Everything You Need to Know About Blockchain
Blockchain is a term that’s being increasingly used in the world of software development and finance. Some even claim it is one of the most ground-breaking inventions to hit the world of payments since the arrival of the chip and pin. But what does blockchain actually mean, and how does it impact the business world?
What is blockchain technology?
Blockchain was designed as an alternative technology for financial transactions, originally with the crypto currency bitcoin as its primary usage area. It is effectively a digital ledger that keeps an ever-growing list of historical transactions (blocks) over every network distributed across thousands of computers.
In his book “The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology” (2016), William Mougayar describes blockchain as a technology that permanently records transactions in a way that can’t be erased at a later time; only sequentially updated. This creates a never-ending historical trail.
So what does this mean? Well – for starters, this digital transaction framework becomes virtually impossible to hack, laying a foundation for a new, more secure banking future. But it also forces us to rethink the ways in which we create transactions, store data and move assets.
How blockchain impacts business
Although born in the financial world, blockchain offers alternative uses that have the power to change many other business areas. As with most other types of technology breakthroughs, the blockchain innovation wave will likely continue and find different ways to impact the way we operate.
Here are a few applications of blockchain we are likely to see in the future of business, according to Business Insider:
- Stock exchange transactions
The stock exchange is often referenced as the ideal playing field for blockchain technology. The current system relies on all participants (the bank, the brokerage, the stock exchange and the company selling their stocks) having their own private transaction records without being able to see each other’s. This means that nobody can actually verify that everything is accurate on all ledgers.
Blockchain, on the other hand, allows everyone to draw information from the same set of records. Instantly, everyone can verify that all data is legitimate. And for every transaction added, the information gets more secure because every block added verifies all previous blocks as correct.
There have even been discussions around adding national currencies on blockchain. This would add a secure layer of transparency and traceability, making it easy for banks to track the currencies through the financial system in real time.
Another implementation of blockchain is the concept of ‘smart contracts’. This is a workflow that eliminates the insular contracts throughout a supply chain. What we’re used to seeing is one contract between the manufacturer and the wholesaler, another contract between the wholesaler and the retailer, and yet another between the retailer and the customer – with various contracts with logistics agents in between. A smart contract framework using blockchain technology, on the other hand, could revolutionise how businesses operate. By keeping all contractual agreements in a central place where everyone can see the trail, there is a level of transparency that can include factors like fair trade, deliveries and collections on time, product quality and much more. Rather than keeping separate paper trails, everyone gets the opportunity to look at the same contract.
- Payments and invoices
When it comes to smart contracts, there is one additional benefit: the ability to connect deliveries with payments. Once a delivery is scanned in by the recipient, the confirmation gets added to the blockchain and can trigger an automatic payment from the recipient’s account. This bypasses the invoicing process – as well as the chasing of overdue payments.
There could be tremendous benefits to using the concept of smart contracts in healthcare as well. Not only would blockchain support secure data storage, but also provide a bridge between insurance systems and the care provider, where all the patient data would be available through encrypted access points.
These are just a few examples of where blockchain would meet a very particular process need and bring with it a whole range of benefits. There are many other industries where this same concept would add value such as property, public service, music and games, utilities, automotive and much more.
The future of transactions
No matter how this technology is implemented or how, it’s safe to say that we have only started to scratch the surface of what blockchain can do! We’re likely to see a great deal of innovation over the next few years, especially in the finance world, to prove the value of blockchain and secure its place in the future of transaction management. We will of course keep a close eye on what this will mean for the future of software development, and pass that knowledge on to you.