The blockchain technology is growing at an exponential rate, taking many fields of businesses in its fold. Still, the technology remains all Greek to many people when explained to them, the explanation often leaves them more confused than solving the issue for them. Therefore, we have collected some easy ways to explain blockchain to a non-expert through our article.
Breakdown of the word “Blockchain”
The most common occurrence when it comes to the explanation of blockchain is people not deriving any sense out of the description. All the talks of hashing and nodes make it very complicated and incomprehensible for the general public that wants to understand how the technology works.
So, let’s start from questioning ourselves, as in what do we already understand of blockchain?
In the easiest way describable, blockchain is a distributed ledger or a database, to make it easier, let’s call that ledger a record book. The information that is present in the record book is called data, which is always distributed on that ledger. Think of it in the way that this record of information is saved in a book in the form of pages where each page is connected with the previous, which makes the information in the book all distributed and shared.
To make our reader develop a better understanding of the term blockchain, we will be using the word distributed ledger for information ledger in the article.
Information Book or Record Book?
Technology is a product created by individuals with regular intelligence level, therefore it carries nothing that is above the understanding of an average person in it. If you’re to sell the product that you have made, you single out the features according to the demands of the buyer and explain to him in the easiest way possible so he understands completely what he is making a purchase of.
It’s often said about blockchain, that this technology is going to transform the way businesses operate in the corporate world. Its said that this new way of making the records of financial transactions secure is a revolutionary trend and is going to transform the operation of businesses. The book (record) stores data in many places, like on many devices with thousands of copies on different computers all around the world. The information can be secured on both home and business servers, and this is the reason the system is called decentralized, as it’s saved in many different places. The use of this book of records is not limited to saving transactional or financial information only but is extended to saving information regarding the healthcare insurance activity, in online shops, supply chain and many more.
However, to explain it in the simplest form, let’s use an example of money transfer. If a person called Eric wants to send money to his friend called Henry, a new stream is created to record this transaction. The same stream of transactional record is copied or let’s say sent to many other computers to show a transaction has taken place. The other computers on the system of the blockchain, that work as the members, give a verification to this transaction, validating that an unobjectionable activity just happened. These computers agree or disagree, if they have to, to this transaction verifying that the action was completely valid and contains no malicious activity. The verification of the record, for the approval or progress of the transaction, is needed from every computer that is part of the system, to guarantee that the transactional activity was totally legitimate.
These computers work like alibi or witness to the action or lets say the act as peers or neutral friends that testify that the action of Eric sending a particular amount of money to Henry took place before their eyes.
The difference from the bank
The basic idea behind the blockchain is to keep a decentralized system where no bank or regulation from a centralized body is involved to regulate the transaction. The core idea was to eliminate the need for a middleman, which could be a bank or any financial institution.
To explain it further, let’s say that the records are not regulated by any one party that could be banks, individuals or an organization, rather its owned by everyone on the network. This gives every person an equal right to view the data and verify it, without giving only one person the authority to change anything that’s on the network.
This feature makes the record book, that is blockchain, more secure and immutable than any other technology. The data that’s gone on the network is irreversible and cannot be edited, this adds to the security of the information. For instance, as mentioned earlier, information of the money that’s transferred from Eric to Henry, remains in the original and unedited form. The members of the blockchain network can only verify the entry and activity through the network, but cannot edit or change the information.
There is an additional feature that an entry once made can never be erased from the internet or the blockchain network. the data on the network cannot be changed, but only a new streak of transactions can be created to record a new entry in the blockchain. for example, if Henry wants to return Eric the money he has taken, he will have to generate a new line of block to show the refund of the money he took from Eric. This is the reason, the data on the blockchain remains more secure and immutable than at any other place. This will not overlap the previous information that has already been put on the blockchain.
Because of such strict security and a manner in which its put to the blockchain, there is no room given to any participant or user to corrupt the information that is present on the blockchain.
The use of this technology quite fairly eliminates the need for a middleman or a third party that is used to take guarantee of the transaction, the role which in normal circumstances is played by banks. The banks work as the managers and vouches for the clients and the same is done by blockchain as well. Where, just like banks, the records of money and transactions are kept on the network, without the payment of huge amounts of money to it for the service.
Where is the money stored
Blockchain works as an underlying technology for the digital currency. When talking about the cryptocurrency, there is no repository of coins, the record that is saved on the blockchain works as money. When miners of bitcoin generate the cryptocurrency, they submit their proof of work on the blockchain which allots it a token or a number exclusive to that person and submits the work in the form of money to the wallet.
If a person coining bitcoin aims at transferring the money to Eric or Henry respectively, he will have to create a new line/streak of codes to transfer this amount. The two guys Eric and Henry will provide the miner their account numbers, so he can send the money to both of them through different streaks. Once the money from the miner’s side is sent, his line of transaction completes and he loses control over what can be sent further from his side. To make another transaction, he will then have to create a new line. This is how thousands of people can have a stream of their own for each transaction, without any hindering the other’s transaction or overlapping it.
