The blockchain technology took the world by storm, courtesy the bitcoins and cryptocurrencies. As per Gartner, the current combined value of cryptocurrencies in circulation is approximately $155 billion worldwide and the value is supposed to grow further. However, the biggest thing to come out of the cryptocurrency-craze isn’t the currency itself. It’s the underlying technology that powers it – blockchain. The blockchain technology has got multiple scopes in other industries. In this post, we will look into the blockchain technology beyond cryptocurrencies and financial services (payments).
Blockchain Technology Beyond Cryptocurrencies and Financial Services
As per the HashChain Technology, the cryptocurrencies have officially returned to a full-blown-frenzy. Everyone is trying to get a piece of the crypto-pie. Back in 2011, Bitcoins (the first cryptocurrency) traded for $1 each. Fast forward to 2018 – one Bitcoin is worth a whopping $16,000. The mind-blowing growth of the crypto-sector has minted its share of millionaires, even leading Forbes to publish the very first “Crypto-Rich List.”
The technology behind the bitcoin and other cryptocurrencies is the blockchain technology. The blockchain is the world’s leading software platform for digital assets. According to Don & Alex Tapscott (authors of Blockchain Technology, 2016), “the blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Blockchain in Layman’s Terms
The blockchain is a virtual (digital) public ledger, which records everything in a secure and transparent manner. The blockchain is the digital and decentralized ledger technology that records all transactions without the need for a financial intermediary like a bank.
The traditional financial institutions normally allow transactions in traditional currencies. But, the blockchain allows the free transfer of cryptocurrency through a decentralized environment. All the data is then held in an interlinked network of computers, owned and run by none other than the users themselves.
How does the Blockchain Technology work?
The blockchain technology is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data.
Blockchain can also be seen as the Internet of Money. The Internet makes it possible to freely distribute data online. Similarly, blockchain does the same thing for money. Read more about the blockchain technology and how does blockchain work.
5 Basic Principles of the Blockchain Technology
Here are five basic principles underlying the technology by HBR.
1. Distributed Database
The blockchain is basically a secured distributed database. It’s like a spreadsheet that is duplicated thousands of times across a network of computers. Then the network is designed to regularly update this spreadsheet.
The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.
2.Peer-to-Peer Communication (Transaction)
Communication occurs directly between peers instead of through a central node. The biggest advantage of blockchain is that the technology ensures the validity of a transaction by recording it not only on the main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.
3. Transparency with Pseudonymity
Every transaction and its associated value are visible to anyone with access to the system. Each node, or user, on a blockchain, has a unique 30-plus-character alphanumeric address that identifies it. Users can choose to remain anonymous or provide proof of their identity to others. Transactions occur between blockchain addresses.
4. Irreversibility of Records
Once a transaction is entered in the database and the accounts are updated, the records cannot be altered, because they’re linked to every transaction record that came before them (hence the term “chain”). Various computational algorithms and approaches are deployed to ensure that the recording on the database is permanent, chronologically ordered, and available to all others on the network.
5. Computational Logic
The digital nature of the ledger means that blockchain transactions can be tied to computational logic and in essence programmed. So users can set up algorithms and rules that automatically trigger transactions between nodes.
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Blockchain Beyond Bitcoins & Cryptocurrencies
The blockchain was originally created for the digital currency – Bitcoin. Blockchain created waves mostly due to the cryptocurrencies. In the language of cryptocurrency, a block is a record of new transactions (that could mean the location of cryptocurrency, or medical data, or even voting records). Once each block is completed it’s added to the chain, creating a chain of blocks: a blockchain.
However, there are many more cryptocurrencies (altcoins) in place now. Some of the other popular cryptocurrencies are Ethereum, Litecoin, Zcash, Ripple and many more. Know more about the popular cryptocurrencies.
Of course, blockchain is the key concept behind the cryptocurrencies. But, blockchain technology has got many more applications other than cryptocurrencies – see the infographic below.
Blockchain Beyond the Payments & Financial Services
Obviously, the financial services sector is one of the key areas where blockchain has got multiple applications. Blockchain can make the processes of asset management, insurance claims, and cross-border payments much easier, cheaper, more transparent, and more effective. But, the blockchain technology has the potential to upend the way every industry manages its information and data, not only financial services.
Below are the other major sectors for blockchain applications:
- Legal
- Supply Chain
- Government
- Energy
- Food & Agriculture
- Healthcare
- Accounting
- Smart Contracts
- Insurance
- Travel & Hospitality
- News & Media
- Education
- IoT
Advantages of Blockchain Technology for SMEs & Startups
Blockchain has the potential to revolutionize everything from voting to the stock trader. More importantly, the blockchain can be very useful for small and medium-sized businesses (SMEs) and startups. SMEs face high barriers to entry and low insulation from conditions that would barely bother the large enterprises and corporations. Blockchain can open up the currently privatized infrastructures underlying our financial and data systems.
With the blockchain’s ability to achieve remote, autonomous consensus among users, small ventures can launch products and transactional services to market quickly and inexpensively. SMEs and startups can get rid of the traditionally high costs of security, Know Your Customer (KYC) protocols, data storage and other overheads. Thus, it not only reduces costs but also allows businesses of all sizes to compete on a more level playing field. Learn more about the major advantages of blockchain technology and blockchain is here to stay.
Scopes for the Students and Young Researchers
In 2017, big technology players like Microsoft, IBM, Oracle, SAP made heavy investments in the blockchain space. There was a seismic jump in ICOs in 2017, mostly driven by the cryptocurrency bubble. At present, intense research is being carried out both in the academia and industry applying the Blockchain technology in multifarious applications. Hence, the blockchain technology is going to be a hot topic of research and commercialization.
Watch the following video that features Neha Narula, a PhD graduate in Computer Science from MIT. She is currently the Director of the Digital Currency Initiative at the MIT Media Lab.
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