Introduction To Blockchain Technology: Every Beginner’s Guide

In 2008, a cryptographer named Satoshi Nakamoto — a name used by the unknown person or persons — invented Bitcoin. It is a digital currency that enables people to conduct peer-to-peer transactions without the help of any third party such as banks.

Whenever we do any transactions, it happens through a third party such as a bank and regulatory laws, but in the blockchain schema, these transactions happen securely but anonymously without the involvement of any intermediaries.

So you might ask how the current transactions are happening online with debit and credit cards? Current transactions happen through electronic intermediaries where we depend a lot on the third parties for trust and fraud detection. More complexity in the transaction requires more mediators. Every step here adds cost and takes a lot of time. However, blockchain technology has an advantage of reducing the cost involved in transactions.

How Does Blockchain Technology Work?

Here is a simple example. A wants to send money to B. A initiates the process, and in blockchain terminology, this transaction is represented online as a block. The block is then broadcast to every entity involved in the network for authenticity and approval. The entities approve if the transaction is valid. The block will then be added to the chain which provides a permanent and transparent record like a ledger of transactions and the money moves to B. In this process there is no physical currency involved but just the acknowledgment of the change of ownership.

Applications of Blockchain Technology

1. Money transfers

The original concept behind the invention of blockchain technology is still a great application. Money transfers using blockchain can be less expensive and faster than using existing money transfer services. This is especially true of cross-border transactions, which are often slow and expensive. Even in the modern U.S. financial system, money transfers between accounts can take days, while a blockchain transaction takes minutes.

2. Financial exchanges

Many companies have popped up over the past few years offering decentralized cryptocurrency exchanges. Using blockchain for exchanges allows for faster and less expensive transactions. Moreover, a decentralized exchange doesn’t require investors to deposit their assets with the centralized authority, which means they maintain greater control and security. While blockchain-based exchanges primarily deal in cryptocurrency, the concept could be applied to more traditional investments as well.

3. Lending

Lenders can use blockchain to execute collateralized loans through smart contracts. Smart contracts built on the blockchain allow certain events to automatically trigger things like a service payment, a margin call, full repayment of the loan, and release of collateral. As a result, loan processing is faster and less expensive, and lenders can offer better rates.

4. Insurance

Using smart contracts on a blockchain can provide greater transparency for customers and insurance providers. Recording all claims on a blockchain would keep customers from making duplicate claims for the same event. Furthermore, using smart contracts can speed up the process for claimants to receive payments.

5. Real estate

Real estate transactions require a ton of paperwork to verify financial information and ownership and then transfer deeds and titles to new owners. Using blockchain technology to record real estate transactions can provide a more secure and accessible means of verifying and transferring ownership. That can speed up transactions, reduce paperwork, and save money.

6. Secure personal information

Keeping data such as your Social Security number, date of birth, and other identifying information on a public ledger (e.g., a blockchain) may actually be more secure than current systems more susceptible to hacks. Blockchain technology can be used to secure access to identifying information while improving access for those who need it in industries such as travel, healthcare, finance, and education.

7. Voting

If personal identity information is held on a blockchain, that puts us just one step away from also being able to vote using blockchain technology. Using blockchain technology can make sure that nobody votes twice, only eligible voters are able to vote, and votes cannot be tampered with. What’s more, it can increase access to voting by making it as simple as pressing a few buttons on your smartphone. At the same time, the cost of running an election would substantially decrease.

8. Government benefits

Another way to use digital identities stored on a blockchain is for the administration of government benefits such as welfare programs, Social Security, and Medicare. Using blockchain technology could reduce fraud and the costs of operations. Meanwhile, beneficiaries can receive funds more quickly through digital disbursement on the blockchain.

9. Securely share medical information

Keeping medical records on a blockchain can allow doctors and medical professionals to obtain accurate and up-to-date information on their patients. That can ensure that patients seeing multiple doctors get the best care possible. It can also speed up the system for pulling medical records, allowing for more timely treatment in some cases. And, if insurance information is held in the database, doctors can easily verify whether a patient is insured and their treatment is covered.

