What is Blockchain?
Let’s define in plain English – Blockchain is a secured database that is shared by multiple participants distributed across the world connected through Internet. Data in the database cannot be changed and data state is verified by the multiple participants/entities, not by a central organization.
Underlying technology of Blockchain is called Distributed Ledger Technology (DLT).
Reasons behind so much Hype about Blockchain
Characteristics of Blockchain like immutable transparent smart contract-based trustless consensus is very useful in modern life.
- Decentralized Architecture – Decentralized Synchronized Ledger. Decentralized data is maintained in multiple nodes by multiple participants.
- Tamper-proof – Security and Privacy
- Trustless Consensus – Blockchain removes the dependency on the intermediary that was helping build the consensus between parties, say, between seller and buyer. In turn, Blockchain develops the consensus with a few algorithmic mechanisms.
- Transparent with Open Ledger
- Smart Contract – It represents a real-life contract in digital form that can be used in Blockchain.
Blockchain Technology Characteristics
- Cryptography – Important component in Blockchain architecture. It makes sure that the data in Blockchain cannot be modified by parties having access to the Blockchain. Two important components –
- Encryption – Process of converting a human readable text to cipher text that cannot be understood.
- Hash Function – A cryptographic hash is a function for encrypting any data to a fixed-size string.
- Consensus Mechanism – Capability of forming an agreement even when there is no trust-based relationship
- Immutability – A characteristic of Blockchain that the data in Blockchain cannot be modified. New data can only be appended so that a participant can view the history of the current data.
- Non-Repudiation – Any party cannot disagree the obligation.
- Permissioned vs Permissionless – Permissionless Blockchain is open to the public. Permissioned is not, it is restricted.
Token Economics support the conversion of the value of a physical object like a photograph or painting into a token that can be transferred on a blockchain system.
- Cryptocurrency – Digital currency, supported by Cryptography, used in Blockchain
- NFT – Non-Fungible Token. A token that cannot be interchanged. NFT Examples could be associated with photos, videos, and audio as digital files.
- Crypto Coin vs Token – Coins represents the medium of exchange in Blockchain. Tokens represent the asset. Coin is traded but functioning of token needs a smart contract. Tokens do not have their own blockchain.
- Cryptocurrency to FIAT Currency conversion in a country is a pre-requisite to investing cryptocurrency in that country. Please refer to this article for details:
Blockchain Use Cases
Though Blockchain was initially conceptualized to support world’s financial and banking system, eventually it grew to have far-reaching impacts on human life.
Transparent Blockchain system, along with the traceability of ownership information, enable counterfeit detection. For example, Guardtime HSX (https://guardtime.com/health/efficient-supply-chain-management) supports counterfeit medicines prevention; medicine track and trace pharma, Everledger (https://everledger.io/industry-solutions/diamonds/) is being used for diamond trade.
Removal of Intermediary for any final transaction is a big driver towards adoption of Blockchain. Decentralized lending is also important use case. Blockchain based KYC (Know Your Customer) and AML (Anti Money Laundering) process help financial regulators to prevent financial criminal activity.
An example to explain how Blockchain can also help Insurance sector – A good that is being insured, might be shared among multiple owners. In case of a damage, a third impartial party can easily inspect and quickly initiate the claim process.
Audits can be performed faster and effectively if all transactions are stored/recorded in a Blockchain-based system.
- Very important use case is related to storage of patient’s medical data. Medical history of a person and the current treatments can be stored in a Blockchain-based system, can be be inspected by doctors in faster and in accurate. Medical insurance companies can use blockchain and smart contracts for faster claim processing and detection of insurance frauds. Please refer to this article to read how U.S. Health and Human Services (HHS) department is using Blockchain-based application called Accelerate:
- Blockchain usage in Electronic Health Records (EHRs) –The blockchain characteristics like immutability, cryptography, distribution, decentralization, transparency, auditability, and nonrepudiation will enforce the stringent requirement of EHR regarding governance, interoperability, privacy, scalability, and security.
Example of Use of Blockchain for Healthcare
Image reference – Applications of Blockchain in Healthcare by Suyel Namasudra, Ganesh Chandra Deka
- Public Records – Protection of property rights and the proof of existence for use cases for exploiting the blockchain to store public records like Birth Certificate, Marriage Certificate, Death Certificate, Property/Land Registry etc. Will of an individual and subsequent management of pension or family’s funds can be implemented as a Blockchain Smart Contract.
