Blockchain — An Easy Introduction
Blockchain in simple words and with use cases and examples.
A misunderstood concept — Let’s Nip It In The Bud.
Blockchain is not Bitcoin. I couldn’t find a better way to start writing this article than clarifying the most misunderstood concept regarding Bitcoin and Blockchain. If I had to put it lucidly, I would say Bitcoin is to Blockchain, what Amazon is to the internet. Yes, you heard that right. Bitcoin is just a product of a use case of Blockchain, which is known as cryptocurrency. Researchers have often stated that the idea of Blockchain in our present time is similar to the concept of the internet in the 1990s. You may, therefore, assume what potential it has in store for us in the next 20 to 30 years. Blockchain has the power to disrupt how the significant industries around us function.
Blockchain — Intuition
Blockchain technology is a way of recording information that makes it difficult or nearly impossible to alter or remove it. This might sound very generic, so let’s understand this with an example. In earlier times, when properties were purchased, the property registration was done in physical hard-covered books called ledgers. These ledgers held details about whom a particular property belonged to. This practice was considered a good one with the available resources, but it was equally challenging. The vulnerabilities of information loss came through in many ways, like natural disasters, human error, or sometimes dereliction. The advent of the computer was then considered to replace this traditional method of record-keeping which reduced the challenges to a certain extent, but they are still prevalent whatsoever.
Moving the records from physical storage to a digital database has reduced the chances of records being destroyed. Still, however, it couldn’t stop the hacking attacks to tamper the authenticity of the documents. Also, in our traditional record-keeping approach, a third-party institute had been brought in as a mediator. This mediator can be any entity like governments, corporates, regulators, etc. This third-party entity acts as a centralized trustee who serves as the custodian of the records. Blockchain attempts to break this concept of a centralized trusted body into a network of distributed trusted entities.
Blockchain — A high-level understanding with a use case
Let us revisit the use case of property purchase. When a transaction occurs between two individuals (in our case, an owner and a potential owner), it is added as a block of data to a chain of pre-existing transactional records known as a block. These blocks (transaction information) are preserved by cryptography, making it nearly impossible to break and tamper. Over time the transaction history gets locked in blocks of data that are cryptographically linked together and secured. This creates an immutable record of all transactions across this network. It is then replicated in all the computers that are part of this network. Instead of trusting a central body with the data, the trust has been distributed among the network participants. Since the records are interlinked, they cannot be tampered with without hampering the entire Blockchain.
Blockchain — Popular Use Cases
Whenever I try to grasp new technology, I approach it by understanding its applications in real life and what problems it aims to resolve. I would keep the same approach for Blockchain as well, as it might help you too. Therefore, let’s look at the most popular use cases of Blockchain and how they attempt to disrupt the traditional transaction model around us.
1. Smart Contracts:- Smart Contracts are like regular contracts except that they are enforced in real-time between two individuals in a Blockchain network. This eliminates the involvement of mediators and third-party entities and emphasizes peer-to-peer communication. Smart Contracts also implement the parties’ accountability in such a way, which is otherwise difficult to have in regular contracts.
BurstIQ, based out of Denver, Colorado, is a leading provider of blockchain-based data solutions working in the healthcare industry. Their smart contracts facilitate the transfer of sensitive medical information between doctors and patients. Smart contracts (aka Blockchain contracts) dictate the parameters of what data can be shared and also helps in providing personalized health plans to each patient.
2. Money Transfer:- It all started with Bitcoin, and now we have many cryptocurrencies in the market. Blockchain is popular in the cryptocurrency world and can save a lot of money for financial institutions. Moreover, when it comes to transferring money between individuals, Blockchain attempts to eliminate the involvement of regulators and third-party entities, thus reducing the cost.
Circle, a peer-to-peer payment technology company based out of Boston, is using Blockchain for money transfer and investment to cryptocurrencies like Bitcoin, Monero, Zcash.
Another company named Chainalysis uses Blockchain to build tools to help financial institutions and governments monitor cryptocurrencies’ transactions and build trust in Blockchain technology.
3. Internet Of Things:- IoT, as it is fondly called, is in itself a revolutionary technology that attempts to change the world around us by connecting every physical object to the internet. However, the only drawback that tends to hold back its implementation is the security concern. This is where Blockchain steps in. IoT infused with Blockchain takes it a notch higher on the security front, as the transparency and decentralization of the latter eliminate the chances of data breaches.
Filament, an IoT company based out of Reno, Nevada, builds hardware and software that enables connected physical devices to operate on Blockchain.
4. Personal Identity Security:- In recent times, we have seen an upsurge in personal identity theft. To tackle fraudulent activities of this measure, we need a technology that is (nearly) impossible to tamper with and provides a robust mechanism against unforgeability. Unfortunately, there is no score for telling the correct answer, but you are right anyway. So, yes, Blockchain helps to solve this problem as well.
Civic, a blockchain-based ecosystem in Palo Alto, California, provides users with visibility on who has their information. The user enters into a Blockchain contract agreement to define which personal data can be shared and to what extent. If there is any violation of this contract, the user is at once alerted.
5. Logistics:- In the field of Logistics, Blockchain can be used to keep track of inventory, transparency in the movement of products, visibility in transactions can help settle potential disputes, flexibility in invoicing and payments. In this field, too, Blockchain can remove the middle-men architecture, thus providing a conspicuous end-to-end view of the entire process.
The shipping giant Maersk and technology colossus IBM has come together to build a Blockchain. It will help understand supply chain management better and provide real-time updates on goods being moved worldwide.
Conclusion
Although we have seen that Blockchain has some promising applications and can significantly reduce deception activities, there’s a whole lot of an unexplored world out there. Moreover, Blockchain is still in its infancy, waiting for technologists and entrepreneurs to brainstorm and bring out ideas to use it constructively. So now we must wait and see how this new technology, which is often considered fundamental and parallel to the internet, transforms our lives and surroundings for the better.
What can be the other use cases of Blockchain? Please give it a thought and let me know in the comment section. Or, you may also connect with me through email. I am all ears at samiran_banerjee@outlook.com.
