Blockchain is a decentralised, trusted ledger of transactions which occur within a network. They are validated by a network of separately-owned computers using a cryptographic protocol to assess the accuracy of the data contained within the ledger.
Blockchain technology makes it possible to trust the information kept on that database without relying on a central institution.
It can revolutionise the way businesses and governments operate, putting an end to unnecessary costs while making it easier for different parties to trust each other since they share a trust in the data. But how will blockchain change the world?
Here are just five ways that blockchain benefits society and individuals…
Banking and Payments
Because of the way data is stored within blockchain, there is no need for a central organisation to be involved. This makes it easier to transfer data and money while reducing the risk of fraud. Blockchain benefits are such that it has been predicted that “10% of GDP will be stored in blockchain technology by 2025”, according to the World Economic Forum.
It offers advantages over conventional banking. Quicker transactions, for instance. Conventional ways of banking are known to consume a lot of time as third parties are always needed. However, blockchain can do in a matter of seconds the things that would normally take three days to complete. It has also reduced transaction costs. Because blockchain makes transactions so much quicker it renders third parties and their charges unnecessary. Which means businesses involved in multi-nation transactions will benefit.
Immutability and trust
Another defining feature of blockchain technology is the immutability of the data it contains. Once that data is recorded and validated by the whole network, it can no longer be changed. It’s somewhat limiting to parcel up the various benefits of blockchain precisely because they arise from the synergy of three technologies: cryptographic keys, shared distributed ledger, and validation protocol.
However, the underlying implication of the immutability of records kept on a blockchain is that those records are trustworthy on their own. No central bank or regulatory agency needs to stand by them. Unlike people, data can be trusted. For organisations that deal in trust, this feature alone justifies their foray into blockchain.
The application of cryptographic keys to blockchain technology aims to ensure confidentiality, security, and privacy of users and the data they share. There are two types of cryptographic keys, public and private, and every user has one of each.
The public key is that address or a hashed (shorter) version of that address. You can only access your wallet (public key A) and move Bitcoins using your private key (A), in the same way, that the person who owns the wallet you send Bitcoins to (public key B) can only access those funds using that wallet’s private key (B).
The combination of a user’s private and public keys forms that individual’s digital signature, allowing him or her to conduct transactions on a blockchain. This digital signature differentiates users in the network which adds another layer of security to guarantee the data’s integrity.
Online retailers today face a handful of hurdles, most stemming from the payment process involved with e-commerce. From the ‘abandoned shopping cart’ issue (it’s been estimated that almost 70% of shoppers leave their purchase at checkout) to individuals losing faith in the retailer’s ability to keep their details safe, there’s a range of issues that demand a remedy as the e-commerce sector continues to grow. Blockchain technology may be the saving grace that the industry needs.
Blockchain technology is precisely the sort of development that can change the face of the online shopping process. Consumers using a platform based on a decentralised ledger are part of a more seamless experience that doesn’t sacrifice their privacy. With zero-knowledge storage, an individual can simply upload their payment details (or identification, for verification purposes), encrypt these, and store them in a container visible only to themselves.
On the convenience front, it means that, when it comes to payment, there’s no fiddling with a plastic card, squinting to read the various bits of information as you type them in. The user can authorise a payment without any of the traditional hassles.
In 1994, Nick Szabo, a cryptographer and legal scholar, realised that a decentralised ledger could be used for smart contracts. Smart contracts are self-executing contracts with the terms of the agreement being written into lines of code for the buyer and seller. The code and agreement then exist in a decentralised blockchain network. This avoids using the services of a middleman, whilst saving on huge costs. Smart contracts speed up the process massively. It would normally take a considerable amount of time and paperwork to manually process documents.
However, the software that smart contracts use takes hours of the processes. Jerry Cuomo, vice president for blockchain technologies at IBM, believes that smart contracts can be used across a broad spectrum, including healthcare services to insurance.
If you enjoyed this article, check out our guides- all about blockchain technology.