We have all seen the rise of bitcoin in the past two years. And while everyone has been awed by it, not many know about the technology behind bitcoin, something which many believe is more revolutionary than bitcoin itself. The technology is blockchain and it is one of the hottest topics in the tech world at the present moment.
Blockchain underpins the entire Bitcoin model of cryptocurrency. It is like a giant public ledger which records all transactions which have taken place till date. Unlike traditional accounting systems, it is not stored on a single server. Rather it is decentralized and distributed. All computers on the bitcoin network have a copy of it.
How are new transactions added to it? Every 10 minutes or so, computers on the bitcoin network pool all the new transactions into a single block and generate a hash out of it. This hash, if accepted by all the computers on the network, gets added to the chain of blocks which make up our giant public ledger. In this way, the blockchain grows.
Okay, so computers on the bitcoin network accept hashes computed from raw transactions. Once these hashes have been accepted by them, they get added to the public ledger. The good thing about this is that no individual computer has the right to change the ledger. It is distributed in nature. Since the right to publish on the public ledger is distributed, so is the trust in the system.
Users of a bitcoin system do not trust a single third party for their transactions. Rather, they trust the bitcoin community in general. They believe that the honest computers on the network will not accept a dishonest transaction. As such, the system will remain secure. This might sound trivial but has massive consequences. Think about the number of industries which work as a trusted third party to two transacting parties.
Stock exchanges serve as third parties between buyers and sellers of securities. Amazon serves as an intermediary between buyers and sellers of goods. Banks serve as an intermediary between paying and receiving parties. The court serves as the enforcer of a contract between two parties. All of these industries will experience a mammoth shift if blockchain technology can be applied well.
Not only this, blockchain is also all electronic. Hence, it does not have to be constrained by the location of a person. Someone present in New York can transact as easily with another New Yorker as he can with a person in Sub Saharan Africa. Hence, blockchain can be used to provide financial services to people in remote corners of the globe.
As mentioned above, blockchain can be used in a number of ways in a number of industries. Now, let us get to the specifics and learn more about this in detail. Exactly how can blockchain be used in different industries:
#1 Cryptocurrencies
It is almost criminal to think about applications of blockchain without starting with Cryptocurrencies. Almost all major Cryptocurrencies in the world today use blockchain in some form or the other. The technology of blockchain is the foundation of their entire model. Using blockchain, these Cryptocurrencies come to know about the transaction history of any bitcoin.
#2 Recording intensive industries
There are many industries like health, warehousing etc which require intense record keeping. In health, it is the record of people, their reports, their treatments etc. In the case of warehousing, it is the record of goods, their dispatch dates, their storage periods etc. In these industries, it would be very helpful to have decentralized databases maintained by computers on the network. In this way, the reliance on third parties can be reduced. The transaction processing times can be faster and many times less expensive.
#3 Distributed cloud storage
This is another very exciting application of blockchain technology. Until now, we have been used to the client-server model of data storage. We send data over the network to be stored on a particular company’s servers. We, then, pay periodic maintenance charges to the company. Using blockchain, a peer to peer storage system can be created. Any data which one uploads can be hashed and stored with anyone in the world who has some space to spare.
#4 Banking and Financial services
Money remittances form an important part of the global banking system. For example: Remittances to Sub Saharan Africa alone totaled $30 billion during 2015. In fact, remittances form a huge part of these countries’ GDP. It forms 26% of Liberia and 19% of Lesotho. However, the cost to transfer these remittances is huge, almost 10% for Sub Saharan Africa. If blockchain technology is used, it won’t be anything much and there can be savings of up to $3 Billion.
There are just some examples of how blockchain can be used in the private sector. Many more such examples exist and the list is only going to grow over time.
Yes, it can be argued that the public sector will take its own sweet time in accepting blockchain as a viable technology. However, that doesn’t mean that blockchain cannot be used here. It can be used in several different ways:
#1 Voting
Blockchain can really change the way we vote. Increasingly, people around the world are concerned about voter authenticity. They are questioning the quality of our democracies. Blockchain can be used to help people vote online. The votes they cast can then be stored in a public database for all to view. In this way, people can even check if the votes they polled were counted correctly.
#2 Smart contracts
Contracts, a few decades ago, were not very popular. Today, thousands of contracts are executed every second. Along with the increase in volume, they have experienced a rise in complexity. Forwards, Futures, swaps and list goes on. Smart contracts can be created using blockchain technology which will be stored online permanently and will execute as soon as all the conditions are satisfied. For example: a forward contract will be executed as soon as the forward date arrives.
#3 Carbon Credits exchange
There are some assets which are very clumsy to exchange like carbon credits, real estate, gold etc. By creating digital tokens and records, these can be easily exchanged between parties and an online record can be created. It will be faster, safer and smoother.
Blockchain technology can create a large difference in the way public institutions work. The reason for this is that public institutions are usually built as keepers of trust. Since people can’t trust each other, they create and trust public institutions: a problem to which blockchain has an efficient answer.
There are many real-life examples of the use of blockchain as a service. The major part of these, as of now, is taken up by Cryptocurrencies. The other non-cryptocurrency based uses are majorly in development. But we expect them to roll out very soon:
#1 Health
The issue with health in cities like Boston, Massachusetts is that they are multiple enterprising provides health recording services. And most of them have different data handling and manipulation procedures. Hence, changing doctors becomes a bigger issue as the new doctor will have to take all data from the previous recording service and translate it according to his recording service. The process becomes clumsy, wastes precious time of medical professionals and any small error here can lead to disastrous consequences.
However, the Massachusetts Institute of Technology is working on a blockchain technology-enabled system in which data entered by medical professionals will stay on the servers of individual service providers, but an anonymous link to them will be posted on a blockchain. Next, medical professionals and patients will be given a customized app which can handle all sorts of data. Now, what happens is that any medical professional can access a patient’s medical history from the blockchain without having to worry about any kind of clumsiness.
#2 Voting
Follow My Vote was launched around a few years back to provide a digital and seamless experience to voters. It has a product by which people can download the voting booth on their computers and verify themselves. Then, they can cast their vote as they wish. The votes are stored on a blockchain so that they cannot be tampered with.
After the results are declared, another feature of Follow My Vote comes to light. People can audit their voting booths to check if all votes were counted properly. They can also check if the software has correctly recorded his/her votes.
Not only corporate giants, even countries have put blockchain in their technology plans. There are specific reasons why blockchain has been gaining so much momentum and traction in recent years.
#1 No intermediary required
Blockchain eliminates the need for a trusted third party altogether. Hence, the trust in the system is maintained by the users of the system themselves.
#2 Transaction costs
The transaction costs are very low for transfers using blockchain. This is because there is no third party required. Hence, the only cost is in the form of infrastructure required to maintain trust in the system.
#3 All electronic
Blockchain can be applied in the remotest corners of the world. Since blockchain is nothing but data and data can be easily transferred anywhere, it is like a giant system on wheels.
To conclude, there are indeed numerous advantages of blockchain technology. Probably, that is why it has found so many takers for itself. Every day, blockchain seems to enter a new domain and every day, the belief that it can destroy entire industries only grows stronger. In the coming years, we can only expect a disproportionate amount of growth in the industries using blockchain to their advantage.
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