Blockchain, the distributed ledger (DLT), is at the heart of Bitcoin and other digital currencies. At its core, blockchain technology is easy to comprehend. The technology consists of a database with entries that must first be verified via peer-to-peer networks before being encrypted. Imagine it as a network of users who have all consented to a shared Google Document that is highly secured, validated, and where each line of the spreadsheet depends on the logical relationship to the ones before it.
Bitcoin is not the only currency powered by blockchain technology. Other applications for it are numerous. We've included a few of the recently developed decentralized applications of blockchain technology in business, government, and finance.
What is Blockchain and What it isn't?
It is best to define Blockchain using analogies and emphasize what it isn't. Blockchain isn't a magic potion that can solve all your problems. Ledgers have existed for centuries. However, they were centralized and controlled by a single person, with access granted to certain people.
Simple Definition: Blockchain is a type of distributed ledger technology (DLT) in which digital ledgers are duplicated across numerous computers or nodes. Due to the irreversible nature of the data stored in the catalog, the Blockchain cannot be altered or deleted. A distributed ledger is one whose nodes—the computers that make up its network—are dispersed throughout the world. Because choices are decided by consensus, a decentralized blockchain achieves centralization.
The Bitcoin creator who developed the first use case in the financial industry. Bitcoin is digital money that allows people to transact with no need for intermediaries or banks. Blockchain is not new; it's just the combination of other technologies like peer-to-peer cryptography hashing, mining consensus algorithms, and more.
A Sidebar is in Order: Bitcoin and Blockchain are not the same thing. Blockchain can be compared to electricity and Bitcoin with a light bulb. Bitcoin is what Blockchain is. Bitcoin would only exist with the Blockchain. As electricity isn't only used to light bulbs, neither is Bitcoin the only use for a blockchain. Numerous use cases have been developed or are being developed in many countries. Let's first see why companies should bother to use the Blockchain.
Blockchain Technology: Why Blockchain Applications?
There are many reasons, beyond the hype, why Blockchain is attractive to private as well as public entities and individuals. These are some of the senses. They're the characteristics of the Blockchain.
Decentralized
Blockchains can be described as being decentralized because there is no central authority. The digital ledger is maintained by everyone. Consensus algorithms are used to reach business decisions on how the digital register should be updated with correct data.
Nodes are Distributed
The participants in the blockchain network do not all reside in one place. Nodes for the Bitcoin network are spread around the US, the UK, and other nations.
Pseudonymous
Contrary to popular belief, the Blockchain doesn't promote complete anonymity but rather pseudonymity. The wallet address is a series of alphanumeric letters that identify participants in the Blockchain. It is, therefore, ironic that cryptos are used as a tool for money laundering. The traceability is permanent.
Immutable
It cannot be changed or altered. In general, data entered into the ledger cannot be changed.
Open Source
Blockchains are typically open source, at least the public/permissionless ones. Anyone can use the software, download it and start using it. They may also give feedback and make suggestions. You can make your software by making changes.
Hashing and Cryptography
The Blockchain uses cryptography to encrypt (secure) the data that is entered into the ledger. Private keys are used to verify ownership and authorize transactions. Private keys can be used for signing transactions and interacting with others on the network.
The Blockchain Application Challenge
As we'll see shortly in our use cases, it is easy to lose yourself in the excitement of blockchain applications and how they can help businesses. It's essential to look at the big picture. The following are some of the significant challenges that Blockchain Applications face:
- Incompatibility With Other Frameworks: The first thing to consider is incompatibility. What is a system that combines decentralized and centralized components? Unfortunately, none. Blockchain is notorious for replacing all existing frameworks. In the world of decentralization, blockchains need to work together. One cannot, for example, transact on the Ethereum and Bitcoin blockchains. Interoperability is being worked on.
- Absence of Reversal: Do you still recall the Immutability attribute? This takes things a step further. In a blockchain, confirmed transactions cannot be undone. Therefore, erroneous transactions cannot be undone. The process cannot be stopped once it has started. Certain changeable chains permit editing in such circumstances. However, these are often made to order for use by private businesses.
