Beginner’s guide to understanding blockchain technologybit2main
Blockchain is one of the fastest adopting technologies globally for its interesting features, such as decentralization, transparency, and immutability. But what is blockchain all about? Why is there so much demand for it across startups, banks, and governments? Here are all your answers.
What is a blockchain?
In simple terms, a blockchain is a digital ledger or a tracking sheet that stores the list of transactions across multiple computers in a network. Now, you might ask how it is different from the bank’s ledger or track sheet? A bank’s ledger is a centralized ledger where the bank keeps track of all your transactions, account balances, etc. banks can use this data for several different purposes to suit their business needs. However, the ledger in a blockchain is a decentralized ledger, meaning nobody has control over this data.
How did blockchain come into the picture?
Even though the concept of blockchain was first introduced as a research project in 1991, it became famous only after Satoshi Nakamoto published the Bitcoin ‘whitepaper’ in 2008. And the creation of cryptocurrencies, decentralized finance (DeFi), and smart contracts has skyrocketed as a fundamental pillar of blockchain technology.
How does blockchain work?
Simply a blockchain is a set of blocks that keeps adding to the chain whenever a new request is initiated. The block basically consists of three elements: the data, the address of the previous block, also known as ‘hash’, and the current block hash.
Why do we need blockchain?
Here are some of the reasons why blockchain technology has become famous for
All the transactions made on the blockchain are public because it is an open-source ledger. Anyone can see and verify the authenticity of the transactions to ensure that the blockchain’s integrity is maintained.
Cryptocurrencies based on blockchain technology are not under the control of any government or financial organization. This is meant to power the individual giving authority to the individual making transactions.
The transactions performed on the blockchain are recorded and cannot be changed. As mentioned earlier, anyone can verify the data at any time. This strengthens the security of online transactions. Any change in the blockchain is immediately reflected on each node. In case of any error, the following blocks are made invalid.
Cryptocurrencies using blockchain can be sent across the globe more quickly and cheaply, unlike the traditional banking systems. Blockchain is active round the clock processing the transactions way more efficiently.
Since blockchain does not allow any third party to approve transactions automatically, the processing costs also come down.
Some of the prominent use cases of blockchain across industries include:
Blockchain can streamline trade finance deals across borders enabling enterprises to transact easily.
Using blockchain, smart contracts can allow customers and insurers to manage claims transparently and securely.
- Supply Chain Management
With its immutable nature, blockchain is well suited to perform tasks such as real-time tracking of goods as they move and change hands throughout the supply chain.
The patients’ vital information, such as age, gender, and medical history, can be stored on a shared blockchain that could be accessed by doctors worldwide without undue privacy concerns, providing better and immediate treatment.
In real estate, blockchain can help in quickly verifying the finances of the property and can help in reducing fraud through encryption. It can provide better transparency throughout the selling and buying process.
Most governments across India and worldwide have already started to apply blockchain technology in administrative processes such as project management, identity management, taxation and voting.
Real-life use cases of blockchain
In 2016, the smart Dubai office introduced a blockchain strategy where entrepreneurs and developers will be able to connect with investors and giant companies. The main goal is to implement a blockchain-based system that can make Dubai ‘the happiest city in the world’. Since then Dubai has been thriving to make best use of blockchain technology.
- Government of Maharashtra
In March of this year, the state government of Maharashtra started using the Polygon blockchain to issue verifiable caste certificates to its citizens living in the Bhamragad and Etapalli villages of Gadchiroli district. Other state governments are looking toward adopting blockchain technology to make the administration process easier.
- Blockchain for Humanitarian Aid
In early 2017, the United Nations world food program started a humanitarian aid mission. The project intends to use blockchain technology and send beneficiaries money, food, and all types of transactions registered on a blockchain to ensure greater transparency and security.
Blockchain is becoming more mainstream these days. It has facilitated various companies in providing efficient security measures and improving the infrastructure to stay alert against cyber attacks. With increasing awareness, more and more industries and governments are likely to adopt this technology in the coming years.
Views expressed above are the author’s own.
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