto the blockchain, the nodes must reach a consensus achieved through cryptographic algorithms like the Proof of Work (PoW) algorithm used in the Bitcoin blockchain. The consensus algorithms also prevent a single point of attack as more than 50 percent of the blockchain network has to acknowledge the transaction as valid. Once the participating nodes reach a consensus, the block is appended onto the blockchain.
What Are the Advantages of Blockchain Technology?
Although blockchain is in its early stages, its uses are spread across several sectors with various advantages, as shown below.
- Blockchain technology uses digital signatures and cryptography to ensure that all the data passed in the chain is secure, using hashing algorithms to encrypt the data and hide its users’ identity.
- The system has no central authority; therefore, there a low to no transaction fees since there is no need to pay any third parties.
- Trust is improved on the network by ensuring all the nodes validate transactions before appending them onto the chain, making the network transparent.
- Data is stored across all participating computers/nodes, so any lost information is quickly retrieved from other computers/nodes.
- Users have the opportunity to choose between a public or private blockchain network. This provides several access levels and permissions, depending on the network’s use case.
- The digital ledger stores data in a chronological way to ensure each transaction is time-stamped. Therefore, users can trace the path of transactions, controlling fraud, and money laundering.
Where is Blockchain Technology Being Used?
Initially created as a transparent ledger for Bitcoin and cryptocurrencies, blockchain has seen growing implementations in several areas. Blockchain provides three crucial features, transparency, immutability, and security. Currently, blockchain is applied in financial services, healthcare, education, governments, supply chain management, and real estate.
The Benefits of Applying Blockchain Technology in Any Industry
Blockchain technology is significant as it is applied in almost an infinite number of ways. Just like the Internet in its infancy, blockchain can upgrade and provide more solutions across multiple sectors.
Just as you have a bank account and a name attached to it, blockchain technology provides its users with public addresses. However, this address is a unique set of characters that hides your identity. Through these addresses, every participating node in the network can track transactions while also maintaining their privacy. This provides an unparalleled layer of accountability in the network.
Blockchain technology is ranked as one of the most secure record-keeping systems. Using cryptographic techniques, it ensures that it’s immutable. Since it is distributed, once a transaction is validated and appended, it cannot be tampered or altered, preventing a single point of failure in the network. For a node to make any changes on the chain, it requires two sets of keys, private and public key, and the consensus of over 50 percent of the nodes in the network. Without these parameters, the transactions are deemed invalid.
Due to its decentralized nature, transactions flow is quicker and efficient because of intermediaries’ absence. In traditional sectors like remittance and real estate, transactions of huge volumes take multiple days to complete. However, blockchain technology works all through the day, meaning the transactions can be made quicker and safer.
Top Advantages of Blockchain Technology in the Business Sector
Operational Cost Reduction
One of the core benefits of blockchain technology is that it eliminates intermediaries. This reduces any administrative effort and operational costs associated with record-keeping and transaction validation hence reducing or even eliminating any operational cost.
Improving Business With Smart Contracts
Blockchain allows a business that engages in frequent deals to create digitally signed smart contracts. They are convenient because they are immutable. Subsequently, once the code is written, there is no need for repetition; it is simply implemented on another deal.
Transparency, Traceability, Authenticity, Reliability, and Security
Finally, blockchain technology provides effective traceability, authenticity, transparency, reliability, and security. This is because all the data is encrypted, more secure, and every aspect of the transactions can be recorded and tracked.
Three Potential Benefits of Blockchain Technology for Government
Blockchain presents valuable qualities for the government. Particularly in enhancing transparency, accountability, security, and citizen engagement in areas that impact democratic governance, as shown below.
Building Trust with Wary Citizens Using Blockchain Technology
According to the Pew Research center, only 18 percent of Americans say they can trust the government to do what’s right for its citizens most of the time. At a time when the citizens’ trust is at an all-time low, blockchain technology provides a solution.
Blockchain’s primary feature is transparency. Through transparency, blockchain changes half of the sentiments by allowing citizens to verify the government’s claims personally. Citizens can view the data, track it, and eventually verify it, which eases the issue.
Protection of Sensitive Intel
As the record managers of society, governments are the main target for hackers globally. Stolen identities are a sad part of today’s reality.
For example, issues like the 2017’s Equifax breach and 2015’s data loss, where millions of American citizens and government employees were exposed in both cases. Their personal data, including their Social Security numbers, were compromised straight from under the government’s nose. As a result, most American citizens held the government responsible.
This is where blockchain-based solutions play a significant role. Since blockchain is tamper-proof and secure through cryptographic mechanisms, it eliminates the scope of a single point of failure, making the network unhackable.
Improvement in Efficiency and Reducing Cost
Currently, there are trillions of dollars lying around as unreconciled and untraced funds within the federal budget. Tracking and reconciling these funds is both expensive and time-consuming. Blockchain technology can mitigate this. If implemented efficiently, blockchain will reduce redundancy, streamline the process, ensure data integrity, and lower the audit budget.
How Can the Creative Sector Benefit from Blockchain Technology
Blockchain technology promises to redefine how artists are reimbursed. It provides a platform where intellectual property creators can receive value for their work. One common challenge among creators is the increase in third parties like YouTube, which takes up much of the chain between creators and their audience. Hence, artists end up receiving less pay and have less to say about it. Smart contracts, P2P transactions, and distributed nodes are some of the blockchain features that serve to address the issues.
What’s the True Cost of Your Bacon?
Being secure, transparent, and tamper proof blockchain technology’s advantages outweigh its drawbacks, and not adopting or even looking into blockchain technology would be sure death for your company.