Blockchain is a technology for the ages. The wildly popular Bitcoin cryptocurrency and other currencies are an example of blockchain.
In this article, we shall give you a detailed but simple understanding of blockchain technology and it’s potential and applications.
What is blockchain?…How does blockchain work?
Blockchain technology is not very simple to understand when you go into the full specifics, however the primary idea is not very hard to follow.
Blockchain is primarily a database of information that is validated by a decentralised and wider community rather than some central authority such as banks.
In simple words, it is a ledger where data is distributed over a wide network of computers and so is safe from manipulation because the entire network cannot be hacked or manipulated easily.
Blockchain is a number of records which is maintained and overseen by a crowd rather than one single entity like banks or a government.
Blockchain is completely digital as a physical record could never be stored by thousands of peers. Therefore blockchain makes use of computers and cyber space.
In blockchain, the transactions are divided into blocks. Every “block” is a copy of records of transactions and the “chain” part links all records together with a hash function
(You can read more about hash functions here- https://en.m.wikipedia.org/wiki/Hash_function)
When a record is created, it is confirmed by a decentralised and widespread group of interconnected computers and they are joined or paired with the preceding entry in the chain. This creates the chain of “blocks” or “blockchain”.
The entire “blockchain” is then filed and is retained on the large network of computers.
The advantage of this is that no single person has full control over the history of the transaction.
This is very important and is one of the major pros of blockchain because it confirms everything that has already taken place in the chain before and it also means that no body can change or fudge the ledger. Thus there is no scope for manipulation of the blockchain public ledger and it makes the technology incredibly safe.
A centralised database of information might be tampered with but the structure of blockchain is such that it naturally confers a built in layer of information protection by virtue of the ledger being decentralised.
To change the value in a ledger, a person would have to hack the entire network of computers and this is very difficult.
We have till now needed some central authority (like Visa or MasterCard or a government) to complete transactions and guarantee our contracts but now blockchain has made it so that our peers can do this in a fully automated and safe manner.
What are the Applications of Blockchain?
examples of blockchain applications
When we think of the applications of blockchain, our mind immediately goes to Bitcoin and other cryptocurrencies like ethereum but they are only a small part of the immense applications blockchain has.
Blockchain has immense potential in serveral fields like politics where it can ensure fair elections and in health care where it helps maintain medical records or even news and video games.
We will talk about five of the most exciting blockchain applications here
First, let us look at Bitcoin and other cryptocurrencies
Although cryptocurrencies all use blockchain, they do it in different ways.
In Bitcoin, every ten minutes a new block is created in the blockchain. This block serves to verify and record new exchanges and transactions that have happened.
For this to take place, miners use heavy duty computer hardware to make the proof of work which is a calculation which makes a number and this number verifies the new block and all its transactions.
Although technically the transaction is near instantaneous, a number of such confirmations must be received before it can be thought to be complete.
This has led to some problems with Bitcoin as the 10 minute period for creating a block is relatively difficult and it may take a long time to confirm all of the transactions and backlogs may occur.
Several other coins like litecoin and ethereum attempt to solve this issue and rescue transaction times.
However faster speed comes with a greater chance for error.
In situations where more than one party manages and trades assets, blockchain can reduce errors by encryption of the records. The ledger also cancels out the need for intermediaries.
This is in comparison to traditional trade processes where parties have a high risk of error especially in international transactions.
Insurance processing can often be a hard procedure which fills you with frustration. Insurance processors have to go through claims thoroughly and weed out fraudulent ones and also analyse scattered data sources or abandoned policies for claimants and process all these manually.
The margin of error here is quite big, Blockchain is the perfect system for zero risk management and transparency. The encryption offered by it allows insurers to fully capture the information about the ownership of assets to be insured.
Cross border payments
We might have had experience with the global payments sector which is quite costly, gives rise to money laundering and is error ridden. Transferring money might take days if not more time.
Abra, Bitspark and Align Commerce are providing blockchain powered secure and encrypted remittance services.
Registration of both intangible and tangible property like cars, houses, intellectual property or shares might have smart tech embedded in them. These can be stored in the ledger system of blockchain. Smart keys exist which would allow only the registered party to enter the premises.
Thus we see that blockchain has immense potential to change the world and we won’t have to wait long for several more applications to come up.