Beyond Cryptocurrency: How Blockchain Technology Is Transforming Industries?
Director of Marketing
Table of Contents
- Types of Blockchains
- Real-Time Applications of Blockchain Technology Across Industries
These are some of the many names credited to the blockchain technology over the years. Actually, blockchain is one form of distributed ledger and record-keeping technology.
The International Data Corporation (IDC) reports that worldwide spending on blockchain is expected to be nearly $2.9 billion in 2019, an increase of 88.7% from last years spending of $1.5 billion.
In October 2008, Satoshi Nakamoto published a whitepaper detailing the blockchain technology as an electronic peer-to-peer system. This was the origin of blockchain technology. As of today, more than a decade later, blockchain has become a revolutionary technology that finds its use in almost every industry.
In this article we aim to shed light on the types of blockchains in the market and their applications across various industries.
Types of Blockchains
There are mainly three types of blockchains:
Public blockchains provide complete decentralization because they are openly available to everyone. Users can read, write, and access these blockchains from anywhere in the world. Also called as ‘permissionless’ blockchains, these blockchain systems have no central authority that can make any changes to the ledger state or modify network protocols. Although the blockchains are publicly accessible, they are not vulnerable and exposed. These blockchains are extremely secure and anonymous and only make certain information openly viewable.
For instance, users can view all the transactions but cannot view the personal information of another user. The information pertaining to the transaction such as wallet number, amount, and date are made available to the public.
Private blockchains are as the name suggests, controlled by a central authority. They are not accessible by everyone as they are permissioned blockchains. A central authority is in charge of writing and validating the transactions, and can also give read and write access to verified users on the network.
Private blockchains are beneficial at the enterprise level where businesses choose to monitor and control all activities and manage roles within the network. Members of a private blockchain network have knowledge of each other but the transaction details are private. This is achieved by creating a level of cryptographic security on the system.
Consortium or Federated Blockchain
Consortium blockchains, sometimes also called as federated blockchains are semi-public permissioned blockchains that are essentially a hybrid between public and private blockchains. Consortium blockchains provide higher levels of security and auditability by adding more degrees of cryptography. Control over consortium blockchains does not lie with a single user but instead a group of authorized users. This allows for both centralization and decentralization within the same system.
By providing enhanced security, consortium blockchains mimic the traits of a private blockchain. Additionally, the security and control is maintained by more than one central authority, allowing the system to act as a public blockchain.
Real-Time Applications of Blockchain Technology Across Industries
Banking and Finance
Banking and finance were among the first industries to see the positive implications of applying blockchain technology. Cryptocurrency comes to mind when we think of blockchain and finance together.
Experts in the field are convinced that blockchain technology has the potential to change the way the global financial market operates. Here are some of the major areas in banking and finance that can be advanced by the technology:
Because blockchain technology is capable of storing any kind of digital information, it can be used to store computer code that is programmed to perform specific functions. Smart contracts are digital codes embedded in an if-then code and are self-executable. In actual live scenarios, contracts require the presence of an intermediary whose job is to ensure that both parties agree to the terms of the contract. With blockchain, the need for any third-party involvement can be excluded.
Most banking and financial systems across the globe operate on a centrally built database making them highly vulnerable to cyber attacks. Blockchain is essentially a distributed ledger comprising blocks of information. Each block records all batches of individual transactions and every block is linked to the next block. It also records the timestamps. This would significantly reduce the cyber crimes that affect many financial institutions.
Know Your Customer (KYC)
KYC regulations are intended to prevent money laundering and financial terrorism. This is carried out by verifying and validating businesses and clients. Per a Thomson Reuters survey, the global expenditure on regulating and performing due diligence on customers for the KYC process ranges anywhere between $60 million to half a billion dollars.
KYC verification using blockchain technology would not only be time saving and easier, it would also be a more efficient process when compared to the traditional method. As a decentralized architecture, blockchain can be used for gathering and storing customer data from multiple service providers and then stored into a single cryptographed and validated database.
A 2016 McKinsey report revealed that nearly 5 to 10 percent of all insurance claims are fraudulent. As the usage of connected devices is on the rise, insurance companies find themselves handling more data than ever before.
Insurance firms need to streamline processes and verify customer data to avoid any insurance frauds. In addition, insurers need to sift through large quantities of data to design tailor-made insurance plans for their customers. The costs involved in these processes is quite high.
Blockchain can prevent counterfeit transactions and identify suspicious ones because the technology acts as a public ledger and logs in every transaction. Using blockchain, insurance companies can automate claims processing and verify the authenticity of customers, transactions, and even insurance policies. Additionally, managing and tracking of digital assets is possible using blockchain.
One of the prominent use cases of blockchain in healthcare is patient and medical data management. Medical record keeping is an extremely important process in healthcare and doctors and patients often rely on this data to recommend and receive treatments respectively. Blockchain can be used to store relevant medical information in one place and make it easily accessible.
