A blockchain is a mechanism by which a ledger that stores transactions is made. The transactional data is then made available for relevant parties to engage with, view, and audit.18 Distributed ledger technology (DLT), of which blockchain is a part of, copies the ledger to several computers, or nodes.19 Consequently, the ledger is maintained by each node, which independently updates it when data changes occur.20
Because blockchain is decentralized, and forgoes the need for a single authority to manage operations, strict security protocols that are built on computational trust are in place. Every copy of the ledger is updated whenever anyone adds a new transaction, and all transactions are encrypted before they’re added to the ledger.21
Blockchain technology only allows transactions to be added; no provision is made for altering or deleting a transaction. This makes blockchain one of the most transparent technologies, which means that it’s particularly well-suited to the finance industry.
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What are the applications of blockchain?
Blockchain technology continues to provide solutions to a range of everyday problems. Monitoring and controlling fraud in supply chains, increasing transparency at the polls through digital voting, efficient asset management, faster banking, and less paperwork and more automation in real estate and claims processing, are a few examples.22 Other applications include:
- Supply chains. Blockchain technology is able to track and trace damaged or spoiled goods, which increases visibility and accountability, and reduces waste and loss from product-wide recalls.23 In order for maximum back-office efficiency to be reached, the entire supply chain must include automated inputs in the blockchain network
- Transportation and logistics. With the potential to consolidate and improve the fragmented systems, manual processes, and outdated IT architecture so typically found in the transportation and logistics industry, blockchain can be used to streamline receivable collections and payments by removing the need for a middleman. Consequently, it can also reduce the number of middleman-related disputes24
- Smart contracts. Typically used to enforce an agreement between collaborating parties, smart contracts are lines of code stored on a blockchain that execute automatically when certain predetermined criteria are met. All parties are assured of a desired outcome, and the contract removes the need for an intermediary.25
How blockchain technology will change business
Blockchain technology is poised to play a significant role in disrupting existing business models and processes. While traditional methods of conducting business will be disrupted, blockchain-based solutions will also present plenty of opportunities for organizations that are able to adapt and innovate. Some key ways that blockchain technology is already being used include:2627
- Better storage and data management. Blockchain technology allows for confidential data, including social security numbers, to be stored and shared securely. Its decentralized nature also protects against malicious attacks that target a single system.
- Unprecedented transparency. By providing entire networks with access to the same information in real time, blockchain technology is able to reduce processing times and eliminates the need for reconciliation between multiple parties.
- Increased security. Blockchain technology’s strong cryptography and decentralized nature make it hard for data to be altered or hacked.
- Improved efficiency. This technology has the potential to streamline business processes and reduce operational costs by automating back-office functions.
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Read more: Blockchain fintech online course – Krypto-NFTs