Initially, the creation of the blockchain was associated with the need to support Bitcoin. To solve the problem of double costs related to digital money, Satoshi Nakamoto created a stable ledger of transactions that combines data blocks with digital cryptography.
While this system works great for Bitcoin and other digital coins, many blockchain-based applications exist. Let’s discuss what is blockchain technology and its main areas of application.
The definition of blockchain
It appeared in 1991 as a method of storing and protecting digital data, and then for 30 years, there was an active blockchain evolution. It is a distributed database or registry that is shared between different elements of a computer network. Such a structure is resistant to hacks and changes. This technology allows users to communicate with each other directly without the intervention of intermediaries in the face of government agencies, financial institutions, and other organizations.
All records, called blocks, are successfully connected through cryptography tools. The peer-to-peer computer system checks each operation, timestamps and adds procedures to the registry.
Any transaction in this book is authorized with the owner’s digital signature, which confirms the legitimacy of the manipulation and protects it from illegal access. All data that is in the digital registry is securely protected.
In simple terms, a digital ledger resembles a standard Google spreadsheet suitable for sharing from different computers on a network, where transactions are recorded based on actual purchases. An interesting detail is that anyone can see the information, but there is no function to edit or delete it.
Key features of the blockchain
If we compare a decentralized network with a standard database, the key difference is the structuring and availability of information.
The blockchain contains programs called scripts that successfully perform tasks that people usually do manually in spreadsheets, such as entering and accessing insights and storing data safely. Blockchain is a distributed technology; multiple copies are stored on different devices, but they must all match for the structure to be valid.
The blockchain receives the transaction data and enters it into the block as a database cell containing the insights. As the block fills up, the data passes through encryption tools that generate a hexadecimal number, this process is also known as cryptographic hashing.
The system then adds the hash to the following header and encrypts it with the other data in the block. Thus, a series of blocks is created that are connected.
Miners generate new blocks in the process chain, which is called mining. In a blockchain, each block is given a unique number and hash, and it is linked to the last element in the chain, so mining is not an easy procedure, especially when it comes to large chains.
Miners use unique digital solutions to solve the complex mathematical problem of finding the nonce that forms the accepted hash.
The importance of blockchain
Although blockchain technology is primarily related to cryptocurrency exchange, its importance is much broader. Today, decentralization is completely changing the way people and organizations keep records and interact with each other. Consider the main reasons for using blockchain:
- The system simplifies access to capital: blockchain changes the role of financial institutions in the movement of funds. In real life, banking requirements are often out of reach for ordinary people who live in developing countries. Security in blockchain allows even people without ID to access financial services.
- Blockchain eliminates the need for intermediaries: no third party exists in the decentralized space. Each operation is entered into a distributed ledger, and there is no need to obtain approval from the governing authorities.
- Blockchain increases transparency: all stakeholders in the network are in control of transactions from their inception to completion, which increases transparency. It means no one can make changes and remain invisible. Blockchain provides a public display of transactions, making illegal manipulations difficult.
Blockchain is known for its contribution to transforming capital into digital tokens with real value. Digital art, valuable collectibles, real estate, long-aged alcohol, and other goods are sold as non-fungible tokens. Asset ownership can be divided into separate shares, while the tokens act as parts of the whole, making the investment available to all investors.
Use cases of blockchain technology in real life
Blockchain technology is used in many industries. According to a study by CBInsights, total spending on blockchain will exceed $16 billion in 2023, while the technology adoption rate is accelerating. Such a system allows firms to stay ahead of competitors. It is only natural that many companies are adopting blockchain platforms today because of the benefits they provide. Let’s look at which industries adding distributed ledger technology brings the most advantages:
- Remittances: the initial concept of blockchain is still widely used today. Money transfers using the potential of blockchain can be cheaper and faster than standard money transfer services. It is especially true for cross-border operations, which are often slow and expensive.
- Lending: advanced lenders use blockchain to manage secured loans through smart contracts based on the blockchain. They allow certain events to activate the payment for services, the full repayment of the amount of debt. As a result, loan processing is cheaper and faster, and lenders can offer the most favorable terms.
- Real estate: any real estate procedure involves the collection of a massive package of documents to verify financial data and ownership and transferring paper to new users. Using blockchain to record real estate transactions enables the implementation of modern and secure methods for verifying and transferring ownership. It speeds up transactions, reduces paperwork, and saves capital.
- Voting: the use of blockchain technologyensures that no one votes twice, that only voters who meet specific criteria can take part in the procedure, and the probability of vote forgery is zero.
Blockchain is increasingly affecting the cultural sphere, including music tracks and video files distributed over the Internet. The implementation of technology ensures creators get paid for their work. Since the blockchain makes it so that one file exists in one place, it can be used to fight piracy.
Several successful blockchain examples
Although bitcoin and cryptocurrencies were the first well-known applications of blockchain technology, this is not the only option today. Let’s analyze the most popular blockchain applications:
- B2Expand: This developer creates game content based on the Ethereum blockchain. His debut game, Beyond the Void, got into the Ubisoft startup project. The company became the first developer of digital products on the Steam system with a well-established crypto-economy.
- Warranteer is a blockchain application that provides consumers quick access to data about purchased products and allows them to receive service in case of a product breakdown.
- IBM Blockchain: understanding the status and condition of each product in a manufacturer’s supply chain from raw material quality to delivery terms. Such a logistics application guarantees transparency with a record of the owner and the current location of the lot; all data can be tracked in real-time.
- De Beers: the company mines and sells about 30% of all diamonds on the planet. The enterprise is implementing a blockchain application that will control each diamond from its extraction at the mine to delivery to the buyer. Such transparency in blockchain helps the industry and everyone who wants to ensure that diamonds are real.
Although the blockchain is most often used in the Bitcoin system, thousands of crypto coins are created based on this technology today. While it is still unknown whether Bitcoin will succeed in replacing standard payment methods, blockchain technology is constantly increasing, which can lead to significant changes in all industries.