Anand Kumar Mishra
9 Mins to Read
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You’ve almost certainly heard of the term blockchain. However, it’s likely that you are unaware of both its nature and its workings, much alone the reasons for the frenzy it creates.
That hasn’t stopped it from being used as a buzzword in practically every business, from shipping to finance to fantasy football. A-list firms like Walmart, Facebook, IBM, and Amazon are among those that think blockchain technology may, among other things, track shipments and store data more effectively. They aren’t the only ones using technology, which many people think will transform various industries, including banking, logistics, food safety, healthcare and even voting.
What is Blockchain and how does it work?
Blockchain is a distributed ledger that functions as a decentralized network to store and secure digital data and records. The block and the chain are the two elements that make up a blockchain.
In a virtual chain, a block is a grouping of data that is connected to other blocks chronologically. A blockchain can be compared to a railway with numerous carriages that are connected in a line and have a certain quantity of data in each one. Blocks are limited in the amount of data they can hold before becoming full, just like people in a real train carriage.
Additionally, each block has a timestamp, which makes it apparent when the data was captured and stored. This is crucial for things like transaction or supply chain data, where knowing the precise time that a payment or item was shipped is critical.
One of the key benefits of a decentralized ledger, where numerous parties can access it simultaneously, is that the recorded data is hard to change or edit.
With the use of this technology, numerous parties to a contract that requires security and transparency can verify and follow transactions.
Blockchain can speed up data transfer processing, lower operating expenses, and guarantee safe transactions. Contract management and supply chain audits can both benefit from blockchain technology. Blockchain can be applied to the management of shares and securities as well as electronic voting platforms.
The creator(s) of the technology, which was developed alongside bitcoin, is thought to go by the pseudonym, Satoshi Nakamoto. Nakamoto, a shadowy individual who has been nearly impossible to identify positively, desired a decentralized, long-lasting, and open method of tracking the production and distribution of each bitcoin. Many cryptocurrencies nowadays are supported by blockchain technology.
More than 18 million of the 21 million total bitcoins that will ever exist have already been mined. They have all been listed on a blockchain, along with any transactions that included them. That provides you with an idea of the amount of data that the system can manage.
Although Nakamoto intended for blockchain to be a public ledger, permission-backed blockchains that were under the authority of a certain organization or group quickly emerged. Because they are stored on a much smaller number of machines, they offer a different level of immutability. Despite the fanfare, the ideas that underlie them are not original.
Why is blockchain important?
Due to its transparency, blockchain technology is significant. Blockchain networks and protocols come in various varieties. Due to the nature of its technology, public blockchain offers transparency. Conducting electronic elections is just one application of this kind of blockchain’s many benefits for enhancing our contemporary civilization. Businesses and organizations can utilize this technology to enhance user experience and ensure users can engage with various processes, such as transparency and full or partial control.
Users have complete control over their genuine digital independence thanks to blockchain technology. They are their own bank and have more financial privacy because they keep their own records. Individuals do not need anyone’s permission to send or withdraw their money anytime. They are the single owner and in charge of asset management because there is no need for a central authority.
Blockchain technology is not just used in the financial industry. Nearly every industry and business, including banking, government, healthcare, education, and commercial finance, can benefit from blockchain.
Modern encryption technology is used by blockchain to offer an extra degree of security to the documents and data kept on the network. The proof-of-work (PoW) mechanism and the complicated mathematical algorithms used in blockchain cryptography can protect the data and systems on the blockchain network.
When compared to other technologies and systems, blockchain technology is far less expensive. Decentralized technologies reduce operational costs because there is no need to pay for intermediaries.
Less paperwork is generated in the supply chain when blockchain is used. The paperwork and documents themselves are rather expensive.
What makes blockchain so special?
Distributed public ledgers
A blockchain network or protocol is a distributed ledger that uses cloud computing in a decentralized manner to store data and transaction records across numerous machines.
Users can access and participate in a distributed ledger, which functions similarly to a distributed database.
Blockchain employs the cryptography algorithm to protect data, preventing unwanted access. Private and public keys are the two types of keys that each user on the blockchain network owns.