- Regulatory Uncertainties: Different countries around the globe adopt different approaches toward the Blockchain. Others are content with neutrality, while others have made visible attempts to develop a legal framework. A few countries with a forward-looking system have passed regulations tailored to blockchain use. Blockchain project creators have no choice but to move their projects to countries that are clear on rules.
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Banking & Finance: Blockchain Applications
Paying Internationally
The Blockchain is a secure and efficient way of creating a log that can't be manipulated. It is, therefore, ideal for money transfers and international payments. Santander, as a major commercial bank, has a number of retail customers who could benefit from cheaper and more efficient payments. This is especially true in international transfers. By reducing the amount of manual settlement required by banks, blockchain technology could be used to reduce the costs associated with these transfers.
Capital Markets
Capital markets can also be improved by blockchain-based systems. Reports highlight the benefits blockchain-based solutions can offer to capital markets.
- Clearing and Settlements are faster
- Audit trail consolidation
- Operational Improvements
Trade Finance
The traditional methods of financing trade have caused significant problems for businesses because they are slow and difficult to manage. When communicating data, such as the country of origin or product information, cross-border trading involves many variables. Transactions also generate a lot of paperwork.
Blockchain technology development can streamline and simplify trade finance transactions across international borders. The technology allows enterprises to transact more efficiently with one another, regardless of geographic or regional boundaries.
Compliance with Regulations and Audit
Blockchain's extremely certain features make it a valuable tool for auditing and accounting, as it reduces human error by a significant amount and guarantees the integrity of records. Using blockchain technology, nobody, including the owner of the documents, can change the accounts once the data is locked. Blockchain technology could eventually eliminate auditors and, therefore, jobs.
Anti-Money Laundering
The encryption of Blockchain is beneficial for combating money laundering. This technology enables recordkeeping, which is essential for "Know Your Customer" (KYC), the process by which businesses identify and verify the identity of their clients.
You can Also Get Insurance
Smart contracts are arguably the most critical blockchain application for insurance. Smart contracts enable customers and insurance companies to handle claims efficiently and transparently. All contracts and claims can be recorded on the Blockchain, and the network will validate them. Because the Blockchain rejects numerous claims for the same accident, this would stop invalid claims. The Association of Insurance Services and a company's blockchain platform created the OpenIDL network to streamline insurance regulatory reporting.
Peer-to-Peer Transactions
Venmo and other P2P services are useful but have limitations. Certain services limit transactions by geography. Some financial services charge for use. Many are also vulnerable to hacking, making them unattractive for users who put their financial data out in the open. With all the benefits it offers, blockchain technology could be the solution to these problems.
Applications of Blockchain in Business
Supply Chain Management
Blockchain is well-suited for tasks like tracking goods in real-time as they travel and exchange hands through the supply chain. The use of a blockchain gives companies that transport these goods a number of options. The entries on a Blockchain can be used for a queueing up of events in a supply chain - allocating newly arriving goods at a Port to different shipping containers, for instance. Blockchain is a dynamic and new way to organize tracking data.
Healthcare
Blockchain can be used to store health data such as age, gender, and primary medical data, like vaccination history, vital signs, or immunization records. This information alone would not be enough to identify a patient. It can be shared on a blockchain and accessed by many people without privacy issues.
Blockchain can be used to connect these devices and the health records of individuals as specialized medical devices are increasingly common. The devices will store data on the healthcare blockchain and add it to medical records. The siloing data generated by connected medical devices, a fundamental problem for the industry today, is a significant issue. Blockchain could provide a solution to this.
Real Estate
In a lifetime, the average homeowner sells their house every 5 to 7 years. Blockchain could be useful in the real estate market, given that people move so frequently. The Blockchain would speed up home sales, as it could verify finances quickly, prevent fraud with its encryption and provide transparency during the whole selling and buying process.
Real estate is frequently given as an example of how unyielding blockchain data is. A lot goes into buying a home or piece of land, including lengthy paperwork, expensive hourly lawyers, bureaucratic banks, and a bureaucratic government. Because possession only sometimes equates to ownership, there are glaring flaws in this system that can make it challenging to demonstrate ownership.
The Media
Media firms are already utilizing blockchain technology to cut expenses, safeguard intellectual property rights (IP), and minimize fraud. By 2024, the worldwide blockchain business for media and entertainment is predicted to be worth $1.54 billion, according to research.
