The blockchain has been known for a long time, but 2020 has shown its especially rapid development. It was the very year when various businesses began to use blockchain-based applications more willingly and achieved good results. And, as judged from the latest forecasts, the trend is expected to continue for the coming decade.
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Such an onrush of blockchain technology was caused, at least in part, by the pandemic. Forced to social distance, we’re actively developing new digital solutions to make our online existence as comfortable as possible.
But why is blockchain so interesting? The point is, it offers a unique way of storing and transferring confidential information and allows managing things without intermediaries. So there is an excellent opportunity to make your business more profitable and productive. And it’s not just about cryptocurrencies! Blockchain permeates various areas, including the economy, financial market, corporate culture, and so on.
Of course, the blockchain took some time to win our trust. It didn’t happen right away. At first, we had our concerns and doubts. Fortunately, everything has changed, and today the largest companies around the world are using this technology to improve their processes. Among them are such bright names as Amazon, Microsoft, Walmart, PayPal, DISH Network, and other leaders of different markets. Their example proves that an innovative business built on blockchain technology has all the chances of faster success.
Interested? Then let’s discuss the topic at length. We’ll describe top blockchain benefits and its best usage areas. You’re going to learn what you need to know when implementing blockchain-based systems; as a result, you’ll be able to create your strategy with greater insight.
And of course, we’re always happy to help you and answer your questions if you have any. Just contact us when you feel like it.
What is Blockchain?
The world first heard about the blockchain in 2007, when a new digital signature method was announced. Its essence was in reducing the risk of fraud and theft and speeding up transactions.
Initially, the blockchain was associated only with bitcoins, and no one assumed any other technology use. But almost ten years later, in 2016, people started talking about the Internet of Value. The concept was suggested by Don Tapscott, founder of the Blockchain Research Institute, during a TED Talk interview. In his opinion, most physical assets can be turned into digital ones and managed in the same way as we do with Bitcoin (using the blockchain, of course).
In a sense, he turned out to be a prophet… and his predictions keep coming true. However, we guess it’s better to discuss the future of blockchain technology a bit later. We’d like to start simple (with some basics, so to say).
What is the Blockchain concept based on?
Blockchain has a speaking name, which explains the whole concept in itself. In simple terms, we’re dealing with a chain of blocks built according to certain rules. It is a special and highly secure system, which automatically records and verifies incoming digital transactions.
Imagine a series of computers connected to a single network. Each of them is protected separately, and each has blockchain software installed. So every member of the network (the owner of the computer) is somehow responsible for the safe and reliable system operation (at least, to some extent). These network participants are equal, and they willingly interact with each other to achieve an excellent result (and they do achieve it).
Let’s give a couple of definitions to make things clearer (as to the benefits of blockchain technology for business, we’ll discuss them later):
- Decentralization. We’re terribly tired of intermediaries in various business activities. And how about you? Probably you, too, are tired of them. In the end, any intermediary means an additional fee, which is always an extra waste of money that could be spent in a smarter way. Happily, in the case of blockchain, there are no intermediaries, just as there is no centralized system management (network participants are equal, as you remember).
- Intermediaries are banks involved in monetary transactions, real estate agents who help in buying and selling property, and so on. Do you get the idea? If you use blockchain, you won’t have to pay them.
- Blocks and nodes. Information is stored in interconnected blocks, and they make up a network (chain). And these blocks, being unchangeable and non-removable, are located in nodes providing timely data updates.
- If a new node is added to the blockchain network, it automatically downloads copies of all currently existing blocks.
- Algorithms and rules. At the beginning of the section, we mentioned the rules behind blockchain technology. They explain how a certain blockchain network can be used (some call them smart contracts). These rules (smart contracts) are set by the participants themselves, and blockchain algorithms enforce and guarantee their proper implementation (since algorithms are digital, they treat network members objectively and don’t have favorites, they cannot be bribed or deceived).
Is it only about Bitcoin?
When we hear about blockchain, the first thing coming to our mind is bitcoins. Or, at the very least, any other cryptocurrency.
“But my company doesn’t work with cryptocurrency!” – you may object to us. – “Does it mean I cannot enjoy the benefits of blockchain?”
Indeed, the blockchain was originally focused on bitcoins… however, the situation has changed over time. And today any type of physical asset can be digitized, including art, precious metals, and property. Moreover, we’re even converting contracts, personal customer data, any confidential information into a manageable digital form! All we have to do is use the so-called “tokenization” procedure.
Simply stated, we turn the said assets into tokens and put them on the blockchain network. When it’s done, we’re free to manage them as needed (by analogy with cryptocurrency) and conduct various kinds of digital transactions.
