What Is Blockchain And What Are Its Business Applications?
Securing financial transactions is always a concern for businesses, and blockchain technology is one of the most reliable third parties you can entrust to safely complete your transactions. Blockchain employs math and cryptography to create a free, open, and decentralized database that contains transactions between millions of individuals.
The records of these transactions (money, property, goods, contracts, etc.) are stored in an online system which allows access to its participants, who can authenticate new transactions. You can trust that your business is in good hands with blockchain because it’s timestamped and public. (No, not public in the sense that everyone can see your records!)
Blockchain is a method of sharing information between two parties in a safe and automated manner with a slight transaction fee.
In a blockchain-based transaction:
- A party initiates the transaction by creating a block.
- The block is authenticated on a network of millions of computers distributed across the world.
- It is then added to a chain stored across the internet.
- In turn, the chain creates a unique record with a traceable history.
Blockchain allows people to write entries into a record of information. This can be updated or amended by a single entity but is controlled by a community. Much like Wikipedia, there is no single authority for this information. The big difference being that your records are encrypted and completely secure – nobody can break the encryption.
Due to the infrastructure of the database, it’s virtually impossible to fabricate a single record since there are already millions of instances of it across the globe. This is why monetary transactions involving cryptocurrencies are secure and why businesses are adopting it in lieu of physical currencies.
Blockchain and Bitcoin
It’s important to understand that bitcoin isn’t blockchain. While blockchain is a distributed ledger that makes peer-to-peer transactions possible, a bitcoin is a unit of crypto-currency that helps reduce the time and costs in cross-border transactions.
The two have become intertwined in the minds of many because we first heard of them together. Bitcoin was the first technology to use blockchain. But blockchain can handle far more than just bitcoin, as discussed briefly above.
Core Features of Blockchain
Blockchain is distributed and decentralized. It doesn’t live in one server or on one person’s computer. The technology lives on all the nodes in the network. That is, blockchain exists on the computers and hard drives of all those participating in the system.
Also, blockchain is public, so it’s readily available to all. Even if you don’t know the specific details about the transactors when viewing a blockchain transaction, you can still see when those transactions are taking place. As long as you are participating in the network, you can see these changes as they occur.
Blockchain is also timestamped because all events are duly identified. Whenever there is a transaction or change, the date and time of each event are recorded. This is important in relation to the two keys above. Everyone can see this information and no single entity can tamper with the timestamp.
All peers, through the consensus model in the Bitcoin Protocol, have to agree that this change or transaction happened at this time.
Lastly, blockchain is persistent. As long as all the people participating in the blockchain database keep doing what they are doing (verifying transactions, maintaining copies of blockchain on all the different nodes, etc.,) the network could theoretically last forever.
You may also want to read: 6 Ways Blockchain Can Help Your Digital Marketing
Business Applications of Blockchain
Blockchain allows you to protect your company’s data from being hacked or lost by distributing it across a network of computers in various locations around the world. The advantage of a decentralized data storage infrastructure like this is that the damage to a single node (computer) in the network doesn’t affect other nodes.
When a node is affected or compromised in the network, the others will continue to function since they are scattered geographically across the globe.
This opens up the opportunity for business owners to manage storage systems without compromising sensitive data. In addition, you have complete control over your data as it’s readily available to you and in a safe location.
If you work with big data and would like to achieve efficiency, performance, and security in your business, you can utilize blockchain technology to power all data storage applications that you are using in your business.
In the business sector, fraud is a bottleneck which costs companies more than $17 billion annually. For this reason, many companies are now adopting blockchain technology to combat digital identity frauds. In blockchain, each identity can be authenticated in a secure, immutable, and irrefutable manner.
Instead of the current method of using password-based systems that exchange and store sensitive data on insecure systems, blockchain technology employs digital signatures based on public key cryptography to verify and authenticate identity.
When performing checks on each identity verification request, the authentication system checks against a private key that’s only available to the owner or administrator. Only when the system detects the correct key will it carry out the request.
You may also want to read: The Growing Importance of Blockchain Technology
If you are in the B2B marketing business, blockchain technology can help you improve your sales processes. Since the backbone of a sales process is built on responsibilities and relationships, a company that employs blockchain technology can create trusted relationships at lower costs. Unlike the B2C sales cycle, which has a shorter lifespan, the B2B sales cycle is longer and ongoing, requiring an effective monitoring strategy to minimize trade risks.
Furthermore, since blockchain is established on a secured infrastructure, it’s often qualified as credible. Therefore, it can help you deal with other businesses, institutions, or customers based on shared trust.
So, businesses looking for a safer, and faster way to verify key information can take advantage of these benefits.
Payments and Money Transfer
Blockchain’s payment processing feature allows businesses to transfer funds to employees directly and securely anywhere in the world, without an intermediary. This is particularly great for companies that employ remote talent or that are participating in a global marketplace.
Additionally, the cost of each transaction is minimal and each transaction is instantaneous. This is because there are no intermediaries which can slow down the transfer or charge exorbitant fees.
You may also want to read: 6 Ways AI Can Spark Immediate And Scalable Progress Through Blockchain
Blockchain technology allows a business to set up a product management system which can be used to prevent counterfeits once a product lands at the end of a supply chain. When used to secure the supply chain, this technology can identify and enable the tracing of problematic parts back to the source. This helps to grow trust among supply chain partners.
One of the significant advantages of using blockchain technology in stock trading is share settlement. Within a peer-to-peer network, trade confirmations can be executed immediately, instead of waiting days for authorities to verify the transaction. This efficiency can remove intermediaries like auditors, clearinghouses, and custodians from the process.
Many stock and commodities exchanges are gradually adopting blockchain applications for their services as well. The Nasdaq Stock Exchange announced in 2018 that it would consider blockchain as a means of recording transactions and data. If this system is successful, it could be replicated in exchanges across the world.
Early this year, the Nasdaq added two new indexes BLX (Bitcoin Liquid Index) and ELX (Ethereum Liquid Index) to take advantage of blockchain technology. It’s expected that more and more companies will continue to adopt the technology as the trend continues to gain in popularity.
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