Last Updated on September 2, 2022 by Daniel Cardoba
Blockchain technology is increasingly being heralded by investors and businesses alike as a potential game-changer that could transform almost every aspect of our lives.
From financial services to healthcare and retail, blockchain is already making an impact on these industries in some way or another.
With this in mind, we’ve put together a quick guide to help you understand exactly what blockchain is, and how you can benefit from using it to improve your business.
What Exactly Is Blockchain?
A blockchain is essentially a distributed ledger – essentially, it’s a digital record that has been shared across multiple computers so that nobody can alter its contents without all parties agreeing to do so. It’s also encrypted, which means that no one else can see what’s going on behind the scenes.
This makes blockchains useful because they are highly secure, and anyone can access them (or ‘mine’ them) for free. This is why many have described blockchain as a cryptocurrency, as it uses the same rules and principles as cryptocurrencies like Bitcoin.
However, while blockchains may be used to store data and create value, they can also be used to verify transactions between two parties. For example, if you wanted to sell something online, but you couldn’t trust the buyer to pay you back, then you would use a blockchain to ensure payment was made.
How Does Blockchain Work?
To understand how a blockchain works, think of it as a giant spreadsheet. Each entry into the spreadsheet represents a transaction, such as a transfer of money or goods. In order for these transactions to take place, both parties must agree to enter their details. Once entered, the entries cannot be altered or deleted.
The beauty of a blockchain is that each time someone adds a new transaction onto the spreadsheet, it gets automatically added to the chain, thus creating an ever-growing list of transactions. You need to reach a consensus with the majority if you want to edit the previous entries. That’s what democracy is supposed to be, unlike centralized systems where only the top of the top can edit history
It should come as no surprise that the security of blockchains relies heavily on cryptography. Cryptography involves encryption techniques like hashing and asymmetric key pairings, which are used to keep all of the information secure.
When you use a blockchain to make a transaction, the person who receives the payment will need to verify that the sender is legitimate. This process is done through the use of cryptographic signatures and public/private encryption keys.
The recipient’s wallet will generate a unique signature based on the transaction details provided. The receiver then sends the signature to the sender to confirm that the transaction is genuine. The sender can then verify the signature to confirm the legitimacy of the transaction.
In addition to verifying transactions, blockchains are also used for smart contracts, which involve process automations. For instance, when a contract is created, it can be coded to trigger certain events after it is completed.
If I were to buy a house, I might code my contract to trigger a monthly rental payment once the house is mine. As long as both parties sign off on the terms of the contract, the contract will automatically execute.
This makes blockchain perfect for tracking complex agreements between companies or individuals. That being said, so far most smart contracts have only been used on DeFi applications.
Why Blockchain Is Important For Finance
As explained above, blockchains are useful in several areas of modern life. One area where they are particularly effective is in finance, as they provide a way to track transactions and ensure that no party can cheat or deceive another.
For example, let’s say you bought a car using a credit card. You would usually have to wait until the end of the month to pay the bill. However, using a blockchain, you could write down a receipt on your smartphone at the time of purchase that automatically updates the balance on your credit card.
This feature would be especially useful for consumers who buy things online or even offline, but don’t have enough cash on hand to cover the cost. With a blockchain, there would be no risk of distrust, as both parties would have to approve any changes to the transaction before it took place.
Another reason why blockchains are important for finance is that they allow us to make payments quickly and efficiently. For example, when you go shopping online, you often find yourself waiting for shipping confirmation emails that don’t arrive until a week later.
Using a blockchain, however, you can send your payment request immediately and receive updates as soon as the item ships. This would save you a lot of time and hassle, and would likely speed up the process of completing the transaction.
Finally, thanks to blockchains, businesses are able to track their inventory better than ever before. They can easily track inventory levels, order histories, and other vital statistics, all without having to rely on third-party systems.
How Blockchain Will Reshape The World
Blockchains aren’t just useful in finance. They can be applied in a wide range of industries. Below are a few examples:
Supply chains: Supply chains today are plagued by problems such as theft and loss due to counterfeit products, theft during transport, and delays in delivery. By implementing a blockchain, companies can ensure that everything from raw materials to finished goods are tracked throughout the supply chain and transactions are verified instantly.
Insurance: Insurance companies currently use third-party verification methods to determine claims and payment amounts. Using a blockchain, insurers can verify insurance claims and payments directly, saving time and money on paperwork.
Healthcare: Healthcare providers can use a blockchain to store patient records securely and share information between different hospitals. Patients can access their records anytime, anywhere, as long as they have internet access.
Financial services: Many financial institutions are trying to become more customer-centered, but they still lack transparency. A blockchain can bring greater transparency and accountability to financial dealings, allowing customers to know exactly what’s happening at the click of a button.
Smart cities: Smart cities have been hailed as one of the most important trends in the coming decades. Governments around the world are eager to implement solutions that will enhance the quality of life for citizens. A blockchain offers numerous possibilities for smart city initiatives, including providing residents with real-time information about crime and emergency situations.
These are just four examples of the types of applications blockchain can have in various sectors of society. There are countless others, and we expect to see widespread use over the coming years.
Blockchain isn’t just for the future – it’s already helping businesses in the present
Crowdfunding: Crowdfunding platforms often rely on third-party validation to protect themselves against fraudulent activity. Thanks to blockchain, crowdfunding sites can verify that the funds raised actually reach the project’s creators.
Smart contracts allow everybody to feel safe and transparent. Many crypto-related projects were able to raise funds thanks to smart contract usage.
Real estate: Real estate is notoriously difficult to manage, as buyers, sellers, and agents must coordinate activities to complete a sale. Blockchain can streamline the entire process, eliminating the need for intermediaries.
Voting: Voting technology is outdated, inefficient, and costly. Blockchain voting is faster, cheaper, and more accurate than traditional methods.
How To Get Started With Blockchain
There are plenty of reasons why you should consider using blockchain technology in your own business. You can read articles explaining how blockchain works and explore potential applications. Plenty of use cases out there, as explained by fool.com.
Alternatively, if you’re looking for more ways to integrate blockchain into your business, just wait for our future articles where we will explore how you can use blockchain for various use cases.