What do voting results, healthcare records, and organic tomatoes all have in common? They all rely on centralized authorities to give their stamp of approval.
Usually, this system works reasonably well. But it lacks transparency. Unfortunately, there’s no good way for people to verify most information independently. It requires that you trust an authority to behave honestly. After all, you can’t count voting ballots yourself. And you can’t be sure if your organic vegetables are pesticide-free when you don’t even know where they’re grown.
Blockchain is one way to increase transparency in everything from supply chains to government elections. It’s a digital record of information that doesn’t rely on any single actor to approve the data.
Instead, all information on a blockchain is approved by a shared network of independent validators. Once information is added to the public blockchain, it can’t be changed or deleted – not even by a government or bank.
This way, no one needs to trust a single authority as the only source of information. As a result, the decentralized nature of blockchain technology creates a trustless system. Anyone can interact peer-to-peer, even if they don’t know each other.
How is blockchain already being used in everyday life?
Essentially, blockchain can improve any system that requires fast, efficient, accurate data processing. This means that almost any industry in the world could be enhanced by blockchain implementation.
Perhaps the best example of blockchain’s real-world application is cryptocurrency. The thousands of cryptocurrency coins and tokens on the market couldn’t function without a decentralized, trustless blockchain.
Cryptocurrency
Blockchain and cryptocurrency are so closely related that many people confuse the two terms. Blockchain is the technological foundation for cryptocurrencies like Bitcoin and Ethereum.
It allows you to use crypto for online payments or transfer money without intermediaries like banks. The blockchain makes this vast digital currency network possible and stores immutable records of each transaction on a public ledger.
Digital assets
Blockchain can be used to create a record of ownership for both digital and physical assets. For example, NFTs can be easily duplicated or copied. However, blockchain records ensure that an accurate chain of custody is maintained.
In terms of physical assets, blockchain can provide the record of sales and ownership for things like paintings, automobiles, or houses.
Smart contracts
Smart contracts are revolutionary advances in technology that rely on blockchain. These digital contracts self-execute once specific conditions have been met. The blockchain keeps track of each activity related to a smart contract. This way, intermediaries like lawyers or notaries don’t need to be involved.
Many smart contract deployments are currently happening in the decentralized finance (DeFi) space. For example, they’re very useful for automated lending and borrowing services. They enable providers to automatically approve loans or adjust payment plans according to the inputted data.
What are the benefits of using blockchain over traditional systems?
Blockchains are superior to traditional ledgers in many ways. Here are some of the main benefits:
- Lower transaction costs
- Immutable records
- Decentralized
- Efficient
- Transparent
- Trustless
- Privacy and anonymity
Not all blockchains have equal performance levels. Each blockchain is built for a specific purpose and has different features that give it advantages and disadvantages.
For example, Ethereum is the world’s second most valuable cryptocurrency blockchain. It serves as the launching pad for thousands of decentralized applications that power the DeFi space. However, despite its extensive functionality, it has scalability issues.
Ethereum can only process around 14 transactions a second. In contrast, a newer smart contract blockchain, Solana, can process up to 65,000 transactions per second. Ethereum also has some of the highest transaction fees in crypto. However, Ethereum 2.0 is set to launch soon and should solve these issues.
Another thing to be aware of is a blockchain’s interoperability. Some smart contract platforms, like Polkadot, enable cross-chain transfers of information. Their strength lies in communicating with other blockchains and transferring assets and data.
Blockchain use cases by industry
Below, we’ll discuss some of the practical ways companies use blockchain to increase transparency and efficiency.
Healthcare
Blockchain can be used to connect people with their healthcare records directly. For example, patients could access their confidential information with private keys to ensure that their records are accurate and secure. No more filling out new forms every time you visit a different doctor.
In addition, blockchain could improve the drug labeling process. Since different regions have their own labeling requirements, blockchain allows sellers to customize labels easily. Furthermore, the decentralized network would independently verify the labeling information. Then there would be no need for centralized regulatory bodies.
Government
Our digital identities are fragmented across all the different apps and websites that store our data. Blockchain could help governments establish authentic digital identities for individual citizens to protect them from identity theft. It would also increase the efficiency of civil services and immigration procedures.
Blockchain can also protect voting systems from fraud and human errors. Connecting citizens’ digital identities to the voting process would reduce the chances of election tampering. Real-time results could be determined with pinpoint accuracy. And since the whole process could be conducted online, it may increase voter turnout.
Cyber Security
Blockchains are incredibly secure. Since there is no centralized entity to hack, it’s difficult for hackers to compromise the security of the entire blockchain network.
The more participants there are in the network, the less susceptible to attacks. For example, Bitcoin has one of the largest blockchains and has never been hacked. It would take extraordinary financial resources and computational power to attempt an attack on Bitcoin’s blockchain. While smaller or private blockchains have vulnerabilities, they’re still more secure than most networks.
Manufacturing
Consumers are demanding an increasing level of transparency regarding retail products. Blockchain can establish an independently verifiable record to show that the manufacturer is taking the proper steps to follow regulations.
Whether it comes to proving the purity of food ingredients or determining which goods are ethically sourced, blockchain facilitates communication among stakeholders across the whole value chain.
Finance
There are countless ways for blockchain to be applied to the world of finance. For instance, blockchain can streamline Know Your Customer (KYC) procedures. This would make official onboarding for banking services much more efficient.
It can also help automate regulatory reporting activities without tedious manual input from several departments. And when it comes to transferring money across borders or between banks, blockchain is the best way to securely boost transaction speeds and lower fees.
Supply Chain
Supply chain management can be highly complex. Global supply chains are constantly generating enormous amounts of data, but it can be difficult to capture all this data in a way that increases transparency. Due to blockchain’s immutable record-keeping system, it is possible to trace goods from origin to destination.
For example, suppose a batch of baby formula is identified as contaminated. The manufacturer might find it time-consuming to track every shipment with standard record-keeping. In contrast, blockchain technology can improve traceability and allow the manufacturer to pull their defective products from the shelves quickly.
IoT (Internet of Things)
As more and more machines become connected to the internet, from home appliances to cars, we need a system for recording and managing the generated data. Blockchain is the perfect tool for integrating IoT devices into broader data systems.
For example, shared data from autonomous vehicles could improve safety and efficiency. Or data from global weather monitoring sensors could help predict natural disasters.
Real Estate
Blockchain can facilitate rental agreements, property sales, real estate taxes, mortgage payment plans, and more. In addition, all records about individual properties would be visible to the involved parties, reducing the possibility of disputes.
Another use case for blockchain is real estate tokenization. If you can’t afford to invest in an entire property, you can purchase tokens that represent a fraction of ownership in a property. This allows people to gain exposure to the real estate market without investing more than they can afford.
Energy
As the world shifts to a more sustainable energy grid, efficient distribution will become more and more important. Currently, renewable energy providers find it challenging to respond to fluctuations in demand.
Blockchain enables the grid to distribute power automatically and autonomously according to demand. Through smart metering, individual houses with solar panels can trade electricity with their neighbours in response to local supply and demand levels. If you’re consuming less electricity than you’re generating, you could sell this surplus to the grid.