10. Artist royalties

Using blockchain technology to track music and film files distributed over the internet can make sure that artists are paid for their work. Since blockchain technology was invented to ensure the same file doesn’t exist in more than one place, it can be used to help reduce piracy. What’s more, using a blockchain to track playbacks on streaming services and a smart contract to distribute payments can provide greater transparency and the assurance that artists receive the money they’re owed.

11. Non-fungible tokens

Non-fungible tokens, or NFTs, are commonly thought of as ways to own the rights to digital art. Since the blockchain prevents data from existing in two places, putting an NFT on the blockchain guarantees that only a single copy of a piece of digital art exists. That can make it like investing in physical art but without the drawbacks of storage and maintenance.

NFTs can have varied applications, and ultimately they’re a way to convey ownership of anything that can be represented by data. That could be the deed to a house, the broadcast rights to a video, or an event ticket. Anything remotely unique could be an NFT.

12. Logistics and supply chain tracking

Using blockchain technology to track items as they move through a logistics or supply chain network can provide several advantages. First of all, it provides greater ease of communication between partners since data is available on a secure public ledger. Second, it provides greater security and data integrity since the data on the blockchain can’t be altered. That means logistics and supply chain partners can work together more easily with greater trust that the data they’re provided is accurate and up to date.

13. Secure Internet of Things networks

The Internet of Things (IoT) is making our lives easier, but it’s also opening the door for nefarious actors to access our data or take control of important systems. Blockchain technology can provide greater security by storing passwords and other data on a decentralized network instead of a centralized server. Additionally, it offers protection against data tampering since a blockchain is practically immutable.

14. Data storage

Adding blockchain technology to a data storage solution can provide greater security and integrity. Since data can be stored in a decentralized manner, it will be more difficult to hack into and wipe out all the data on the network, whereas a centralized data storage provider may only have a few points of redundancy. It also means greater access to data since access isn’t necessarily reliant on the operations of a single company. In some cases, using blockchain for data storage may also be less expensive.

15. Gambling

The gambling industry can use blockchain to provide several benefits to players. One of the biggest benefits of operating a casino on the blockchain is the transparency it provides to potential gamblers. Since every transaction is recorded on the blockchain, bettors can see that the games are fair and the casino pays out. Furthermore, by using blockchain, there’s no need to provide personal information, including a bank account, which may be a hurdle for some would-be gamblers. It also provides a workaround for regulatory restrictions since players can gamble anonymously and the decentralized network isn’t susceptible to government shutdown.

Benefits of Blockchain Technology

1. Trust

Blockchain creates trust between different entities where trust is either nonexistent or unproven. As a result, these entities are willing to engage in business dealings that involve transactions or data sharing that they may not have otherwise done or would have required an intermediary to do so. The enablement of trust is one blockchain’s most cited benefits. Its value is evident in early blockchain use cases that facilitated transactions among entities that didn’t have direct relationships yet still had to share data or payments. Bitcoin and cryptocurrencies in general are quintessential examples of how blockchain enables trust between participants who don’t know each other.

2. Decentralized structure

Blockchain really proves its value when there’s no central actor who enables trust, explained Daniel Field, head of blockchain at UST, a global provider of digital technology and services. So, in addition to enabling trust when participants lack trust because they’re unknown to each other, blockchain enables sharing of data within an ecosystem of businesses where no single entity is exclusively in charge. Supply chain is a case in point: Multiple businesses from suppliers and transportation companies to producers, distributors and retailers want or need information from others in that chain, yet no one is in charge of facilitating all that information sharing. Blockchain, with its decentralized nature, solves for that dilemma.

3. Improved security and privacy

The security of blockchain-enabled systems is another leading benefit of this emerging technology. The enhanced security offered by blockchain stems from how the technology actually works: Blockchain creates an unalterable record of transactions with end-to-end encryption, which shuts out fraud and unauthorized activity. Additionally, data on the blockchain is stored across a network of computers, making it nearly impossible to hack (unlike conventional computer systems that store data together in servers). Furthermore, blockchain can address privacy concerns better than traditional computer systems by anonymizing data and requiring permissions to limit access.