Sport
Imagine social communities for sports where fans could interact directly with their favorite clubs and sports heroes. Sports is a team of innovators today, with players such as artificial intelligence, robots, biometrics, and machine learning. The Blockchain could be used to achieve goals such as incentivizing contributors and unlocking new opportunities for sports interactions.
Energie
Reports suggest that blockchain technology can be applied to energy transactions and also provide a basis for billing, clearing, and metering processes. Reports indicate that blockchain technology could be used for a wide range of other applications, including documenting ownership and asset management. It can also provide origin guarantees, emissions allowances, renewable energy certificates, as well as metering, billing, and clearing processes.
Human Resources
Work is moving fast away from the suffocating cubicles and towards wherever creative thinking takes us. Is the current workforce well-equipped or ready? Remember that human competitors are not the only ones to worry about - think bots.
As an example of blockchain applications for HR, the system can be used to verify data that is sensitive and difficult. The existence of skills, certificates, or degrees can be easily verified by job seekers. Now HR managers of globally dispersed workforces can keep their minds sane when trying to pay employee salaries and allowances across borders. You can also create tokens or corporate currencies that your employees will be able to accumulate when they achieve KPIs.
Read More: A Detailed Description of the Types of Blockchain Technology
The Blockchain in Government
Record Management
The national, state, and local governments maintain records of individuals, such as dates of birth, death, marriage status, or property transfers. Despite the difficulty of managing this data, some documents still exist on paper. Sometimes, the citizens are required to visit their local governments to change things, which can be time-consuming and inconvenient. Recordkeeping can be made simpler and data will be more secure with blockchain technology.
Identity Management
The argument made by supporters of blockchain technology for identity management is that with enough data kept on the Blockchain, individuals just need to disclose the bare minimum of information (such as their birthdate) to prove their identity.
Voting
Blockchain technology can make voting easier while also improving blockchain security. Blockchain technology would make hackers ineffective, as even if they were to gain access to the terminals, their actions could not affect any other nodes. The government could count votes faster and more accurately because each franchise is attributed to a single ID.
Taxes
With enough data stored on Blockchain, the tax filing process, which can be prone to error due to human mistakes, could become much more efficient.
Non-Profit Agencies
The technology can show that NPOs actually use their donors' money in the way they intended. Blockchain technology could also help NPOs manage resources more effectively, track their funds better, and tribute these funds with greater efficiency.
Compliance/Regulatory Oversight
Recordkeeping is the primary source of oversight by regulatory agencies; however, it's clear that not keeping records can have much more severe consequences. Compliance is, therefore, a non-negotiable requirement for businesses. Blockchain updates can be made available in real-time to companies and regulators, reducing the time between them and red flags.
We still use thumbprints to vote when facial recognition is available. Blockchain can be used to track votes and IDs, whether it's for voting or managing identity. Smart contracts can change how governments operate their countries and act as the legal engine for a nation. Smart contracts are being used by countries like Dubai to build an automated, efficient smart city.
Use of Blockchain in Other Industries
Financial Accounting and Management
Customers who are concerned about financial fraud would find it tantalizing if the Blockchain was as safe as has been shown in recent years.
Record Management
Blockchain is a handy tool for managing records because of its encryption. It prevents fraud, duplicate entries, and other issues.
Cybersecurity
Blockchain technology has the most significant benefit in terms of cybersecurity because it eliminates single points of failure. Blockchain technology also offers end-to-end privacy and encryption.
Big Data
Blockchain is a great tool to store big data because of its immutable properties and the fact that each computer in the network constantly verifies the stored information.
Data Storage
Data storage follows the same principles as big data.
IoT
Blockchain technology is set to revolutionize a variety of IoT industries, such as:
- Supply Chain: Monitoring the movement of products as they're shipped and making sure they meet certain conditions.
- Asset Tracking: Asset tracking is a way to monitor assets, machinery, and their output to replace cloud-based solutions.
The technology of the IoT still depends on startups, despite these areas in which Blockchain is most beneficial.
