The blockchain is one of the latest inventions to come out of the magical honeypot that is technology. No doubt, you have heard the word ‘blockchain’ being bandied about, especially by your financially or technologically savvy friends.
But do you know what it is exactly?
Why don’t we clear up your confusion?
Picture Credit: Pixabay
What Is Blockchain?
The blockchain is a list of permanent records called blocks which are interlocked and linked with one another, secured by cryptography. In a sense, each block is a function of the previous block. Each new block is intertwined with the previous one because it is designed to hold the cryptographic hash of the previous block. A new block also contains relevant transaction data and a timestamp.
Essentially, blockchain allows users to perform decentralized operations over a highly secure P2P network. It is a near perfect system that doesn’t require human touch at all. There is practically no use for a third party or middleman in blockchain transactions; as a result, the concept of “trust” is redefined completely.
Picture Credit: Pixabay
Security and Applications
Operations and data transactions conducted across a blockchain P2P network are highly secure, which is why the technology is already changing the landscape of record keeping and data transactions.
Due to the revolutionary design of this new technology, any stored data is impervious to modifications and manipulations.
This public, distributed, and decentralized ledger is suitable for taking records of transactions between multiple parties easily and through a valid means. Once data is entered into a blockchain, it cannot be tampered with by any of the parties involved.
This unchangeable quality of blockchain data is because blocks are linked to one another. Therefore, tampering the data of a single block would require to alter all consecutive blocks as well, which is logistically (almost) impossible in practice.
You might be wondering what brought about the need for blockchain. It is said that necessity is the mother of all invention. The necessity that led to the conceptualization of blockchain in the form of Bitcoin was the financial crisis of the first decade of the new millennium.
The very first blockchain was the brainchild of Satoshi Nakamoto. Born in 2008, blockchain was propounded for utilization in Bitcoin trading. It served as the public ledger that holds records of all Bitcoin transactions. The face or faces behind blockchain have been able to hide behind the moniker Satoshi Nakamoto. No one knows the person or group of people behind the innovative technology.
As a result of the revolutionary synergy between cryptography and coding that is blockchain, Bitcoin became the first cryptocurrency to avoid the issue of double spending without using a trusted body or authority to verify the validity of the transaction. In the same vein, blockchain quickly became the foundation for other new technologies.
The fact that data blocks function with the whole system has had many positive implications in different sectors. With the ingenious new method of verifying transactions provided by blockchain, traditional trading and commerce systems may become outdated.
Deals and record keeping have the potential to become an instant, secure and very accessible phenomenon.
How Does Blockchain Work?
There are a few simple steps which every transaction must go through on the blockchain. They include:
- Requesting a new transaction
- Broadcasting the details of the transaction over a P2P network
- Confirming the transaction details and user status
- Combining the verified data to create a new block of data
- Mark transaction as a completed
Three characteristics make blockchain suitable for use in many industries. These characteristics are the fact that it is public, a secure ledger, and is equally distributed. The many benefits of blockchain are:
- It is time and cost efficient
- It is highly secure
- It is a decentralized system
- It offers you impeccable and unaltered record keeping
- It reduces the chances of fraud to almost zero
- You can make use of smart contracts with blockchain
The blockchain is slowly but surely permeating many industries. This permeation is what is known as blockchain disruption and BitFortune has very interesting stories about it. A positive thing is that blockchain disruption has wholly revolutionized activities in sectors such as banking, voting, finance, and others.
Here are some of the industries that are being disrupted by blockchain:
The technicalities in the voting industry remain the same for many decades. Of course, most people complained that voting is stagnant. Even the supposedly modern electronics systems of balloting offer little to no improvements.
Blockchain has been able to step in and entirely ostracize the usefulness of paper ballots. It offers a voting process that is secure and transparent.
The blockchain is able to offer the creation of publicly viewable and timestamped votes that cannot be altered or tampered with in any way.