4. Reduced costs

Blockchain’s nature also can cut costs for organizations. It creates efficiencies in processing transactions. It also reduces manual tasks such as aggregating and amending data, as well as easing reporting and auditing processes. Experts pointed to the savings that financial institutions see when using blockchain, explaining that blockchain’s ability to streamline clearing and settlement translate directly into process cost savings. More broadly, blockchain helps businesses cut costs by eliminating middlemen vendors and third-party provider that have traditionally provided the processing that blockchain can do.

5. Speed

By eliminating intermediaries, as well as replacing remaining manual processes in transactions, blockchain can handle transactions significantly faster than conventional methods. In some cases, blockchain can handle a transaction in seconds or less. However, times can vary; how quickly a blockchain-based system can process transactions depends on multiple factors, such as how large each block of data is and network traffic. Still, experts have concluded that blockchain typically beats other processes and technologies in terms of speed. In one of the most prominent applications of blockchain, Walmart used the technology to trace the source of sliced mangoes in seconds, a process that had previously taken seven days.

6. Visibility and traceability

Walmart’s use of blockchain isn’t just about speed; it’s also about the ability to trace the origin of those mangoes and other products. This allows retailers like Walmart to better manage inventory, respond to problems or questions and confirm the histories of its merchandise. If a particular farm has to recall its produce due to contamination, a retailer using blockchain can identify and remove the produce that comes from that particular farm while leaving its remaining produce for sale. According to experts, blockchain can help track the origins of a variety of items, such as medicines to confirm they’re legitimate instead of counterfeit and organic items to confirm they’re indeed organic.

7. Immutability

Immutability simply means that transactions, once recorded on the blockchain, can’t be changed or deleted. On the blockchain, all transactions are time-stamped and date-stamped, so there’s a permanent record. As such, blockchain can be used to track information over time, enabling a secure, reliable audit of information. (That’s in contrast to error-prone paper-based filing and legacy computer systems that could be corrupted or retired.) Omar pointed to Sweden’s use of blockchain to digitize real estate transactions to keep track of property titles even as they change hands as an example of this benefit’s potential.

8. Individual control of data

Blockchain enables an unprecedented amount of individual control over one’s own digital data, experts said. “In a world where data is a very valuable commodity, the technology inherently protects the data that belongs to you while allowing you to control it,” said Michela Menting, a research director at ABI Research. Individuals and individual organizations can decide what pieces of their digital data they want to share and with whom and for how long, with limits enforced by blockchain-enabled smart contracts.

9. Tokenization

Tokenization is the process where the value of an asset (whether a physical or digital one) is converted into a digital token that is then recorded on and then shared via blockchain. Tokenization has caught on with digital art and other virtual assets, but tokenization has broader applications that could smooth business transactions, said Joe Davey, director of technology at global consulting firm West Monroe. Utilities, for example, could use tokenization to trade carbon emission allowances under carbon cap programs.

10. Innovation

Leaders across multiple industries are exploring and implementing blockchain-based systems to solve intractable problems and improve longstanding cumbersome practices. Field cited the use of blockchain to verify the information on job applicants’ resumes as an example of such innovation. Studies consistently have shown that a strong percentage of people falsify their resumes, leaving hiring managers with the time-consuming task of manually verifying the information. But pilot programs that allow participating universities to put data about their graduates and their awarded degrees on the blockchain that can then be accessed by authorized hiring managers helps solve for both issues, getting to the truth and getting to the truth quickly and efficiently.

Blockchain Technology Facts That Need Clarity

• Complex technology involved
• Regulatory implications
• Implementation challenges

There is already a huge adoption and implementation of this technology all over the world. Transactions are now smoother and has helped a lot of freelancers working in different geographic locations. The blockchain technology is also a boon for companies that employs freelancers since not many regulations and laws are involved. There is less friction between parties and increased productivity.

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