According to an IBM Study, 80% of large corporations are investing in or considering investing in blockchain technology. Companies like Walmart, Maersk, and British Airways have implemented blockchain programs to strengthen their supply chain and airline ticket processes. And some companies have gone so far as to replace their existing networks with a blockchain system.
Here’s what you need to know about one of today’s most exciting new technologies:
We dive into each of these questions below…
Table of Contents
What is blockchain?
In broad terms, blockchain can be thought of as nothing more than a digital database; information recorded on a ledger that contains everything from financial transactions to medical records (though we’ll cover use cases for these two scenarios in subsequent sections). At its core level though, blockchain can be thought of simply as blocks – or ordered sets – of data being synchronized across a computer network by way of cryptography (for security reasons) and distributed software. Each block contains unique identifiers that allow for data inside it to be secured and properly verified before being added to additional blocks within the database. Unlike traditional databases which are stored in centralized locations, there is no central repository of data (hence decentralized); rather all nodes participating in a blockchain contain identical copies of the entire database. This means multiple parties can add new data without needing approval from others, but also means no single entity has control over any given piece of data. The crux behind blockchain’s success comes down to how resilient its systems are to attack. Because no single node has ownership over any given piece of data, hackers would not only need access to your specific node(s), but simultaneously break into each node across an entire network at once – something considered virtually impossible today due to both technical and economic challenges involved in pulling off such an attack/affecting such widespread disruption.
What does blockchain do?
Today, almost everyone who owns cryptocurrency owns either Bitcoin or Ethereum – the two largest cryptocurrencies by market cap (over $140 billion USD combined). While Bitcoin was first introduced in 2009, Ethereum only entered beta testing phases during June 2016. Both were created through ICOs: Initial Coin Offerings where anyone who wanted to buy tokens could purchase them and trade them later on. But while they may share similar features and names, they function in dramatically different ways. While Bitcoin is simply used to exchange value between users, Ethereum allows developers to build apps and services that utilize smart contracts – predefined contracts which trigger automatically once certain conditions have been met – along with data encoded directly onto blockchain. These features make Ethereum incredibly flexible when it comes to developing practical applications of blockchain outside of currency-based systems. To date, developers have used Ethereum’s platform to create everything from secure storage solutions, games, prediction markets and prediction platforms.
How does blockchain work?
At its core, blockchain is a shared database that maintains a continuously growing list of records (blocks). New data being added to a block can only be added if it follows a strict set of rules and regulations. If new data does not follow these rules, it cannot be accepted into a block. Before being accepted into any new blocks, data must meet these four key requirements: It must be valid – Data is checked for errors (encoded digitally via algorithms called hash functions) in order to ensure that it has no double-spends or duplicates. Hash functions guarantee data integrity. It must be signed – All data being added to a block is run through a one-way hashing algorithm which generates a unique fingerprint. That fingerprint must then be signed by each node in possession of said data (consensus). This prevents tampering and ensures that every copy of blockchain across its network is identical. It must be unique – Every piece of data being added to a block can only appear once. Once it appears, it cannot reappear again in any other blocks after that point. This one-to-many relationship means that no two blocks can ever be identical. And finally, it must be irrevocable – Once a new block has been accepted into the blockchain, it cannot be edited or removed by any of its participants.
Who is already using i?
Blockchain technology was originally something talked about by anti establishment figures seeking independence from central control, but it’s fast becoming part of the establishment. Companies such as IBM and Microsoft are selling it, and major banks and stock exchanges are buying.
How are organizations already using blockchains?
The first use of blockchain was as part of the cryptocurrency Bitcoin, which is based on blockchain technology. However, the practical applications of blockchain extend far beyond cryptocurrencies, and the technology is likely, in time, to impact many industries.
Let’s look at some real-world examples of blockchain technology in action:
Cutting out the middleman
Companies like Uber, Airbnb and Expedia act as aggregators, i.e. a centralized platform that connects providers of a service with customers who need that service. The centralized aggregator is the one in control here; they set their own terms and conditions, and, naturally, take a cut of each transaction as their fee. Blockchains are now being used to cut out the middleman and create a secure, decentralized way for service providers and customers to connect and transact safely and directly.
The world’s largest tourism company, TUI Group, is pioneering the use of blockchains as a way to eventually replace travel aggregators like Expedia. The company already uses a private blockchain to house its contracts, but is keen to create a public blockchain where agents and customers can engage directly with hotels. But TUI isn’t alone in this endeavor; Winding Tree is another company working to create a decentralized travel booking system, so expect to hear a lot more about blockchains disrupting the travel industry over the next few years.
Blockchain provider SimplyVital Health has already created two blockchain products that are designed to improve healthcare management. The first, ConnectingCare, tracks the progress of patients after they leave hospital, and the second, Health Nexus, is designed to provide decentralized blockchain patient records. Elsewhere, startup company Gem is working with the Center for Disease Control to build a blockchain for storing disease outbreak data, in the hopes of increasing the effectiveness of disaster relief.
Better banking and transactions
Barclays has already launched a number of blockchain initiatives for, among other things, tracking financial transactions and combating fraud, and Bank Hapoalim is collaborating with Microsoft to create a blockchain for managing bank guarantees. In another example, Aeternity’s blockchain platform allows users to create smart contracts that become active when certain conditions have been met, which means automated payments can be released when parties in a transaction agree that their conditions have been met.
Smarter supply chains
Knowing the status, condition and provenance of every product on your supply chain is key for businesses – and, for consumers, provenance is becoming an increasingly important issue. DeBeers is planning to use blockchain technology to trace diamonds all the way from the mine to the end customer, which will increase transparency and allow customers to verify that their diamonds are free from conflict.
Walmart is also using blockchains to track the safety of farm produce – which will be welcome news for consumers after batches of contaminated lettuce left dozens of people in the United States sick in 2018, causing the retailer to pull lettuce from stores as a precaution. From 2019, farmers will have to input detailed records of their produce into a blockchain and, in the event of any future contamination scare, Walmart will be able to pinpoint potentially contaminated batches much more easily.
Efficiencies in the world of insurance
Nationwide insurance company is trialing a blockchain solution called RiskBlock, which provides proof-of-insurance information. The goal is to help law enforcement and insurers (not to mention the insured) verify insurance coverage in real time, plus make the claims process faster and more efficient.
Blockchain-enabled smart contracts also have the potential to revolutionize insurance claims by ensuring only valid claims are paid out. For example, the blockchain would know instantly whether multiple claims have been filed for the same accident. And when conditions have been met for a satisfactory claim, payment could be triggered automatically, without any human intervention, drastically speeding up the resolution of claims.
Clearly, blockchain technology is still in its infancy, and has a long way to go before it can be considered even close to mainstream. Yet these examples show how industries are beginning to wake up to its advantages, and, as the technology matures, we can expect to see even more companies investing in blockchains.