Blockchain technology has taken the business world by storm, but there’s still confusion about what exactly it is and how it works. The word blockchain may be used to refer to everything from bitcoin to virtual reality, but in its most basic form, blockchain is simply a digital ledger in which transactions are recorded chronologically and publicly, starting with the first-ever transaction that took place in 2009.
Using technology to facilitate safe digital transactions, blockchain keeps data both transparent and secure.
As a digital ledger of sorts, information on a blockchain can only be updated by consensus between participants in the system- no centralized authority is required.
More than just a buzzword for techies, blockchain’s practical applications extend far beyond cryptocurrencies like Bitcoin. Some industries are already taking advantage of its potential.
Security Concerns with Blockchain
One thing that’s not talked about a lot in blockchain-related articles, but should be emphasized: although blockchains are encrypted, they’re not always secure. Hackers can still break-in.
Don’t believe us? Read on: The most basic type of attack is simply to steal cryptocurrencies by hacking into public blockchains. This has happened many times before- like when Mt Gox got hacked or when Bitfinex was breached. In 2016, a hacker stole $72 million worth of Ethereum from The DAO, an Ethereum-based investment fund. Many other attacks have been thwarted by quick action from exchanges and developers alike. However, there’s no guarantee that any system will remain unbreached forever.
Non-Monetary Applications of Blockchain
Today, when we think of blockchain, we usually associate it with cryptocurrencies. However, there are many non-monetary applications of blockchain technology.
Consider security - if you’re a bank, your currency doesn’t matter if someone gets ahold of your data; they can drain all your funds. With that in mind, consider how blockchain can protect our sensitive information to ensure data integrity between parties.
Supply chain management: Another area where blockchains have been proposed is supply chain management. Blockchains can be used to track items as they move from one place to another, ensuring no tampering has occurred along the way.
Smart contracts: We mentioned smart contracts here, but what exactly are they? Smart contracts allow for self-executing agreements between two or more parties without needing an intermediary such as a lawyer or notary public. Instead, these agreements are enforced by code and run on top of blockchains.
For example, let’s say You rent out your apartment using Airbnb. When you agree to rent your apartment out, You set up a smart contract that states under what conditions either party can terminate the agreement (for example, due to noise complaints). This is all written into code so that neither party needs to trust the other - they just need to trust their respective copies of the contract.
Voting: In 2016, Estonia announced plans for its citizens to vote via blockchain-based e-residency IDs. By leveraging blockchain technology, Estonians will be able to cast votes online, making voting accessible even to those who live abroad.
Data storage: You may remember hearing about Storj and Sia- two startups looking to disrupt cloud storage providers like Dropbox and Google Drive. These companies use decentralized networks rather than centralized servers to store data, which means users don’t have to worry about trusting a third party with their files.
You’ve probably heard of the word blockchain without actually knowing what it means, or you may even think that it’s another term for cryptocurrencies like Bitcoin or Ethereum, but the truth is that there’s a lot more to this new technology than just being the backbone of digital currencies.