Over the years, we have faced situations that made us question our dependence on trusted third parties. Bad financial decisions on their part have kept us wondering, “Are our assets really safe with them?” All these have led to the development of blockchain technology. You have most probably heard about this term a lot, especially in connection to Bitcoin. But have you wondered, what is it, and what’s all the hype for? Don’t worry, in this analysis, we will simplify the concept for you. Then, you can decide if you want to actively participate in utilizing this technology. But again, blockchain is the future, so it’s worth a deeper inspection.
What is blockchain technology?
Starting with the very basics, blockchain is a decentralized system. Since the centralized system lacked transparency, we had to develop something to restore our faith once again. In blockchain technology, two parties can conduct transactions without the need for a third party. Traditionally, the third parties were charging for their service, and there were risks associated with it.
With blockchain, the transaction history is recorded transparently through cryptographic hashing. Plus, the digital assets are distributed in the blockchain instead of copying or transferring, which creates immutable records. Blockchain is a revolutionary technology, isn’t it? Not convinced yet? Let’s get into examples.
Blockchain vs Centralized System Architectures
Why is blockchain so favored? How does it fare against the already existing centralized system? Let’s find out:
|Structuring||Follows a decentralized structure without any oversight||Follows a centralized structure with strict oversight|
|Ownership||No one central authority or owner||Has a central body for monitoring and control|
|Security||Highly secure and resistant to hacking and fraud||Security is dependent on the overseeing authority, making it susceptible to data leaks, manipulations, and single point failures.|
|Transparency||Very transparent||Dependent on the overseeing authority|
|Trust||Trustworthy||Trust is relative to the central authority’s goodwill or brand reputation|
|Efficiency||Slower than traditional networks||Fast|
|Scalability||Difficult to scale||Favors scalability|
Examples of blockchain technology
Having understood the definition of blockchain technology, let’s now look at its notable representatives.
Starting with the very popular example, Bitcoin, the cryptocurrency that uses blockchain technology to record and secure every transaction. Basically, it is used to purchase goods and services. It eliminates the need for central banks, as the cryptocurrency can be sent to anyone across the globe. The transactions are quicker, too, as there are no intermediaries involved.
Also, the processing fees are much lower than what the bank charges. Plus, it is a decentralized system where no financial institution or government can interfere. Additionally, if someone tries to make unauthorized changes, the Bitcoin community will know about it. This is to say, Bitcoin transactions are very secure.
In the healthcare industry, blockchain technology is used to secure medical data. It keeps a transparent log of all the patient’s data. Plus, blockchain makes the data more accessible, as it can be retrieved easily as and when required. Take the example of SimplyVital Health. It uses blockchain to streamline the patients’ data processing, saving a lot of time and money.
The other example is Patientory which uses blockchain to store and transfer important medical information among patients, health care providers, and clinicians.
Blockchain is used in the supply chain to track the goods right from the manufacturer to the store. That way, all the information related to where the materials came from, who had access to them, and how they traveled through the supply chain is followed and recorded. It enhances supply chain management via tracking and reporting.
Additionally, the transactions among various parties involved in the supply chain are settled quickly using blockchain compared to the traditional one. These parties are suppliers, manufacturers, distributors, retailers, and customers. The obvious advantage of traceability and transparency through blockchain in the supply chain is cost-saving.
Piracy is one of the key issues the music industry faces. Using blockchain, it can be ensured the files do not exist in more than one location. This reduces piracy and the artists get paid for their work. The other common issue that artists face is not getting acknowledged for their output. Blockchain solves this problem by linking the artists to their work.
An example is Spotify, the giant music streaming platform, that uses blockchain to improve the attribution process between the creators and users. Furthermore, it correlates artists with license agreements and tracks, creating a more transparent system.
Application of blockchain technology
Now that we have covered the examples of blockchain, it’s time we examine some of its applications.
Increases efficiency of the processes
Blockchain stores all transactions in one location. Consequently, the intermediaries are eliminated, and the manual processes are replaced by automation. Also, issues connected to the centralized system are banished.
