Understanding Blockchain Technology and Potential Applications

Blockchain is without a doubt one of the most ingenious and disruptive technologies of the 21st century !

The technology, which was introduced by Satoshi Nakamoto in 2009, has revolutionized mainstream industries in a big way. The initial objective of blockchain technology (Bitcoin) was to streamline to the financial industry by eliminating middlemen and decentralizing the entire banking system. To achieve that, Satoshi Nakamoto introduced a peer-to-peer network that allowed users would send money without centralized control.

Today, blockchain technology has advanced incredibly and continued to revolutionize mainstream industries. Although it was initially meant for financial industry, the technology is being applied in almost every sector including legal, communication, science, health, and business amongst others. But what is blockchain technology?

What Is Blockchain Technology and How It Works?

From my observation, people are still finding it difficult to define blockchain technology. Some still confuse it with Bitcoin which is not the case. The only relation that two have is that Bitcoin was the first blockchain network. To date, we have hundreds of more advanced blockchain networks such as Ethereum, Hyperledger, etc.

Blockchain technology can simply be defined as a decentralized public ledger that is open to anyone connected to the network worldwide. The digital ledger is incorruptible and immutable and runs on a distributed network which can be programmed to transact anything of value including data, money, etc. The main objective of the technology is to eliminate middlemen by supporting peer-to-peer system which is secure, faster, transparent and cheap.

How it Works

To solve the issue of middlemen, the verification of transactions is done by thousands of computers/anonymous nodes across the world all secured by complex cryptography.

Whenever a transaction is initiated, the request is broadcasted across the blockchain network, and the nodes run a sophisticated algorithm to determine its validity. If the request/transaction is validated, it is added to the transaction record (block) and linked to the previous transactions.

It is from this chain of blocks that the term blockchain is coined from. This is how the technology works. 

Check out the illustration below from Market Morgul.

Potential Applications/Usage of Blockchain

Blockchain technology had advanced immensely since when 2009 when Bitcoin network was launched. Over the year, more blockchain based networks have come with the aim of decentralizing most critical mainstream. We can see that from the current influx of ICOs in the market.

Some of the biggest benefits of attracting investors to the technology include increased improved security, increased speed of transaction/high tops and transparency.

So far, it remains one of the highly potent technologies. I have rounded up some of the potential applications of blockchain technology. Check out the following:

Legal Tech Industry

The introduction of the smart contract by the blockchain technology is changing the way legal industry. Smart contract will soon eliminate the need for lawyers while signing deals. This will be a drastic shift in the legal industry. However, it will make things easier, cheap and secure for customers seeking legal services. You may not need a lawyer to seal deals since smart contracts are taking over the legal industry. That’s how potent blockchain technology is.

 Financial Industry

Satoshi Nakamoto vision was to streamline the financial industry. He/they believed that the centralized system was promoting the pilfering of unnecessary transaction fees. The speed of transactions, especially across the borders was inefficient and could take days before a transaction is successful. With the introduction of a decentralized network that enables p2p transaction, the cost of transactions is reduced, and the banks can serve more customers than ever before. Some of the major banks have already adopted the technology.

SMEs

As I mentioned, the main object of the blockchain technology was to improve the financial sector with the Small business enterprises (SMEs) in mind. SMEs are also going to benefit immensely. With the decentralized of the financial sector, SMEs can access cash on a short time basis to address the endemic problem of cash flow. With this technology, small business will be able to cloud source loans at very low-interest rates. SMEs will also be able to sell their trade receivables assets to improve their cash flow. With the banks financing only 7% of account receivables, then the cloud community has about 93% to finance, and that will enhance the growth of SMEs globally.

Supply Chain Management

The supply chain is another complex area that is benefiting immensely from the blockchain technology. In the current state, it is very difficult to monitor the entire supply chain due to the complex documentation of items from the manufacturing, shipping until they reach the end consumer. However, blockchain is making things easier for this industry. With this technology, it is possible to hold complete provenance details of each stage. All the information is stored in the digital ledger where interested parties access to it unaltered. That’s how transparency in the supply chain management is being achieved.

Healthcare Sector

The health sector will be another sector where the application of blockchain technology will be a game changer. The technology is expected to enhance the recordkeeping and sharing which has been a problem for a long time. Currently, sector uses the electronic record system which is a centralized system that impedes efficient data sharing or data interoperability. With the application of blockchain in the healthcare sector, data will be available in a decentralized cloud where authorized persons will freely access it from a standard ledger format.

These are just a few potential applications of blockchain technology. Other industries that are expected to benefit immensely from the technology includes real estate, science research, food safety, and pharmaceuticals, and the educations sector.