This way blockchain gives a more robust and better as well as an equivalent system of banking that is unparalleled and works in a more efficient way than the conventional banks. The blockchain where keeps everything secure and immutable, it also keeps it transparent for the users to view it whenever they deem it fit to be viewed. This system creates an indelible record of information that can neither be overlapped nor changed, which works absolutely wonderfully for those looking for a secure alternative for banking.
The industries blockchain will disrupt besides banking
Since we have explained the process of how this technology works, it’s easier for the reader to understand the functions and vastness of impact it’s going to cause on various industries. The use of blockchain technology is not limited to banking only, the technology has a potential to disrupt many industries outside the orbit of banking or just the finance.
The blockchain guarantees data security like no other technology does. Since the internet has become a part of every household now, the use of it in a positive and negative manners have both become quite known to almost everyone. The biggest threat that the data on computer systems endure is their vulnerability to attack. The way blockchain makes the data and records less prone to attacks is what is making the technology different from the rest in terms of cybersecurity. It keeps all the data through programming in an encrypted as well as distributed form, which makes it least prone to hacking.
Supply Chain Management
The traditional process of supply chain management is usually very long and arduous, while blockchain can minimize the effort that’s put in a regular transaction to a greater extent. The use of blockchain can also reduce time delays, and eliminate the errors made by humans when the activity is done by them. It can very well keep all actions done in the supply chain very secure and even minimize the human resource needed in regular supply chain business.
The system of blockchain is also used to ensure that a fair trade is taking place and the procurement of products has been done, this maintains a log of the trade and keeps a track of the order’s origin and movement. Some of the prominent companies already working in this sector are Fluent, SKUChain, Provenance, and Blockverify.
The basic concept on which the insurance industry thrives is the trust only. The blockchain is a technology that ensures the trust which plays the basis of the industry’s prime notion, by securing the data in insurance contracts and all the relevant information of the insured person. Oracles can be used as a source to integrate the real-time data information with blockchain application called smart contracts to give the best results in all kind of insurance.
The blockchain can also work as a peer to peer version of the decentralized system. With the use of blockchain, both the driver and the owner can communicate and fix terms and conditions in the most secure manner without the interference of a third party.
Blockchain supports the E-Wallets that these ride-sharing and private transportation apps use. They can automatically through a built-in system pay the parking fee, toll tax and more, without the driver bearing the hassle of making a stop at every place. Blockchain can prescribe solutions for even the minor issues a driver in the transportation business faces.
The data that is present on the centralized server is always prone to hacking, theft, data loss or can fall to human error as well. The use of blockchain integrating with the cloud storage can make the system more robust and secure from all kinds of attacks. There are already some companies that are testing the prospects of blockchain and cloud storage integration in their systems.
Among all other industries, there is one area which happens to remain the most neglected yet carries most significance, is the voting system. Every year, in many countries when the elections are held, there are a plethora of political parties that are accused of rigging the elections and winning through wrong means. The revolutionary technology of blockchain can rid this worry of election commissions working in different regions of the world if its integrated with the voting system. The blockchain technology like for other industries can keep a record of voters, take care of their registration, verify their identity and ensure fair elections through the counting of legitimate votes and discarding the bogus ones. Blockchain ensures an immutable and secure manner in which the entire data can be saved, therefore, a voting system with blockchain can produce results that the governments have long been searching for. This can address the biggest issue of the establishment of the democracy that the world is facing these days. Some startups are now building systems for government to ensure a safe online method of voting with blockchain.
Energy has always been a sector taken care of by the state. The producers and users of energy that cannot purchase it directly from one another, rather have to undergo a tiring process of buying it from the public grid or a private trusted distributor. There is scope to buy electricity or other means of energy in a peer to peer set up using cryptocurrency in the blockchain.
Trust is the core of all businesses, whenever you go and purchase a product from the market, you have an evidence of its physical presence before you. While in an unconventional set up like an online retail store, the marketer usually suffers a trust deficit on part of the customer. This trust deficit can be eliminated only if blockchain is incorporated in the retail shopping, the buyer and seller can connect without any hindrance with one another, and additionally, there is no fee taken in the name of a middleman. The security management done by this system for both buyer and seller are unparalleled.
The same issue of security that we have perpetually been highlighting throughout our article, remains to be the focus in this category as well. All kinds of businesses require trust and cannot work efficiently if the security of the user’s credits is not ensured by the system. The use of blockchain in the real estate can minimize the use of paper-based records and eliminate the chances of data tampering to guarantee safer, transparent and fraud-free transactions in real estate business. the blockchain can also track and verify the documents of ownership and check for the accuracy of information on the property documents. This system is the most suitable form of record keeping in the real estate business.
The blockchain which is an emerging technology, it’s revolutionizing the way financial services used to be provided in the past. There are several industries that this technology is going to massively disrupt and transform their functionality.