Most companies and startups that are trying to disrupt traditional voting methods with blockchain are offering secure and convenient voting via your phones, computers, or tablets. This convenience is a uniqueness that can only lead to increased voter turnouts, especially when it comes to the younger generation.
Blockchain technology allows users to confirm their votes without ruining the privacy of the voting process. With blockchain, you can verify that your vote is counted.
Of course, identity and anonymity are a secure part of voting and blockchain doesn’t compromise on these areas. With this technology, total anonymity is guaranteed together with a brilliant identity verification system.
A few of the startups that are making waves in the voting industry by incorporating blockchain technology include Voatz, Follow My Votes, Nasdaq, and Democracy Earth.
- The Banking Industry
Since the dawn of time – or at least banking – the most crucial selling point of the banking industry is its security and seemingly ethical system. Since the advent and growth of the banking sector, many people have trusted its facilities. This trust stems from the belief that no other alternative is more secure than banks.
Using the philosophy of anonymity and security, Switzerland has developed to become the banking capital of the world. The stark truth is that the banking system is not perfect. It is also not as secure as you would like to believe.
The banking system can be easily infiltrated and broken into by hackers. In fact, a perfectly placed agent up in the corporate ladder can wreak considerable havoc within a bank.
The chances of hacking and fraud can be reduced with the introduction of the blockchain. One of the primary objectives of banks is to store money and make transfers for their customers.
The blockchain is a near perfect system that can give banks permanent records and imprints of the billions of assignments and other transactions that occur in the banking industry every day. Monetary transfers can be made faster and cheaper due to the very nature of blockchain technology.
Blockchain technology has the potential to reduce bank infrastructural costs by almost 30%, saving over $160 million annually.
A few banks that already started developing and using blockchain. They include The Bank of Lithuania, Royal Bank of Canada, SCB, Deutsche Bank, and DBS Bank.
- The Finance Industry
For many people, it is impossible to think about blockchain technology without the world of finance coming to mind.
Of course, the world of finance was already disrupted immensely by the advent of cryptocurrency. Don’t forget that cryptocurrency works on the blockchain.
The first successful cryptocurrency was Bitcoin, and there is no doubt it has been a game changer in the world of finance. Other cryptocurrencies making waves in the world of finance include Ethereum and Ripple. It is a no-brainer that blockchain would be a shoe-in to disrupt the finance industry further.
Blockchain technology provides a secure ledger for transactions. Billions of transactions are conducted in the finance world every day. Forex traders, stock exchange financiers, and crypto traders now have the security and record keeping service.
Blockchain technology is at the same place where the internet was 20 years ago. There is plenty of room for improvement, and crypto money might be all we make use of in the next decade.
Blockchain tech also allows the finance industry to make use of smart contracts. Smart contracts were pioneered by BitShares. They are computer software programs that can be used to execute the conditions and terms of a contract automatically. Money transfer and contract execution become smooth and speedy processes with blockchain’s involvement.
- The Real Estate Industry
Any single purchase made in the real estate scene comes with a boatload of documents. With blockchain, the security and speed of that process can increase substantially.
With the aid of blockchain, reports, records of transfers, and deeds of ownership can be securely stored with less stress. As a result, commission rates and the overall costs of real estate purchases can drop immensely.
Deedcoin’s proprietary tokens and platforms have been able to reduce commission rates from 6% to just 1%.
Smart contracts also play a huge role in blockchain’s disruption of the real estate industry. Their capability to only release funds after certain conditions are met can be used to significant effect in the real estate scene. The need for third parties can be drastically cut out of the whole process thereby reducing total costs.
The disruption of the real estate scene by blockchain is real. Property in Lake Tahoe was sold for over 2,000 Bitcoins in 2014. Manhattan real estate also began accepting Bitcoin payments since the same time. A few of the major players that have been able to fuse blockchain and real estate are Ubiquity, Atlant, Propy, and Safe Chain.
Other industries that are being disrupted by blockchain include healthcare, insurance, energy management, cybersecurity, etc., but only the future will show how impactful exactly this latest technological leap will be in our lives.