Proof of Work and Mining
Most blockchain technologies employ the Proof of Work (PoW) technique. A process called PoW is employed on a blockchain network to verify transactions. By resolving challenging mathematical riddles, or “mining,” this process maintains the security of a blockchain network. Miners are users who seek to solve the riddles on a blockchain network.
By using their resources (such as time, computing power, electricity, etc.) to validate transactions and add them to the blockchain’s ledger, miners participate in mining and are rewarded with cryptocurrency.
Blockchain in business
As blockchain technology not only lowers expenses and record keeping but also has the potential to shorten information exchange times, enhancing communication efficiency. It can be used in business to eliminate intermediaries or partners that may one day prove to be unneeded.
While the financial sector stands to gain the most from this cutting-edge technology, other industries, such as healthcare, insurance, transportation, real estate, retail, artificial intelligence, machine learning, and more, might potentially be completely altered by blockchain.
Savings, banking, and finance may be the industries that embrace this technology most widely because it is transparent and secure in these areas. The largest benefit of smart contracts is for digital financial services. Banks can drastically cut the expenses related to maintaining bank accounts and conducting financial transactions by utilizing blockchain.
Why does blockchain matter for the government?
Building Trust in Government
Government organizations might benefit from using blockchain technology to simplify procedures, save costs, and boost effectiveness and accountability. However, there are some obstacles to the government’s adoption of blockchain technology. According to certain analysts, before using blockchain technologies, governments must take their advantages into account.
Increasing Government Accountability
Government organizations may be able to cut expenses, boost productivity, and raise the caliber of contracts they award with the use of blockchain technology. According to Accenture LLP’s paper titled “The Power Of Blockchains In Public Sector,” distributed ledger technology could enhance how government entities manage contracts and make purchases.
A paper on how governments might use blockchain technology to combat corruption was released by the World Economic Forum. According to the paper, blockchain technology can aid in the fight against bribery, fraud, and money laundering.
Even though it won’t stop crime, the WEF notes that blockchain offers a method to monitor transactions and guarantee accountability.
Beneficial business ownership records can aid in thwarting influence-peddling, money laundering, and the swaying of public investments. Blockchain-based registries might simplify procedures, cut down on the number of organizations engaged, and boost verification.
Blockchain in Healthcare
Healthcare is another sector where blockchain will play an important role. Currently, healthcare is suffering from a lack of unity. Patients need to carry their documents, and hospitals put records in separate folders, which takes time to be retrieved when needed. Currently, there are plenty of use cases related to healthcare, including the following:
- Patient consent management
- Drug traceability
- Secure electronic health records (ETRs)
- Micropayments Incentivization
- Clinical trials data security
Blockchain in business and finance
Blockchain has the potential to enhance the banking and financial industry significantly. When it comes to smart contracts, digital financial institutions gain the most. Smart contracts, programmable money, and digital assets contribute to the advantages. There are many possible use cases in the banking and finance industry. Blockchain for trade finance has become very popular recently.
Some of them are as below:
- Capital markets, such as sales and trading
- Remittances and payments for both domestic and international
- Trade finance sectors, including letters of credit and bill of lading
- Investment management including administration, fund launch, and more
Blockchain in Supply Chain
Transparency, precise asset monitoring, and improved licensing are all lacking in the supply chain. Every industry that depends on the supply chain might be significantly impacted by blockchain. It can enhance traceability, transparency, and traceability. Due to the lack of real-time tracing, products can now be difficult to trace. Additionally, malevolent groups won’t be able to alter items in any way.
- Improved transparency
Unquestionably, blockchain is crucial to our society. The effect it has on the present-day industry is unrivaled. Most businesses and industries will only use blockchain when blockchain-based apps as a service (BaaS) or systems become more prevalent.
In recent years, many things happening in our cultures looked unimaginably unlikely to be true. High transaction costs, network fraud, data recovery from deleted files, money laundering, intellectual property theft, transaction recording, influence peddling, government investment targeting, etc., are a few examples. Nevertheless, these issues are now things of the past and may be resolved or avoided with the aid of blockchain technology</