Blockchain is not only about cryptocurrency

For the last few years cryptocurrency, Bitcoin, in particular, was the worldwide trend that introduced the concept of blockchain to average users. The popularity of Bitcoin and Ethereum have made the term „blockchain” almost synonymous with “cryptocurrency”. However, the new technology has more applications outside the Fintech.

First of all, what exactly is blockchain?

Usually, databases are centralized and store all the information on the main computer (server). While the data can be modified by users (if they have the authorization), the viewer will see only the latest version of the stored information.

The blockchain, on the other hand, is an open digital ledger of records that are stored in chronological order. Every block of data has its own hash, unique identifying code, and cannot be modified. It prevents the information from being manipulated. If users want to change the record somehow they have to create a new block with the timestamp that signifies the order in the ledger. That makes the blockchain very hard, even impossible to hack because the hacker would need to break into every consecutive block to change the transaction data and the block’s hash which would take an immense amount of time and computing power.

The biggest advantage of blockchain is decentralization. Computers in the network (called nodes) depending on their role can store a copy of data's fragments or its entirety. It means that the network with a thousand members could possibly have a thousand duplicates of every block. Every node has its own private key that authorizes it to create new blocks. Before the record can be added to the ledger other computers must verify its content and the private key of the owner to make sure that the transaction is legit. If half of the members approve, the block then is included in the chain.

The acceptance process prevents users from adding false information and such that can be harmful to the blockchain. It also adds another layer of security to the stored data.

What applications blockchain can have?

Finance industry

The most famous case of blockchain use is a cryptocurrency, specifically bitcoin. Because of its security, blockchain is perfect for financial transactions and can be successfully used not only for creating cryptocurrencies but also transferring money without any fees. Most banks nowadays have their own systems to process transactions that allow their customers to send and receive money in a matter of minutes. However, when it comes to transfers between different banks it can take days, even longer when banks are in two different countries and accounts are not in the same currencies.

The implementation of blockchain helps banks to shorten the time of transfer drastically because to execute the transaction the chain only has to create a new block and add it to the ledger no matter the details like the number of send funds, its currency and time of the day. Also, time-consuming transfers have higher chances of being hacked or changed due to an error that would never occur with the use of blockchain. 

Besides that blockchain allows saving a lot of money both for banks and their customers by cutting fees and time of transfers’ processing. It is estimated that blockchain technologies can help reduce infrastructural costs by up to $20 billion a year.

Smart contracts

The smart contract is a blockchain protocol that facilitates, confirms and enforces the execution of a contract. It allows removing the need for third parties to participate in the settlement that can have their interest in the contract terms. Due to the self-execution nature of smart contacts parties can complete their part without any delays or errors.

Smart contracts provide a high level of security that cannot be ensured by other forms of agreements. The parties’ data is encrypted, although the details of the contract itself are available for all the network users.

Smart contracts can be used in various industries such as healthcare, music industry and even government. Blockchain allows hospitals to work more efficiently with insurance companies and transfer patients’ information, like surgery receipts and drug prescriptions much quicker and in a more convenient way.

In the music industry blockchain help to solve the problems with ownership. Thanks to smart contracts it can be documented precisely who holds the rights to specific pieces that allow artists to receive adequate payment accordingly to contract terms and the use of their music.

The idea of implementing blockchain in the voting system can help with eliminating the possible election fraud. Blockchain allows verifying individual users and their votes as well to make sure that the results are lawful. Due to security measures, the blocks are incredibly hard to modify and all the information about the users is checked and approved so the voters' choices cannot be changed and the outcome cannot be manipulated.

The use of blockchain, especially smart contracts, in government gives citizens the opportunity to gain access to useful information related to regulations and research done by the government.

Blockchain Identity

The blockchain protects the identity of its users by encrypting their information and protecting it from unfair use. Besides that, it allows storing data about major events in people’s life like birth, wedding, and death, in digital form instead of physical documents. As the world is moving towards complete digitization the need for online identity is becoming more apparent.

Users’ data in blockchain give them access to different rights (e.g. date of birth indicates the right to vote and marry, citizenship – to travel to different countries without the visa). The user’s information can be clustered into a form of digital ID, that can be used instead of numerous passwords and other forms of authentication. It will not only make it easier for users to navigate their accounts but also help to reduce the number of fake ones.

Conclusion

The blockchain has a lot of applications and it is only a matter of time when it will be used more widely. The blockchain provides a high level of security of records that is a huge advantage for industries that are handling very sensitive personal information of their customers and users. However, the blockchain depends on the primal information being truthful and nodes’ ethical standards to avoid the instances where false data would be recognized by the majority of computers as authentic.