Blockchain is not just one of the current buzzwords in the IT world — it is the buzzword. People often think of blockchain as a transaction system for virtual currency, but if you look closer and understand the actual potential of blockchain, you’ll see that it is really a ground-breaking technology for which monetary use is just one of the many possible applications. Blockchain technology is a revolutionary invention capable of revamping the working of the Internet and disrupting a wide array of industries. It is an ideal example of transparent distributed computing, and it is fundamentally designed to be secure.
Understanding blockchain technology
As the name suggests, a blockchain is a chain of blocks that contain information. Technically, a blockchain is a distributed database system that accommodates a continuously growing list of transactions (data records) called blocks. Every such block consists of information such as a block header, the digital signature including the hash of the block and hash of the previous block, a timestamp of modification, and other transactional information.
Every block has its own unique identity called a hash, which can identify all the content of the block. Whenever the data inside a block is modified, the hash is regenerated for this modified data and is, therefore, no longer the same block. This means that every modification is recorded and is made into a new block. Since every block is related to the other blocks using the hash, it creates a chain of blocks that are linked to each other using a secure cryptography powered by hashing. If some intruder tries to tamper a block, all the following blocks become invalid due to the mismatch of hash. Therefore, any such intrusion can be easily detected and traced down with blockchain technology. This is why it is so secure.
On top of the hashing mechanism, each blockchain also uses a technique known as proof-of-work, which is a delaying mechanism meant to slow down the creation of new blocks. Therefore, if an intruder tries to tamper with one block, they need to recalculate the proof-of-work for all the following blocks, making it virtually impossible to hinder or tamper the blockchain.
Unlike the existing transaction system, where the ledger of the record of transactions is stored by trusted third parties or middlemen such as government, banks, or other financial institutions, the blockchain itself acts as a distributed ledger, which is completely open to anyone. Once data is recorded in a blockchain it cannot be edited or rewritten, and this makes it tamper-proof and secure. Therefore, a blockchain can be described as a write-once, read-only distributed database system.
Blockchain was initially invented and devised for digital currency to allow faster, efficient, secure, and transparent digital transactions including the exchange of cryptocurrencies, money, and even intellectual properties. However, we now are seeing its other applications in various fields.
We now know how blockchain works and thanks to its tamper-proof secure mechanism, it can play a vital role in securing the digital identities. Blockchain can protect your identity by the means of encryption. Moreover, blockchain can also be used to build a very strong, secure, and unbreakable system of identities, which can prevent fraudulent activities.
Blockchain technology has the potential to replace all the existing physical identifications and move them to a digital platform. A range of identities such as a passports, voter ID, driving licenses, and other essential identity cards can be carried digitally by the use of blockchain technology. It is also possible that all your identities can be stored together and secured with blockchain, which makes your identity safe and secure. By using blockchain, tampering of various certificates such as educational, marriage, death, or birth certificates cannot be done and thus, it can prevent fraudulent activities.
Be it banking, enterprise, security, government, or even health care, identity management and access management is very important. And implementing blockchain technology in all these fields can result in seamless identity management and authorization.
Financial services and payment infrastructure
Blockchain technology can provide a platform for better financial services and payment gateways. Digital cryptocurrency such as bitcoins, as we all know, is powered by blockchain technology. The use of such cryptocurrencies can revamp the existing payment systems and other financial services. For instance, if we consider a person sending money to his family in another country, the possible means of transfer are banks, payment apps such as PayPal, or other third-party organizations such as MoneyGram or the Western Union. But their service charges are high, even for micropayments.
All these middlemen can be eliminated and money can be directly transferred from sender to receiver using cryptocurrency such as bitcoins, without any third party getting a grip on your money in between. There are startups such as Sentbe and Abra, both of which have already started their remittance services of P2P transactions that are made possible using bitcoin and blockchain technology. Transaction monitoring and ownership rights can also be rightfully implemented in financial sectors using blockchain. Use of blockchain technology in the financial sector will not only ensure a hassle-free payment system but will also ensure a safe and secure means of online transactions.
E-commerce and retail
If implemented in the right way, blockchain could massively aid e-commerce and retail in terms of growth, sales, and marketing. The retail industry has already started witnessing the growth and profits of selling consumer goods and services using blockchain technology.
The Internet acts as a great platform to promote local businesses and other content online, but there is always the risk of content getting used without proper permissions at various places. All this plagiarized content can be curbed through the time-stamping technique of blockchain. This will preserve originality.
Implementing blockchain in the retail industry will also provide a lucid and transparent supply-chain management system, which will allow customers to know, for example, where their food or other commodities are coming from.
E-commerce sites and other companies such as OpenBazaar, Provenance, Everledger, Ascribe, and BlockVerify are some of the blockchain-assisted businesses involved in the retail industry. This way, there will be no middlemen involved to take the commissions on sales and a direct mode of transaction can be set up between the buyer and the seller. This will not only increase the small vendors’ business through an online medium but will also promote the economy.
Blockchain and IoT
Because blockchain is a decentralized mechanism, it allows digital information to be distributed among various nodes without being copied. This can create a new type of Internet, which is secure by every means and tamper-proof.
By using blockchain’s secure and distributed mesh of encrypted networks, it can serve as a platform for the Internet of Things to connect devices seamlessly and reliably. Using blockchain technology, all IoT devices can be operated at a lower cost and low-power model. The secure model allows easy human interaction with the devices without the need for a central cloud-based system, which is usually more costly. Moreover, since there will be no central monitoring system such as a cloud, the chances of the entire IoT system getting corrupted or taken down is negligible. This ensures continuity, ease of operations, robustness, scalability, and security to the IoT use-cases at very low costs. There are several other promising and revolutionizing developments in IoT that can be made possible using blockchain technology.
Use of blockchain technology in organizations can aid businesses to a great extent. All organizations and businesses need to deal with asset management, which involves the active and careful monitoring of all the physical and nonphysical assets within an organization.
The accuracy and fidelity of data are a crucial part of management in every industry. Often, companies spend huge amounts of capital on configuration management and still fail. Blockchain technology can be an easy, reliable, secure, and cheap alternative for configuration management. Any invalid data modification or corruption can be immediately traced, leaving the organizational data free from corruption.
While some of the applications of blockchain are already in use, most of them have yet to surface. Blockchain is a revolutionary technology and we are yet to witness its full potential. Irrespective of the domain, industry, or applications, blockchain has the potential to transform the way things work. Once, governments and legal authorities agree and authorize the node-to-node open ledger system at a global level, blockchain will become an essential medium to improve global economy, businesses, and fair-trading systems.
Photo credit: Shutterstock