The blockchain is a revolutionary technology that powers the Bitcoin cryptocurrency and many other cryptocurrencies. The main properties of blockchain are decentralization, security of entries, transparency and freedom that the technology provides to the users.
A brief overview of blockchain properties
Decentralization means that a blockchain network does not have a single point that is in charge of what happens on the network.
For example, on the Bitcoin network, miners compile transactions on the network into blocks of the bitcoin blockchain. Anyone can become a miner and anyone can become a user of the network and download a full copy of the Bitcoin blockchain that contains a record of all the transactions on the network since Satoshi Nakamoto created it in 2009 (a computer on a blockchain network with a full copy of the blockchain is called a node).
Decentralization means that no party can suddenly change the rules, which provides members of a blockchain network with a sense of security. It also means that a blockchain network is hard to hack because in order to attack a blockchain network successfully hackers would need to attack the majority of the nodes on the network.
Blockchain networks store information in blocks of the blockchain. All the blocks are cryptographically connected in a secure way, which means that if an attacker were to try and change even one digit or letter in the information in just one of the blocks of the blockchain, the network would reject the modified block. To connect the blocks, Bitcoin uses hashes creates using cryptography algorithm called SHA-256 created by the United States National Security Agency.
Because a blockchain network can be fully transparent, users can find information about all the transactions that have ever occurred on the network. For instance, you can see all the transactions for all the addresses of the Bitcoin network by visiting https://blockchain.info/ and either checking the pages of the blocks of the Bitcoin blockchain or by searching for any information you have about a transaction.
This approach can be very beneficial in a variety of different industries. For example, a car buyer could use a blockchain network to search for all the records about repairs of the car and history of the car. In the medical field, patients could use blockchain to find information about doctors and doctors could use blockchain to access records of their patients. In education, students wouldn’t have to request transcripts from the schools they’ve attended and would be able to prove that they have a degree with the help of a blockchain network.
Because blockchain networks are decentralized, they provide users with a high degree of freedom. When sending money using Bitcoin, you do not need to go to a bank or use any other central authority. If it were possible to transfer assets via blockchain, say, to transfer a car title ownership, there would be no need to go to the department of motor vehicles, wait in line, pay the fees, and then hope that the department of motor vehicles will not lose any of your paperwork.
Opportunities for entrepreneurs
Previously, if an entrepreneur wanted to raise capital, he or she had very limited opportunities. These opportunities consisted of getting investment from angel investors, which means that the entrepreneur would need to have affluent family and/or friends, small business loans, which are only available in developed countries, or access to venture capital, which is located just in a few areas of the world, in places such as New York City or Silicon Valley. Because of the concentration of venture capital in just a few spots, the competition for it is very high and the line to get in front of venture capitalists is very long. Blockchain and cryptocurrencies have enabled entrepreneurs to conduct ICOs or Initial Coin Offerings. An initial coin offering is similar to an IPO, or Initial Public Offering in that an enterprise or a group of people can collect funds for their venture. It is different in that ICOs do not give shares. Typically, they pre-sell coins that will later enter the circulation of a platform.
The ability to hold an ICO means than an entrepreneur in any country and from any background can utilize his or her marketing and selling skills to conduct an offering and start a venture. Something like this was never possible before.
Blockchain in financial services
The way banks operate today is a complete mess of separate systems trying to talk to each other. Sending money often takes a lot of time and comes with high fees, especially if done internationally. While banking is not an issue for most residents of developed countries, in the developing world a significant percentage of the population still doesn’t have access to banking services and credit. It is the availability of credit that is highly important for the development of economies and entrepreneurs starting small businesses. Often, banking systems use intermediaries to facilitate the process and serve as an independent third-party that can verify the transactions. This leads to long wait times, increased costs, and increased amount of paperwork. Blockchain can solve a number of issues in the financial industry, from faster money transfers to faster and more efficient processing of insurance claims to the management of smart properties.
Blockchain and the legal industry. Smart contracts.
One of the main differentiators that the Ethereum network has brought to the world of cryptocurrencies and blockchain was the ability of users to create smart contracts. Previously, users would need a third party to enforce a contract. Today, it is possible to use the Ethereum network and pay no third-party fees for contract enforcement. It is important to note here that the Ethereum network will execute contracts as written and if you have never created any legal documents, you would still want to contact an attorney to discuss potential pitfalls and issues of your situation. However, the network can and does execute smart contracts without any third parties, using blockchain to store and verify information and execute contracts.
Blockchain and the Internet of Things
Today more and more devices, including refrigerators, cars and voice assistants, need to be connected to the Internet to function properly, yet many of these devices to do talk to each other. Blockchain can allow the devices to communicate and perform transactions automatically. For example, your printer could order ink from Amazon. Your refrigerator could order food automatically and pay for it. Just like in other industries and areas of life, blockchain provides an extra level of security here.
Industries where trackable history plays a critical role
Because blockchain stores transactions in a secure way that can allow access to the history of information, the technology could disrupt a number of industries where trust and history play a critical role. For example, in the transportation industry organizations could use blockchains to track the history of movements of cargo. In the fashion industry buyers of clothing could use blockchain to verify that they are buying authentic products.
Blockchains could also be extremely useful in the car sales industry, medical industry, document verification process, copyright verification and much more.