Perhaps you’re interested in bitcoin application development? Then our tips might be useful to you (follow the link).
What’s so special about blockchain technology?
Information isn’t stored on one common server, it is distributed among networked computers. And the whole registry is being updated every time a new block of data appears. This explains why the blockchain approach is considered so reliable and secure: hacking all computers at once is an extremely difficult, close to impossible task.
Besides, the blocks are additionally protected with innovative encryption (each of them is protected separately). And only the user who owns the secret private key from a particular record has access to a certain block.
How Does It Work?
We’re going to look at how blockchain works using a cryptocurrency transaction as an example. But the same algorithm is at the heart of any operation related to blockchain tech. A cryptocurrency-related instance is just clearer (and easier to grasp).
- The transaction enters the blockchain network.
- Let’s say you want to send some money to your friend. But why pay a commission when you may use blockchain? And that’s exactly what you’re doing by requesting a transaction.
- The transaction is transformed into a new block.
- Confirmed by special algorithms, the transaction is converted into a new block, which becomes the end of the general chain as its next link.
- The block is checked by the system participants.
- All participants receive a notification (relatively speaking) about the appearance of a new block in need of validation. It is entered into the general database.
- Of course, everything happens automatically, and users don’t check and validate blocks by hand (it would be funny, wouldn’t it?). The task is being performed by digital algorithms (which is another example of the top blockchain benefits).
- The block is included in the chain.
- Now, when the validation is successful, the block gets a unique signature, which characterizes its place among other links in the chain. And while this information is of general nature and open to every network participant, confidential block data is available only to those who work with the transaction (namely, you and your friend, a potential recipient of the money transfer).
- The transaction is finally completed.
- That’s it, your friend received a unique key with access to the content of the block, which is the money sent to him, and none of you paid the commission. Sounds great, what do you think?
Of course, the above principle of operation gives only an approximate and rather rough understanding of the stages of a blockchain transaction. But we hope you got the idea. It’s more than enough to start using blockchain technology.
Top Blockchain Benefits
- High security. The blockchain solution provides enhanced transaction security. First, any transaction requires the consent of all network participants. Secondly, once completed (and verified), a transaction remains unchangeable, which is also a good thing.
- Another point related to security is the ability to ensure the best data confidentiality. We’ve already said how difficult it is to hack a blockchain, so the information protection problem seems to be solved (or rather, nearly solved, since there are no ideal systems yet).
- Good transaction speed. Timing is not as important as security, but it also matters in relation to business. Fortunately, blockchain-based transactions usually take no more than 2-3 minutes.
- Creation of conditions for confidential relations. Trust is the basis of many things, especially when it comes to business (if you don’t trust your partner, you won’t agree with him about anything). And given that the benefits of blockchain include fewer chances of being deceived, trust rises. So you can be confident in your partner and the terms of the deal being satisfied.
- No intermediaries. Making a deal through intermediaries is tedious, right? But we have to face them all the time: when buying and selling real estate, when conducting financial transactions, and so on (the list is endless). Surely, sometimes intermediaries cannot be avoided, but if there is a chance to do without them, why not? Blockchain offers such an opportunity, and it would be foolish not to use it.
- Reduced costs. Whatever the company’s budget, the possibility to save some money is always an advantage. And since the blockchain-based applications work without intermediaries (as we said just above), commission costs are significantly reduced.
- Transparency of processes. When discussing the benefits of blockchain technology for business, we shouldn’t forget one more thing: thanks to it, we have a chance to easily trace the history of each transaction of interest.
- Multi-purpose use. As you’ll see further in our article, blockchain is able to improve a wide variety of areas (if used correctly).
- Real-time sync. There is no delay in updating the data, the information is being synchronized instantly for all network participants.
We’ve listed top blockchain benefits, and they’re truly impressive. But any system has not only pros but also cons. How about them?
- The difficulty of scalability. So far, the blockchain network is unable to scale as easily as other systems (say, those that underlie traditional payment solutions like Visa).
- The danger of any mistakes. Oddly enough, some benefits of blockchain could turn into disadvantages under certain conditions. For example, the unchangeability of blockchain records seems like a good thing… but what if the transaction is wrong, done by mistake (which also happens a lot)? You won’t be able to cancel the operation.
- ‘51%’ concept. As you can imagine, the blockchain network is being supported by some processing power and computational capability. But if more than half of this so-called power (namely 51% and more) falls to just one device, the integrity of the system is likely to be violated.
However, the disadvantages described are temporary. The future of blockchain technology looks bright, and these problems will soon be resolved (no doubt about that!).
