Many companies have more and more data to manage. They also have to worry about security risks and other issues when it comes to analyzing and sharing data. Those companies are turning to blockchain to help solve some of these problems.
Blockchain in finance
Blockchain is often associated with bitcoin, due to its ability to organize and store transactions. Because of its connection with finance, businesses can use Blockchain technology to track assets, create shorter transaction times, and lower the risk of fraud.
"Over the past two decades, the Internet has revolutionized many aspects of business and society-making individuals and organizations more productive. Yet the basic mechanics of how people and organizations execute transactions with one another have not been updated for the 21st century. Blockchain could bring to those processes the openness and efficiency we have come to expect in the Internet Era."
What is Blockchain?
Blockchain works by creating a data structure that can be shared among a network of computers. In the world of blockchain, each computer is called a node.The system uses cryptography to allow each person to manage the data securely. When users enter data into the blockchain, it is very difficult to change it or remove it. This is due to the fact that when a change occurs, all copies of the blockchain, created by individual users, run algorithms to check and approve the new data. If the data is valid and matches are found, the data will be added to the blockchain.
For example, when an organization completes a transaction, it receives a digital marker. Transactions within a certain time frame are collected and transformed into a single block of data. The block of data is sent through the process of verification by other sets of data on other computers in the network. Once the network verifies it, it becomes a part of the blockchain. Then all users on the network can see the new block added.
In this kind of system, each node usually has an entire copy of the blockchain. That way, if one part of the system goes down, there are copies across the entire network. This system also relieves users from the need for a central control agent. This means that data gets verified within the network and by the network, not by another control entity.
Blockchain can help improve many types of industries
As we alluded to above, there are many benefits to creating a blockchain system within the network. Overall, this type of system can help improve many types of industries, not just finance. It can help transform things like supply chains, IoT networks, gaming systems, and others. It could help organizations:
- Create more efficiency in the system
- Provide more security to the data
- Lower costs for organization
- Improve international payments and financial management
- Reduce time needed to process and approve transactions
- Reduce or eliminate overhead costs
Hardware issues and synchronization
Blockchain may have its advantages, but it can be difficult to implement. This kind of system requires all users and parts of the system to use the same network rules and technologies.
Many of the challenges to blockchain are due to hardware issues and synchronization. Businesses in multiple areas will need to be using the same systems and be willing to connect them for it to function correctly. For example, if we look at a supply chain, there are multiple parties involved: the company that placed an order, the resource suppliers, the manufacturers, and the banks. All of these moving pieces in the supply chain have to work together to create the blockchain, otherwise, it will be incomplete.
The uses of blockchain
The uses of blockchain are seemingly endless and many businesses will start to see more results from this technology when they overcome some of the challenges we discussed. Some potential and actual uses of the technology have already started to greatly impact many industries.
Blockchain could help make contracts between businesses more transparent and efficient. When someone shares the record on the network, anyone can update it as progress is made. Those changes then get verified and stored on all nodes in the network, for everyone to see.
When trading assets, a blockchain system can take out many factors and intermediaries in the process. This will make it faster, easier, cheaper, and more secure to buy and sell assets on the market.
Similar to its use in contracts, this application could help manage and track resources as they move within a supply chain. With shared information, the transparency of processes increases and people can stay informed about every piece of the chain.
In general, blockchain affects every industry:
- Financial services - trading, repayments, credit
- Government - financial management
- Manufacturing - processes, supply chains
- Retail - consumer transactions, reward systems
- Healthcare - electronic medical records
- Music - royalties
This is just the beginning of blockchain
As technology becomes more standardized or as more and more companies realize the benefit of blockchain, there will be more instances of its use. We are just at the beginning of seeing how far this technology can go.