Breaking Down the Basics: Blockchain
Exploring the fundamental applications of blockchain technology, along with usage examples, and how this technology is being adopted in the modern day.
Imagine you are a hospital manager, thousands of patients come in and out each day. All of them have varying and unique medical records. Due to the way the current system has been set up you have to manually file away these records and they often get lost or damaged during transportation. On top of that, specific patients fly in from all over the world, each one having a foreign medical record, some not being updated and some having inaccurate information.
The solution to all of these problems? Storing the information on a blockchain.
What is a blockchain?
A blockchain is a distributed ledger system, a sequence of blocks, or units of digital information, stored consecutively in a public database. In the prior mentioned hospital example the distributed ledger system are the various nodes and their various ledgers they use to record information. For this specific scenario, hospital computers around the world are the nodes and the individual databases they all store information in are the ledgers. The digital information stored on the blockchain would be the medical records, being stored in blocks. Once they are added to the blockchain they can not be altered in any way ensuring the data is always accurate.
Each time someone interacts with the blockchain it can be viewed as a transaction on the blockchain and the blockchain stores this information to ensure all transactions made are in fact valid. It does this by making use of protocols, in this case specifically the consensus protocol. This basically means every node on the network needs to verify a transaction before it can be completed.
Benefits of Blockchain Technology
1. Enhanced Security
- Creates a record that cannot be changed and has end-to-end encryption
- Privacy problems can disappear by allowing the anonymizing of private information
- Data is stored across a network of devices versus a singular server, leading to better data protection
- The blockchain itself creates an audit trail
- An industry plagued with fraud or counterfeit can be eliminated
- Possible to share information directly with people
- Transactions can be automatic with the use of “smart contracts”
- Time lag is reduced as once conditions are met for the transaction, execution happens immediately
- Reduce the number of intermediaries required as each step of the transaction is checked automatically
4. Increased Efficiency
- The conventional way of storing information is prone to human error, often needing a third party checker/mediator
- With the blockchain transactions can be completed faster
- No need to coordinate between ledgers, so agreements can be completed much faster
- Due to the distributed ledger system, data is documented identically in a number of places.
- Everyone who has permission and uses the network see the same information at the same time
- Each transaction recorded has date and time information stored to prevent any opportunities for fraud
Which industries could benefit from using blockchain technology?
Can be used for building trust between business partners, ensuring end-to-end transparency and faster processing speeds. Disputes can easily be settled, any disruption in supply can be fixed sooner rather than later. Each transaction can be traced back to the source in a matter of seconds.
Banking and Finance
Financial fraud becomes non-existent, operational efficiency is increased. Middle men and escrows are no longer needed. This leads to transactions costing less and being more secured overall. Banks can use blockchain technology to ensure validity on loans and other consumer interactions.
Patient data can be secured accurately and safely while making it easier to share records with the required personnel. Traditional data loss and outages would no longer be an issue thanks to the distributed system. Counterfeit drugs can now be traced as an audit trail between manufacturers and distributors is created.
Implementing a blockchain system would lead to greater trust between government authorities and the public. Audit trails that the population can track will force governments to take more accountability. Regulations can be built into the system, transactions will not go through unless all conditions are met.
Blockchain can also be referred to as a “trustless network”, this is because people no longer have to rely on trust to conduct transactions. Eliminating errors, third party middle men can give more confidence to the everyday consumer. Beyond what has been mentioned prior, blockchain offers greater business benefits in the form of lower cost and improved operating efficiency.