A 2018 survey by World Health Organization (WHO) reports that one in ten drugs sold in developing countries all over the world are substandard, resulting in the death of tens of thousands of people every year.
Blockchain-based systems can be used to keep a track of pharmaceuticals and organizations that manufacture drugs. This enables in the elimination of fake drugs from the supply chain. Further, blockchain can also be used for tracking clinical trials.
In 2016, cab hailing service provider Uber reported that their system was hacked and data belonging to 57 million users, both drivers and customers, was stolen.
The concern for online data privacy and security is growing as more organizations seek out solutions to prevent data theft and cyber attacks. With the application of blockchain based systems, companies can prevent data theft and fraud.
By storing information on a blockchain based system, the data is stored on a distributed network of several systems rather than one centralized system. This makes it extremely difficult for hackers to destroy the data, thereby ensuring that the security of data is maintained and well-protected.
An IDC report suggests that worldwide spending on IoT is forecasted to be $745 billion in 2019. The report also claims that the consumer IoT spending will reach up to $108 billion in 2019, making it the second largest industry segment.
The idea of combining blockchain and IoT technologies has invariably created a lot of hype as is seen with most emerging technologies. With the world adapting to the use of more connected devices, security and privacy of data is a growing concern among individuals and organizations.
Blockchain technology can be used in tracking connected devices and processing transactions without an intermediary. This would help in building trust between parties and devices, reduce overhead costs associated with intermediaries, and accelerate transactions. In addition, blockchain systems used cryptographic algorithms which secures all consumer data.
Blockchain + IoT can be applied across many industries. For instance, it can be used in the insurance sector for automating claims processing and developing smart contracts. Another benefit these two technologies provide is enhancing cybersecurity through fraud detection and management.
In many ways, the idea of the two technologies coming together as one entity still has challenges to overcome. However, experts in the respective fields believe that it is achievable.
Governments around the world–USA, UK, China, Switzerland are using blockchain to enhance various public services and create more employment. Using a blockchain-based system, individuals, enterprises, and governments can share resources across a distributed ledger allowing them to secure and preserve sensitive government and public data. Because the system is supported by cryptographic algorithms, it eliminates the possibility of system failure.
Although the US and UK governments were among the first ones to use blockchain, other countries are not far behind.
According to Uganda’s National Drug Authority, more than ten percent of drugs that are distributed in the country are fake. The Ugandan government is using blockchain to verify the distribution of counterfeit drugs.
Dubai aims to become the first government in the world to conduct at least fifty percent of all government transactions using blockchain by 2021.
Although a nascent technology for the field of HR, blockchain based systems could transform and automate many HR processes. A large part of the challenge that organizations face when it comes to recruitment is to validate candidates and verify their background.
A substantial amount of organizational time and resources are spent on this process, making it time-consuming and arduous. Organizations often turn to third-party recruitment firms as a way to save time and reduce their efforts in the process of recruitment.
From recruitment to payroll management, here are a few use cases of blockchain in HR:
Blockchain can be used to verify individuals’ identities, work experience, background and more. This information enables the HR team to assess potential candidates and assign them appropriate roles.
Blockchain can be used to store biometric data such as fingerprints and retina scans in real-time. This would enable organizations to record employee data such as attendance and expenses.
Compliance & Auditing
Data stored on blockchain-based systems is authentic and valid. Authorized personnel in an organization can conduct audit checks for compliance easily with the help of blockchain.
Many of the routine processes can be streamlined and automated with blockchain. From payroll tracking to managing business contracts, blockchain can help organizations manage processes more efficiently.
Gathering evidence and maintaining proper documentation is critical in legal proceedings. Lawyers are often flooded with a deluge of paperwork pertaining to various aspects of a case. A blockchain-based system can help law firms record and store such sensitive information securely. It also brings traceability to the system by enabling time-stamped cryptographic records. This enables legal authorities to make informed decisions and focus on more challenging aspects of the job rather than being held up with documentation.
Blockchain also proves useful in litigation and settlement issues such as bank frauds, contractual disputes, mergers and acquisitions etc. Because these legal processes are time-consuming and heavy on paperwork, law firms can use blockchain to reduce time and effort and bring more transparency to the legal system.
A recent report by IDC claims that the worldwide spending on blockchain solutions will reach $15.9 billion by the year 2023.
As blockchain experts find new ways to apply the technology across various fields, some blockchain solutions look more promising than others. Digital identity is one such application of blockchain that can transform how consumers, organizations, and even governments operate and utilize data.
Cybersecurity is another area where blockchain can prove extremely useful. The concept of a decentralized network and immutable system settings and protocols enhances security and privacy of data.
Blockchain technology is no longer confined to just digital currency. The distributed ledger technology has the potential to extend to different sectors such as fashion, retail, logistics, energy and many more as seen above.
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