What we are left with is an efficient system, and blockchain is responsible for increasing efficiency significantly. The same information that took a couple of days to retrieve can now be accessed within a couple of seconds, all thanks to blockchain technology.
Secures the transaction
In blockchain technology, the nodes keep a copy of the transaction record. Moreover, each recorded transaction is agreed upon based on the consensus method. Therefore, if a malicious actor tries to change the transaction, the other nodes will reject its request. This makes the system more transparent and secure for transactions.
Also, these records are maintained with advanced security. There is end-to-end encryption, which makes it nearly impossible for hackers to conduct their unauthorized activities.
Reduces the costs
We all know blockchain is a decentralized system that eliminates the need for go-betweens. If you think about it, businesses spend their resources to pay these third parties for their services. By introducing blockchain, they can eliminate these expenses and reduce costs.
Plus, there is automation that streamlines the processes. This also lowers the interactions required in the processes. Overall, blockchain not only helps businesses to reduce costs but also speeds up processes. People in charge can use those resources to bring innovation to the business.
The best part about blockchain is its immutable records. That way, once the data is written, it cannot be reversed at all. Whether you want to trace goods in the supply chain or information in the business, you can count on blockchain technology. In the supply chain, it creates a shared network for enhanced communication among various stakeholders.
As for businesses, it allows creating an immutable digital ledger of business activities. In either situation, the information is made easily available for retrieving. This is especially useful in verifying whether the products are indeed from where they are claimed to be originated. Also, accurate information helps make better plans and thus conserve money and increase overall efficiency.
The Future of Blockchain Technology
Blockchain technology has garnered much attention, and rightfully so, as it has the potential to change the world as we know it. It has cemented its place alongside the likes of AI, robotics, quantum computing, and so on as one of the most looked-forward technologies. One of the main reasons it has succeeded in doing so is directly correlated with our economy, which has a huge impact on society, and the second is the internet.
Owing to such positive reviews and keeping in mind its potential, the global blockchain market has already amassed a substantial value of $10.02 billion in 2022, as studied by Grand View Research. Furthermore, it is expected to reach more than $3 trillion by the end of this decade.
We have listed a few future trends and predictions for this technology, and even included a video that explains how it will disrupt a few existing industries.
1. Central Bank Digital Currencies
The world has already witnessed the prowess of Bitcoin and other cryptocurrencies, as they have become some of the fastest-growing assets in recent history. Although the last few years haven’t been so productive for the crypto market, we should not forget the technology they are based on.
In fact, many countries have already started accepting Bitcoin as legal tender, El Salvador being the first. It has opened the door for a central bank digital currency that has the potential to replace money as we know it.
2. Global Payment System
Blockchain also has the potential to revolutionize international trade by simply creating a global payment system. It is true that many experts still believe that SWIFT is safe from blockchain influence. However, they forget to factor in just how much faster, cheaper, and more secure a blockchain-based payment system will be.
Today, cross-border payments involve multiple currency exchanges and multiple banks, with no universal platform. Thus, the emergence of blockchain has all the ingredients for creating a global payment system.
3. Online privacy and Identity management
Not only from a financial point of view, blockchain can also prove vital when it comes to online privacy and identity management. Today, the internet is facing a privacy crisis where your data is largely at risk of exposure. Blockchain has the capability to provide you with a safer and more secure platform, all due to its being decentralized.
4. Creating a global economy via Smart Contracts
Smart contracts can also play a huge role in bringing the world economy closer together. It simplifies licensing and certification, reducing overall costs and any dependence on third parties. Furthermore, it increases the speed and accuracy with which you can conduct international trade.
5. Enhancing Supply Chain Management
And lastly, blockchain can have a hugely positive impact on supply chain management. It can prevent human errors, time delays, and any monitoring issues. It can even leverage traceability to ensure fair trade practices while dealing a significant blow to black or gray markets. Furthermore, it is already underway in many industries, but most are still waiting for the technology to mature before moving forward.