Blockchain technology is achieving more than expected. Although it was first developed to support the Bitcoin cryptocurrency, currently it has numerous real-world uses and benefits too. Before discussing its working procedure, let’s understand what Blockchain is?
What is Blockchain?
At its basic level, Blockchain is a system that enables the transaction of data using a peer-to-peer network without any intermediates or third parties. This can be understood as an electronic register for maintaining records of digital transactions.
It stores all information about financial interchanges between two parties in public form so that anyone on earth can see them, but cannot make any changes to them except with specific authorization from the original record owner. Doing this makes Blockchain one of the most secure ways ever invented by humans to transfer assets with any pre-defined values.
Now, let’s learn how it works:
As the name suggests, Blockchain is a chain of blocks containing data related to transaction records that are connected with each other in a proper linear structure. These blocks get added to the register sequentially and cannot be changed or deleted except with specific authorization from the original record owner. Each block contains:
1) Block header:
It includes information like Block size, the Hash value of the previous block, and the Hash value of the current block while connecting them at their ends in a sequence manner.
This makes all blocks interlinked and interdependent on one another for carrying out a completely digital transaction process successfully without any security breach. The term “Block” means a collection of data chunks linked together cryptographically by hashing algorithms in a linear, chronological order in a blockchain.
It includes information about financial transactions or any other record between two entities that are of value to them and must be kept confidential. The data chunks are added to the blockchain only after successful validation by the network consensus algorithm (more about this later).
Once added, no one can delete or edit the content on his own except with specific authorization from the original owner(s) of that particular block. If anyone tries to make changes without permission, all other blocks and their subsequent data will self-destruct automatically because of the changed hash value.
So, Blockchain has strong security systems implemented for preventing unauthorized access and ensuring the immutability of transaction records. These systems make it fit for the secure transfer of digital assets between two or more parties without any risk of data theft or tampering.
Applications of Blockchain Technology:
Now that you know how it works, let’s look at some of the real-world applications.
The first and most popular application of Blockchain technology is Bitcoin cryptocurrency. All the transactions done via Bitcoin are recorded in a public blockchain which makes it transparent and secure for everyone involved.
2) Banking and Finance:
Blockchain can be used for streamlining banking and financial operations. For example, various stock exchanges are exploring possibilities of using Blockchain technology to reduce settlement time from 3 days to a few seconds. Also, many big banks are working on developing their own private blockchains for faster and secure money transfers.
3) Supply Chain Management:
Blockchain helps in monitoring and tracking the movement of goods or assets along supply chains by allowing regular parties to access decentralized transactions records on a common platform. So, it is useful for keeping check of products from their point of origin till they reach customers hands.
4) Property Records:
Land records can also be entered onto Blockchain system which will provide secure transaction record-keeping while being more transparent. This can prevent land title frauds and inconsistencies which are a common feature in developing countries like Pakistan where there is a lack of proper documentation so far.
It’s not just the Pakistan real estate market, even some major property markets of the world have started using Blockchain technology to maintain property records with blockchain so that no party can out illegal transfer or sale of the property.
Most government departments can use blockchain technology to keep all their records updated and secure for easy access during emergency situations.
Blockchain will provide a high level of data security and confidentiality in electronic health records between patients and healthcare providers to ensure that only authenticated users can access them. This way, patient anonymity is guaranteed while ensuring complete data security at the same time.
The electoral process involves a lot of paperwork and manual labor which could be made more efficient with a decentralized electronic voting system based on a blockchain platform where voting results will be transparent and accessible by voters as well as election officials.
8) Smart Contracts:
These are legally binding agreements that cut down on paperwork because they are executed and enforced automatically once all the conditions specified in the contract are met. Blockchain is the perfect platform for implementing smart contracts because of its security, transparency, and immutability features.
This is an open-source Blockchain platform that allows for easy customization of other existing Blockchains. Metaverse will help in implementing smart contracts like Ethereum, but it can also help in creating decentralized exchanges (DEX) and decentralized marketplaces (DM).
10) Digital Identity:
Digital identity is information that can be used to identify specific individuals. This information is usually hashed and converted into a QR code for making it secure and easy to store. With the help of Blockchain, you can easily convert digital identities into tokens which makes them very useful for exchanging personal data with other parties while maintaining full confidentiality.
11) Cloud Storage:
Cloud storage services like Dropbox, Box, and iCloud can be easily replaced by a Blockchain-based storage system. This is because Blockchain provides security, transparency, and tamper-proof features which are very important for cloud storage applications.
12) Charitable Donations:
Blockchain can be used to track the donations made by individuals to charitable organizations. This will help in ensuring that your complete donation reaches its intended destination without any security concerns.
13) Digital Advertising:
Blockchain has the potential to transform the digital advertising industry by promoting a more transparent and secure environment for advertisers, publishers, and users. This is because it provides anonymity as well as transparency through smart contracts which leads to better engagement among all the parties involved in adverting.
14) Supply Chain Management:
The supply chain management process is highly vulnerable to theft and fraud. Blockchain can be used to create a secure and transparent system for tracking the movement of goods from the supplier to the retailer. This will help in reducing the cost of inventory and improving efficiency.
15) Fraud Detection:
Credit card companies and banks can make use of Blockchain to reduce the risk of fraud and identify theft by storing all customer information in a distributed ledger. The right permissions can be assigned to each user to allow them to access only those sections which are relevant for their positions. This way, companies will be able to protect consumer privacy as well as prevent hacking or cyber-attacks.
16) Document Management:
Blockchain can be used to create a secure and tamper-proof system for managing and storing important documents. This will help in reducing the risk of data theft and ensure that only authorized personnel can access sensitive information.
17) Loyalty Programs:
Blockchain can be used to create a decentralized loyalty program that is more secure and efficient than the traditional programs offered by companies like Starbucks and Air Miles. This is because it allows customers to earn and redeem loyalty points without having to rely on a third party.
So, these are some of the ways in which Blockchain can be used to improve various aspects of our lives. It is still a relatively new technology and a lot of development is still required for it to be fully understood and implemented. But, there is no doubt that Blockchain has the potential to revolutionize the way we live and work in the coming years. Stay tuned!