- Election – Blockchain can record in a transparent and immutable way citizen’s votes.
- Intellectual property rights protection
- Exploiting Blockchain and smart contracts to reduce the workload of notaries. In Legal and Compliance areas, Blockchain has potential transform the processes.
- Donation Tracking – Tracking of donations. In addition, Blockchain can help to quickly analyze how donor’s funds’ is getting utilized, and thus guaranteeing the money is reaching the intended beneficiary.
A smart city incorporates a wide range of sensors and devices which collect data of the smart city and share them with service providers. IoT applications are imporant components for Smart City. Smart City can utilize the blockchain to support security of the systems. Also for secure authentication of IoT devices.
A students’ learning history can be stored on a Blockchain-based ledger. The student can have a clear idea of the acquired or missing. It will help identify the required skills/knowledge to be employable. This Blockchain-based system can have the ability to automatically suggest job offers.
Manufacturing supply chain – Blockchain is exploited to provide a guarantee of information on produced/assembled goods and products, be the information is manually entered or senso generated.
Vehicle lifecycle management – Blockchain could be used to track the history of a vehicle and details about the spare parts to improve vehicles recalls.
Applications rely on intelligent locks. NKN and IoTeX blockchain technology addresses these issues and offers a new decentralized alternative to short-term home rentals.
Supply Chain and Logistics
The prominent use case for Blockchain technology is the traceability of the product life cycle throughout the supply chain for its inherent capability of Traceability/Provenance.
- Medicines – For example, PharmaTrace developed a Blockchain-based system for end-to-end solution for Pharmaceutical Industry.
- Food – Condition Monitoring for Compliance and Product Quality is an important step for Food Safety.
- It is a modern economic activity. Airbnb and Uber are two significant players.
- Example of Blockchain-based short-term rental solution – https://www.thebeetoken.com/
- Decentralized Homestay/Couch sharing could also benefit from intelligent lockers, which could automatically enable the access to a house only to verified guests.
- For details how the Blockchain technology works in this field, please refer to:
Blockchain-based management of smart grids, when smart contracts will enable automatic energy trades among energy buyers and sellers. For example, a startup, LO3, is using the Ethereum blockchain to allow consumers to buy power either from a microgrid or from local producers.
Please refer to:
Blockchain supports the arts area of creative activities with provenance and authenticity registry and new forms of copyright registry. The non-fungible token enables investment in collectibles/arts.
Please refer to:
Blockchain can be used to track the production and delivery status. And smart contracts can be utilized to distribute profits.
Smart contract-based property rentals and exchanges, and managing construction logbooks are two important use cases.
Important use case can be maintenance check tracking logbook.
Personal Data Management
Blockchain-based KYC. End user should have some basic computer knowledge. Enable migrants’ identification.
IT applications can utilize the blockchain to support security of the systems. Could be used for the secure authentication of IoT devices. Blockchain has the potential to enable money transaction at device-to-device level like sale of sensor data etc.
- Other than overall possibilities of Cyber attackes, there are a number of Blockchain specific vulnerabilities – 51% Attacks, Sybil attacks, Routing Attacks etc.
- Security of Smart Contract is foundational requirement of Blockchain-based system. An error in the smart contract’s code can have devastating consequences.
- Healthcare-related use cases attach huge important to the privacy of users.
- When adopting a smart contract, organizations and individuals should keep in mind that a simple smart contract may need legal validity
- Sometimes, governance model like GDPR may have a conflicting relationship with technologies like Blockchain. For details, please refer to: https://101blockchains.com/blockchain-gdpr/
- Not all legal contracts and implications be expressed in binary format to express in a digital form suitable for Blockchain.
- Cryptocurrency volatility is always an issue.
- Development of Legal Structure with Policy and Practice around Blockchain is a fundamental need for Blockchain adoption.
- Unless Blockchain is widely accepted in majority of the countries of the world, the niche technology may miss some opportunities to be utilized.
- Finally, Post-Quantum Scenario with Blockchain is still a bit uncertain. Hopefully technologists and scientists will work together to make this technology a vehicle for future growth with positive impacts on societies across the world.