“Bitcoin” and “blockchain” captured a large part of the conversation in the tech world in 2017, and it will get even more attention this year. Almost everyone seems to be talking about it in one form or another. But what exactly is blockchain? Welcome to blockchain explained — and why it is so exciting.
Blockchain explained: What is it?
Imagine a spreadsheet that has duplicates across the entire network of computers. Next, imagine if the network is designed to update all the duplicates, in case of any change in one copy. Well, that’s blockchain for you.
In other words, it’s a distributed and shared database (or ledger) that is reconciled automatically, so all values are updated as and when any change is made.
Each record or copy is called a block and all the blocks are connected to each other through cryptography. Each block contains a hash that points to the previous block, along with a timestamp and transaction data. This way, there is complete transparency within the network, so the possibilities for theft or fraud is greatly reduced.
Such a design comes with other advantages such as:
- No single point of control or authority
- Incorruptible as it is based on a peer-to-peer network sharing
All these advantages have made it a potential technology for different applications.
What can you do with blockchain?
Since blockchain makes it possible to exchange secure transactions and information between different entities, it has the potential to make a big impact across different industries.
Here are a few potential areas where it can make a difference.
Cloud storage? Really?
Well, blockchain can be a disruptor of cloud technology within the next five years or so, and in the process, could alleviate some of the problems we are facing in the cloud industry today.
Currently, cloud storage is centralized. This means, you’re stuck with a single provider and you have to trust this provider to protect your data. In some ways, you’re handing over the control of your assets to your chosen service provider.
With blockchain, the entire process becomes decentralized. This way, you can store all your data online, ensure its safety and security, and have complete control over your assets. In addition, you can even rent out your excess space, like Airbnb-style, to make additional revenue.
Already, companies like Storj.io and Factom are working on creating a cloud storage based on blockchain technology. Let’s hope it becomes commercially available soon.
If you’ve ever been mired in legal controversies or court cases, you’ll know how long and cumbersome the paperwork can get. In fact, lawyers spend a considerable amount of their everyday time creating and maintaining paperwork. At the same time, it becomes difficult to track this vast trail of paperwork, too.
Blockchain can make life easy for law professionals as every piece of information can be recorded on a shared ledger and this could become evidence beyond dispute. This way, the time and effort of maintaining a paper trail would be reduced substantially, along with an increased accuracy rate.
These smart contracts can extend to marriage, divorce settlements, home sales, land reclamation, contractual obligations, and more. You can even store the registered documents of your assets in a blockchain network, for better security.
Internet of Things
Blockchain and IoT go hand in hand, and this fusion opens up exciting and limitless possibilities for everyone. Since IoT is all about connecting devices, blockchain can provide control and access at various points in the IoT network. Also, blockchain can boost security and make IoT more usable across different industries.
Identity theft is a massive problem facing the digital world today. Our current system of passwords and security practices is not enough to curb identity thefts. In fact, a study by Distil networks, Interactive advertising bureau, and trust accountability group shows that companies spend a whopping $18.5 billion every year to protect against online frauds.
Blockchain can completely eliminate this problem because tracking and managing online identities will become easy. As a result, there will be a single and seamless sign-on where authentication will be irrefutable and secure. These verification processes will use digital signatures and public key cryptography, which means anyone who has access to the private key is the right person. With such a process, authentication will be a breeze and at the same time, highly secure.
Blockchain shot into the limelight because of bitcoins, but today, it is not restricted to just bitcoins anymore.
The architecture of blockchain will make it ideal for clearing and settling transactions in the financial world. Currently, both clearing and settling processes cost billions of dollars to financial companies every year, so using this technology can reduce these costs considerably. In turn, this could translate to lower transaction fees for customers and quicker clearance cycles.
For example, let’s say you’re selling a stock. Right now, it takes about three days for the money to settle in your account. If everyone adopts blockchain, the transfer could be immediate. That’s the difference it can make to your transactions.
Besides clearance, blockchain can also be used for interbank transactions. Though a lot more work needs to be done in this area, blockchain could definitely revolutionize this interbank platform in the future.
This is a surprising and practical possibility for blockchain. Historically, there have been many incidents of foul-play during voting and charges of voter fraud during elections. But all that could become outdated if we use blockchain for voting.
These systems can be used to cast, track, and count votes, so everyone knows the final numbers. Such a transparent system can make voting a clean process as well. It may even give political parties better insights into voting patterns, so they can prepare well for the next elections.
Big Data has made forecasting a centralized business. While this is not wholly bad, still such a process has tightly coupled forecasting with Big Data, and that could become a problem in the future.
Blockchain can decentralize the process and open up the prediction market. This can change the way people place bets, sell stocks, and determine the outcome of any particular event, ranging from elections to weather. It can also open up new revenue streams for companies in this market.
Companies like Augur and Gnosis have already taken the lead in this prediction market, and we can expect more companies to create their own niche here.
Health care has become a challenging industry because of the political factors surrounding it as well as the growing costs.
Blockchain can reduce this enormous pressure on the health-care industry by sharing data across different entities, so diagnosis and treatment can be more accurate. Also, the cost of maintaining these vast amounts of data will reduce and, in turn, this is likely to translate into lower costs for patients.
The energy industry is also looking at blockchain technology to improve its distribution. Companies like LO3 Inc. and Power Ledger activities in Australia are looking at the possibility of using this technology to sell locally produced electricity to their neighbors through a peer-to-peer network. If this idea becomes a reality, cost of power will go down drastically and the distribution will be more efficient.
Imagine how cool it’ll be to sell the excess power generated through your solar panel to your neighbor or a local business. Well, that’s possible with blockchain.
Given these endless applications, it’s no surprise that blockchain is creating a big buzz across all industries. Let’s hope this buzz translates into more products and wide adoption, so we can make the most of all that this technology offers.
Photo credit: Shutterstock
More Blockchain Basics articles
- Blockchain primer: What CIOs must know and understand now
- Fight the power: Why it is time for the decentralized web
- Blockchain technology: Why it will change the world
- Links to the future: How blockchain will impact and disrupt industries
- Blockchain technology: What does it mean for your business?