Blockchain, referred to as distributed ledger technology (DLT), makes the history of any digital asset unalterable and transparent through the use of decentralized and cryptographic hashing.
Now, let us understand blockchain by a simple example of Google Docs.
When we create a google document and share it with a group of people, the document is distributed instead of copied or transferred. This creates a decentralized distributed chain that gives everyone access at the same time.
This is just a simple example of blockchain as it is more complicated than Google Docs.
How does Blockchain work?
Let us start.
1. Imagine the blockchain as a digital database, just like an Excel spreadsheet.
2. This database is typically shared across a large network containing many computers (known as “nodes”) and it is completely public. We say “typically” because it can technically be formed by any number of nodes. The more nodes there are, the more secure the network is — that’s why it is good to have a large number of nodes running the blockchain!
3. Every time the network makes an update to the database, it is automatically updated and downloaded to every computer on the network.
4. Blockchain technology is secured with cryptographic techniques, making it nearly impossible for hackers to make changes to it. The only way to make changes would be to hack more than half of the nodes in the blockchain at the same time, which again, is why it is more secure to have more nodes/computers running the blockchain.
Advantages of Blockchain:
The main purpose of the blockchain is to allow fast, secure and transparent peer-to-peer transactions. It is a trusted and decentralized network that allows the transfer of digital values such as currencies and data. A few more are listed here:
- Reducing the risk — Blockchain systems based virtual currencies eliminate the need to take cash into volatile areas and they reduce losses caused by card theft. Also, by eliminating intermediaries, blockchain systems substantially reduce administrative costs.
- Stamps out fraud — Blockchain doesn’t allow hackers or third parties to enter into the system. It’s very difficult to crack open the content and change it.
- Trust and transparency — Blockchain creates trust between different entities where the trust is either nonexistent or unproven. As a result, these entities are willing to engage in business dealings that involve transactions or data sharing that they may not have otherwise done or would have required an intermediary to do so. The enablement of trust is one of blockchain’s most cited benefits.
- Cost-effective — Blockchain is also used to cut down costs for organizations. It also creates efficiency in processing transactions. It also reduces manual tasks such as aggregating and amending data, as well as ease in the reporting and auditing processes.
- Simplifying business to business — As most businesses use different systems, it’s hard for them to share databases with another business. Then comes blockchain technology as it acts as a single shared database for both businesses to work from as sharing data is much easier for them on a blockchain system.
- Unlike cash, crypto uses blockchain to act as both a public ledger and an enhanced cryptographic security system, so online transactions are always recorded and secured.
Blockchain has also helped during the COVID-19 pandemic to securely store medical research data and patient information.
How will Blockchain benefit large industries?
If done right,
- It will remove the cost of third parties.
- Payments and data would be processed much quicker.
- Database management across businesses would be much easier.
- Data protection and security would be advanced.
Blockchain in several other sectors include:
- Cryptocurrency — Crypto uses blockchain to act as both a public ledger and an enhanced cryptographic security system, so online transactions are always recorded and secured.
- Banking and financial services — For any banking or finance organisation, the most important feature is their payment systems. When it comes to blockchain finance, both central and commercial banks, throughout the world, are now using this technology to process payments. By using blockchain technology, cross border payments are faster and cheaper as compared to traditional payment methods.
- Government — A blockchain-based digital government can protect its data, streamline processes, and reduce fraud, waste, and abuse while simultaneously increasing trust and accountability among its citizens.
- Health care — Blockchain in healthcare services may be utilized for updating and reserving patients’ valuable information, like sugar level and blood pressure in real-time with the assistance of IoT and wearables.
- Insurance — Blockchain helps reduce administrative costs through automated verification of claims/payments data from third parties. Insurance companies can now quickly view past claims’ transactions that are registered on blockchain for easy reference. This promotes higher degrees of trust and loyalty between the insurer and customer.
Also, blockchain has helped the insurance industry to automate its outdated processes and has helped in saving a lot of hours of paperwork each year.
Now, let’s brush up on what all we have learned about blockchain technology, and here are some important features to be remembered of blockchain:
A quick overview of Blockchain
- A blockchain is a database that stores encrypted blocks of data, then chains them up together to form a chronological single-source of truth for the data.
- Digital assets are distributed instead of copied or transferred, creating an immutable record of an asset.
- The asset is decentralized (the process of shifting control from one main group to several smaller ones), allowing full real-time access and transparency to the public.
- A transparent ledger improves the integrity of the document, which creates trust in the asset.
- Blockchain’s inherent security measures and public ledger make it a prime technology for almost every single sector.
Few words of getting blockchain explained:
Blockchain technology has changed many industries and will also change further and improve the way how the business operates. But that is not it. It will also change the lives of billions by giving them the ability to store and send money to each other.
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