The technological advancements happening in this generation is disrupting business models and transforming industries. Blockchain – the technology that enables the cryptocurrencies like Ethereum and bitcoin, is now pulling us into an era of openness and decentralization.
It utilizes the resources of a peer to peer network to ensure that there is the integrity of the value exchanged among millions of devices without going through a trusted – third party. Blockchain gives us unmatched capabilities for creating and trading value in society.
A blockchain is a record of transactions, just like the traditional ledger. It is the ledger of all the cryptocurrency transactions that have taken place over a period of time. These transactions could involve money, secure data or goods.
Blockchain technology lets you transfer digital currency via digital tokens on the digital ledger. As activities in this digital arena grow, the crypto economy will grow globally and this will further open up the potential for new revenue streams.
At present, transactions are verified by a central authority like a government or credit card clearing house. Blockchain could very well replace these centralized systems with decentralized ones, where the verification happens with the consensus of multiple users.
All the transactions are highly encrypted, these are initiated and accepted peer to peer. Interestingly there is no middleman or financial institutions that establish trust between the two parties. However, trust is established through the decentralized distributed ledger, which is visible to everyone in the network.
How does it work?
When a transaction is initiated, a network of computers carries out the process of validating the transaction by cracking some complex algorithms. When the network comes to an agreement that the digital ledger shows that the transferring party actually has the asset to transfer, the transaction is then validated and executed.
The digital ledger is then simultaneously updated across the network. Anyone with a decent computing power can be part of the verification process.
The network can effectively validate and clear a transaction immediately because the activity happens instantly within the digital ledger and not between some third-party institutions. After a transaction is successfully cleared, the network then cryptographically links it to the previous transaction and publishes them in blocks.
Every block is linked to the previous block, thereby an immutable chain is established. As a matter of fact, no information can be modified without changing all the blocks prior to it, thereby making it impossible to hack.
Trust is the critical factor of blockchain technology. The blockchain technology uses protocols that ensure that there is tremendous trust. Security is guaranteed through encrypted transactions, which are pseudonymous and locked into blocks.
When transactions are performed and recorded on a shared ledger, the counterparties do not need to maintain an established trust relationship. If every participant in the transaction completely trusts the blockchain, then they do not need to trust one another.
The Blockchain is highly secure. It is designed to store information in a way that makes it impossible to add, remove, or modify data without being detected by other users. A centralized institution is pretty vulnerable to hacking as the hacker needs access to just one main system.
A single point of control like the centralized institution can expose firms and its customers to serious security breaches. However, it is different when it comes to the blockchain technology.
By widely distributing the digital-ledger across thousands of participating nodes ( participant computers on the network of computers, which govern the decentralized blockchains) who anonymously protect the data, it becomes an impossible task to hack all of the nodes at once.
Even if a node is attacked, the tens of thousands of participating nodes that are anonymous protect the data. It’s impossible to hack all of the nodes at one time.
Private versus Public Blockchain
A public blockchain is open to anyone who intends to transact or verify as part of the network. There are no barriers as far as the participation is concerned. A classic example of a public blockchain is the Bitcoin blockchain. It is a blockchain where Bitcoin (digital currency) rides.
Bitcoin is one of the best examples of a digital asset, which can be easily transferred across the blockchain. What makes Bitcoin more valuable is the finite supply. Bitcoin is not a fiat currency that is backed by any government. At present, there are more than 300,000 Bitcoin transactions happening every day across the globe.
In order to have a private blockchain network, one needs an invitation and it must be validated by the network starter. Businesses that set up a private blockchain will usually opt for “permission” network. This will enable restrictions on the participants in the network.
All the participants will have to obtain an invite in order to join. The control mechanism may vary, the active participants could decide the future entrants or a regulatory authority could issue licenses for participation. After an entity joins the network, it will play the role of maintaining the blockchain in a decentralized manner.
Private blockchains can have free or inexpensive transactions. If a single entity processes and manages transactions, then there is no fees or charge involved for the task carried out. Even in the case of having multiple entities carrying out the processing work, the transaction fees can be very minimal.
3 Blockchain Implementation Ideas for Businesses
Smart Contracts in the IoT
These are self-automated programs, which can handle the terms of any contract. A smart contract is different from a contractual agreement. It enables software code, which enforces as well as executes the terms of legal agreements as specified by the contracting parties.
For instance, If 3 people from different part of the world want to ship products, and a courier service provider is ready to ship it for them, then they enter an automated contract that determines how much bitcoin each will pay the courier on successful delivery.
Usually, the users and courier service providers sign the smart contracts as the owners of the objects do not have a legal obligation because of the smart contract. Since the object can be easily tracked, smart contracts can check the delivery status in a flexible and automated way.
Each sensor will form a node on a blockchain and the smart contracts can track as well as record the possession of the device to every individual sensor. A barcode or NFC chip will be read at each sensor on the way to your home.
Every single time it is read by a new sensor, the location is broadcasted and is agreed upon by all the IoT participants on the blockchain.
This will be another app that business can capitalize on. A company by the name of “Storj” is offering blockchain based highly secure cloud storage. Just by utilizing excess hard drive space, the users can store the traditional cloud 350 times over. Blockchain-based cloud storage can significantly reduce the cost to store data for businesses.
Like Storj, a firm by the name “Filecoin” also offers blockchain based cloud storage. Filecoin is basically a storage network, which turns cloud storage into an algorithmic market.
The market operates on a blockchain with native protocol token, the miners earn by providing storage to clients and on the other hand, the clients spend the Filecoin by hiring miners for storing or distributing data.
As the blockchain has it’s rooted in crypto-currency, it could be used as an application for compensating employees. There are businesses that pay regular wages to employees in an international location. They can include Bitcoin into the company payroll process, as it can be a serious cost saver.
Blockchain technology offers a fantastic potential for business transformation and growth. With blockchain strategies gaining more traction. The organizations are now getting a clear picture of how the business transactions will change in the coming years.
This decentralized and encrypted network of computing nodes is all set to become the next disruptive thing in digital business.