Benefits of Blockchain Technology
Blockchain experts identify these top benefits as Blockchain's most important:
Trust
Blockchain creates trust among different entities, where it is nonexistent or has yet to be proven. These entities will engage in transactions and data sharing they would not otherwise do, or that require an intermediary. Blockchain's ability to foster trust is one of its most important benefits.
Early blockchain applications demonstrated their value by facilitating transactions between entities that did not have direct relations but still needed to exchange data and make payments. Blockchain is a crucial enabler of trust among participants that don't even know one another.
Decentralized Structure
Blockchain makes it possible for multiple entities within an ecosystem to share data. An excellent example of this is the supply chain, which involves numerous organizations that desire and need information about one another, including producers, retailers, and distributors, as well as transporters and suppliers. But nobody in this network is in charge of encouraging information exchange. This problem is resolved by the decentralized nature of Blockchain.
Security and Privacy Improved
Another significant benefit of this new technology is the security it offers. This enhanced level of protection is a result of the way Blockchain works. Blockchain uses end-to-end encrypted transactions to prevent fraud. Additionally, blockchain data is kept in a decentralized network, making hacking very impossible, unlike traditional computers, which save data on servers. By obscuring data and limiting access, Blockchain can better handle privacy issues than conventional computer systems.
Cost Reductions
Blockchains' nature can also reduce costs for businesses. The processing of transactions is made more efficient. The system also simplifies reporting and auditing and reduces the need for manual data aggregation and amendment. Financial institutions can save money by using Blockchain. Blockchain Developers explained that the ability of Blockchain to simplify clearing and settlement translates directly to process savings. Blockchain helps companies cut costs in general by eliminating the middlemen - vendors and third-party providers - that traditionally provide processing.
Fasten your Seatbelts
Blockchain can process transactions much faster than traditional methods by eliminating intermediaries and replacing manual processes. Blockchain can process a transaction within seconds in some instances. The speed of a blockchain system is dependent on many factors, for example, the size of each data block and how busy the network can be. Experts have determined that, in general, Blockchain is faster than other technologies and processes. Walmart, one of the most significant users of blockchain technology, used it to track the origin of mango slices in just seconds. This process had taken seven days previously.
Visualization and Traceability
A retailer can use Blockchain to identify the consequences that come from a specific farm that has had to recall its products because of contamination. The remaining items will remain for sale. Experts say that blockchain technology can be used to track the origin of many things. For example, it could help confirm whether or not a medicine is genuine and whether organic products are organic.
The Immutability of the Law
Immutability is the ability not to change or cancel transactions once they have been recorded in the Blockchain. All transactions on the Blockchain are date and time-stamped. This creates a permanent history. Blockchain can track data over time and provide a reliable, secure audit. This is in comparison to the error-prone filing of paper and outdated computer systems, which could corrupt or be retired.
Data Control by an Individual
Experts said that Blockchain allows individuals unprecedented control of their digital data. Researcher said that in a world with a high value on data, blockchain technology protects your data while giving you control. Smart contracts enabled by the Blockchain allow individuals and organizations to decide which digital data pieces they wish to share and for who, and for how long.
Tokenization
Tokenization is the process of converting the value of a natural or digital asset into a token. The blockchain stores and distributes the digital receipt. Tokenization, according to a researcher, might be used to simplify commercial transactions. Tokenization can be used by utility firms, for instance, to exchange carbon emission allowances under carbon cap programs.
Innovation
Blockchain-based solutions are being explored and implemented by leaders in multiple industries to improve cumbersome and long-standing practices and solve complex problems. Field gave the example of using blockchain technology to validate the data on the resumes of job candidates as a good example. The majority of resumes are fabricated, and hiring managers have to check the data manually. Both issues are resolved through pilot programs that provide participating universities the ability to store information on their graduates, their degrees, and the universities they attended on the Blockchain and then make it accessible to authorized hiring managers.
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Conclusion
As new applications and use cases are being discovered every day, the list above is by no means exhaustive. Blockchain technology is only a decade old and has much to do compared to its birth in the early days of the Internet. As the technology improves and refinements are made, its capabilities will surpass any limitations and you can hire blockchain developers to grow your company.
Even though the blockchain revolution is not likely to happen anytime soon, many experts believe it will disrupt and transform business. While Blockchain is revolutionary in principle, the technology will not transform our society as we know it today.