They say all sorts of crazy things, tales, and fables about blockchain… let’s discuss the main myths and legends and try to separate the wheat from the chaff.
- Do you think the blockchain network is one and only, and it is available to everyone? No, of course not. Actually, there are different types of blockchain networks. Some of them are public, like bitcoin ones (they are available to anyone who wants to join them). Others are private, usually owned by a single organization. And sometimes a blockchain network is created (and then administered) by several companies at once, and it’s up to them to establish certain access rights.
- Are you sure your company has nothing to do with blockchain? Well, hopefully, our article will convince you otherwise (especially as we’ve already talked about the benefits of blockchain technology for business).
- Do you think blockchain is closely related to fraud? Not at all, it’s just that scammers exist in any market, and blockchain is, alas, no exception.
- Are you hoping the blockchain is 100% secure? We’d like to confirm this statement, but we have to disappoint you. We want to believe one day there will be a system with a guarantee of perfect, flawless protection against any type of cyber attack, but so far no such algorithms have been developed.
How to Apply Blockchain Technology To Your Business
- Alternative payment methods. One of the most obvious ways to use blockchain is to make various payments (including salary ones) with cryptocurrency (and without unnecessary fees).
- Marketing campaigns management. Marketing is crucial when it comes to business. Without marketing, you won’t be able to promote your company properly. And if you want to make your marketing activities more effective, use blockchain algorithms. They’ll constantly monitor consumer behavior and provide you with the resulting data, on the basis of which your marketers will build their strategies.
- Trust-based business dealings. When describing the key benefits of blockchain technology for business, we mentioned the increased trust between partners. But the point isn’t that you start trusting your partner all of a sudden… you just realize that he (or she) has no real chance of violating the deal provisions (Bitcoin algorithms won’t allow this to happen). The self-executing smart contracts we discussed earlier guarantee the parties will strictly adhere to the terms of the agreement.
- Copyright protection. It’s very frustrating when you come up with some unique ideas or release an original product, and later find it copied (simply put, your intellectual rights have been violated). How to prevent such a sad outcome? The best (and innovative) way is with the help of blockchain, which makes any creative product inaccessible for copying by third parties (provided you’ve tokenized product information, turned it into its digital analog). Since blockchain records are immutable, one can always trace who the author really was, where this is coming from, so to speak.
- Effective management of employee information. Did you know that using blockchain could simplify the work of your HR department? Every company has one, right? So, blockchain tech solutions mean the following:
- access to complete information on each employee with the ability to trace it;
- simplified recruitment process (again, thanks to access to information about the candidate);
- the best protection of personal data of personnel.
- Personal identification, or, more simply, the creation of your digital profile. It can be used in a wide variety of areas, ranging from healthcare (focusing on health data) to the financial sector (where you have to verify your identity every now and then).
- Voting. Sometimes a company needs to implement a voting system in order to get an answer to a certain question or find out the opinion of customers about a particular service or product. What is blockchain doing in such a case, you may ask? What is its purpose? It’s quite simple: the technology ensures the reliability of the results of electronic voting (since it is impossible to falsify or change the elements of the blockchain).
Do you often deal with cryptocurrency? We’ll gladly share our experience with you and tell you which crypto wallets are the leaders on the market today.
Blockchain Tech in Different Industries
Now let’s talk about in which industries the idea of implementing blockchain-based systems would be especially beneficial.
- Financial market. The financial industry covers a variety of areas: the securities market, stock exchange, banking services… This is the very area where blockchain systems will soon become a must-have. An increasing number of businessmen are happy to conduct various financial facilities without intermediaries represented by stock exchanges (in the case of stock trading) or banks (when it comes to transactions).
- The future of blockchain technology is closely related to all sorts of banking operations. The fact is, Blockchain provides transparency, security, and reliability of financial-type processes. Moreover, according to a study by Morgan Stanley, blockchain cut the costs of financial institutions in half (as it became known a few years ago, in 2017).
- Healthcare. The medical area desperately needs blockchain assistance too. Blockchain-based applications would simplify so many processes involved in managing patient health data. However, alas, there are two problems, which make it difficult to introduce the technology in question into the healthcare system. These are the following:
- medicine deals with a huge information flow, and the blockchain so far can only cope with small amounts of data (at least, relatively small). Developers are already looking for optimal ways to solve the problem, and one of them is to store not health data itself in network blocks, but only links to files with the necessary information (stored separately);
- It’s not yet entirely clear to what extent blockchain systems are compatible with various state laws, which indicate who and how has the right to use confidential medical information.