What is Blockchain Technology? Everything You Need To Know.

What is Blockchain Technology? Everything You Need To Know.

A lot is being said about blockchain today, but what exactly does it do?  The first thought that comes to mind is that it revolutionizes payments, given all the hype about Bitcoin, the cryptocurrency.

The world of blockchain, however, is much larger than just that.

Generally defined as “an open, distributed ledger that can record transactions between two parties in an efficient, verifiable and permanent way”[1], blockchain can create digital relationships across boundaries, ensuring that its applications can literally go as far as our imagination.

Blockchain is revolutionizing the systems of records as:

  • It is a chain of records (called blocks) linked using cryptography.  Each block contains information from the previous block in chronological order so as to link them together without the ability for any modifications.  Any changes to a block would require the subsequent blocks to be regenerated as well, which makes it extremely secure and reliable
  • It is a decentralized and encrypted electronic ledger with a timestamp for creating a shared, cryptographically secured database accessible across users in different networks without the need of transaction or one single authority
  • It ensures security and enables fraud prevention
  • It has the ability to improve system operations by reducing costs and increasing agility

Invented in 2008, blockchain serves as the public transaction ledger of the cryptocurrency Bitcoin.  In fact, Bitcoinwas the first application that made not just a variety of industries but also the governments of different countries sit up and take notice of this technology that has far-reaching implications.  The discussion has since evolved, and its use cases extend far beyond cryptocurrencies.

This brings us to the question: How can industries unlock the full potential of blockchain and find more applications for it?

Many corporations still work using a combination of siloed information and databases spread across disparate countries and contractors. With multiple parties involved in numerous such transactions, recordkeeping can add several layers to complexity. However, blockchain offers the solution, where distributed electronic ledgers can integrate the entire commercial world’s record keeping. Also, the fact that each block of data contains a cryptographic hash indicates that the data cannot be modified and is therefore secure, makes it ideal for recordkeeping[2].

Currently, blockchain is already being used for tracking supply chains and easing logistics via smart contracts; maintaining sensitive healthcare records and clinical databases as well as to extract health-related information from wearables; creation of digital identities and more. Vendors are beginning to create more business-specific products using blockchain now.

It has helped revolutionize the rewards systems for Amex and create crypto tokens for Burger King. Bumble Bee Foods traces the journey of yellowfin tuna from the Indonesian ocean to the dinner table using the SAP Cloud Platform Blockchain service[3].

Banks such as UBS, Barclays and Credit Suisse are now creating their MiFID II compliance on Ethereum smart contracts[4]. Recently, Credit Suisse also partnered with a Portuguese bank Banco Best to complete joint Mutual Fund transactions using Blockchain[5].

It helps FedEx and Maersk track their high-value cargo and make their documentation tamper-proof; Walmart and Alibaba to create food supply chains; IBM to bring in smart contracts[6],[7]. It is also enabling the United Nations to research the Distributed Ledger Technology (DLTs) to take initiatives for climate change[8]. Several UN agencies are also working with blockchain in humanitarian relief and international development programs[9].

Despite the fact that it is still very much in its nascence, it is said that approximately 10% of the global GDP will be stored on blockchain by 2027[10]. Earlier this year, Forbes released a list and called it “Blockchain’s Billion Dollar Babies” indicating the number of companies that have found widespread application for the technology[11].

As the number of use cases for blockchain are increasing and finding acceptance among the bigger league of organizations, the question that you need to mull over is – how can your business benefit from the strategic value offered by Blockchainso that the ROI justifies the investments made in a sustainable manner?