Although originally known as the technology behind bitcoin, blockchain’s potential extends considerably beyond cryptocurrencies, with major tech firms and banks among the many organisations which are actively looking at ways of exploiting the concept for wider uses.
In simple terms, blockchain is a distributed public ledger – a consensus of shared, replicated and synchronised digital data which is spread remotely across multiple sites, countries or institutions rather than being held centrally in one place, such as on a server. Instead of using a middle man such as a bank to make a transaction, blockchain removes the need for third party intervention, allowing consumers and suppliers to connect directly with each other.
By using cryptography to keep exchanges secure, a blockchain provides a “digital” record of transactions that everyone on the network can see, the network in this case being a chain of computers all of which must approve an exchange before it can be verified and recorded.
The potential applications of blockchain are vast, and include any type of transaction that involves value, including money, goods and property – such as tax collection, trading in securities, birth, wedding and death certificates, even nuclear codes!
By way of illustration, here are just a few applications where blockchain technology can be expected to have a major impact on business.
- Smart Contracts
Although the term “smart contract” was first used in 1993, it gained popular currency with the Ethereum platform, the best known of the digital currencies after bitcoin. A smart contract is essentially a computer protocol which facilitates and enforces the performance of a contract. It is akin to a computer program that is automatically executed when specific conditions are met. And, because they are run on the blockchain platform, contracts will be executed just as programmed – with no possibility of downtime or third party interference.
Smart contracts can be used for any form of financial or legal transaction, offering total security at minimal cost.
- Cloud Storage
Current cloud storage is similar to banking in that it relies on trusted third parties to act as intermediaries and to hold secure, private data. This makes it an ideal application to be replaced by blockchain, where data can be stored on dozens of individual nodes distributed around the globe, rather than in a regional data center which represents a potential single point of data.
With a blockchain, no third party controls user data or has access to user files, ensuring total privacy. There may also be the possibility of considerable cost savings for users, freed from dependency on major cloud capacity suppliers like Amazon.
- Supply Chain Efficiency
Most businesses sell products that are not made by a single company but by a chain of suppliers who sell their components to a single company that assembles and makes the final product. The issue with such a supply chain is that if there is a problem with one of the components, the whole brand or product can be affected, and the efficiency of the system compromised. With blockchain technology, digitally permanent records, which can be verified and approved, can be created to show the state of the product at each stage of the value chain, allowing individual suppliers to be paid for their part, irrespective of issues with the “chain” as a whole.
- Employee payments
With its roots in crpytocurrencies, it is logical for blockchain to be considered as a means of paying employees – for example, if a company has overseas employees or contractors. Incorporating bitcoin in the payroll process, for example, could eliminate costly fees associated with bank transfers, as well as the time delays associated with moving money from one country to another.
- Online Voting
Blockchain is seen as a way of bringing the voting process into the 21st century, whilst guarding against election fraud. By providing an online, secure means for people to place their votes, blockchain can allow voters the means to safely record their votes without revealing their identity or political preference. In turn, officials can count votes and have confidence that each vote is attributable to one voter only, no duplicates or fakes can be created, and no tampering can take place.
Blockchain technology is here to stay. While it may have had its origins in bitcoin, the concept of a distributed public ledger which eliminates the need for intermediaries whilst offering enhanced security and privacy has many wider applications and potential, and its uses in many different fields – health, government, information technology, security, legal, human resources, to name but a few, as well as financial markets – appears to be endless. As such, we can expect it increasingly to become a common phrase in the lexicon of business, as more people look to embrace the concept and expand what can be done with the technology.