What is blockchain technology and what opportunities does it open up for businesses?

HomeNewsWhat is blockchain technology and what opportunities does it open up for businesses?

Technology changes the world – communication, shopping, studying, entertainment, and business models. So even if your business is not IT related, it’s essential to be aware of the main trends. Otherwise, your competitors may leap ahead of you.

Blockchain is one of such trends. It’s being discussed in the global media and at industry events, as well as in public transport and cafes.

In its 2018 report, the International Economic Forum (WEF) included blockchain in the top 5 technologies that may change global trading.

The most popular book on Amazon on blockchain has already been translated into 15 languages. The authors father and son Don and Alex Tapscott, called it Blockchain Revolution. How the Technology Behind Bitcoin Changes Money, Business, and the World. Sounds defiant. But it seems there is a reason for this.

Why Blockchain Is Popular

For the first time blockchain technology was applied in 2008 to create Bitcoin. The impressive growth of Bitcoin and speculation on its price, and then the rise of other cryptocurrencies drew society’s attention to the technology behind it.

However, the emergence of cryptocurrency as a new method of payment and attracting investment is only the tip of the iceberg.

Blockchain technology has opened up fundamentally new opportunities in data transfer and conducting transactions safely, in large volumes and without intermediaries.

The largest corporations in the world became interested in this technology and began to implement it into their business processes. IBM, FedEx, Walmart, Apple—the list goes on and on.

These days when a company announces a blockchain project media interest in it immediately increases. One of the latest headlines is that Facebook will create its own cryptocurrency called Libra.

Meanwhile, for many people the blockchain remains “something related to cryptocurrencies” even though the potential of this technology is much greater. In this article, we are going to describe the essence of blockchain technology and the main challenges it can solve, including in private business.

What Is Blockchain Technology

The technology is basically a database that consists of blocks linked together in a chain. The properties of this chain:

  1. Each block stores information — anything, from transactional data to voting results.
  2. A set of such blocks can be considered a data registry that exists on the network in multiple copies—each user has a complete copy of the data.
  3. The registry is distributed, as each node (a computer connected to the blockchain) is both a client and a server, and there is no central server.
  4. Each subsequent block contains data about the previous one—thus, the chain is inseparable.
  5. In order to write in a new block, so it could appear in all copies, several blockchain nodes need to perform similar calculations and compare their results, using a complex encryption and verification system.
  6. The information contained in the blocks cannot be deleted, because it would require removing a block from each node in the system, and after that connecting the blocks that were broken at each node, which is practically impossible.

The properties mentioned above demonstrate the main feature of the technology: transparency. Everything is open—the full history of changes is available to all participants. It is impossible to make a change retroactively, to replace, delete or add data insensibly. This is provided by decentralization and a complex encryption system—there is no one “admin” who could secretly change the data.

When You Need a Blockchain

Transparency plus irreversibility of the changes made—this is the fundamental difference between blockchain and other technologies.

Imagine the potential of blockchain and processes that can be optimized with its help:

Digital currencies as a means of universal exchange

Payment can be carried out quickly, regardless of distance, and without the participation of third parties (such as banks).

Digital rights, Access Control, Verification

For example, in order to authenticate the rights of a photo, you need to digitize it and add it to the database of a special service based on the blockchain. After that, all media wishing to use your snapshot can make deals through the blockchain. As an author, you receive payment in cryptocurrency, and the clients receive a private access key. Now it’s easy to prove the rights to this photo. Everyone who doesn’t have a key is using it illegally. This scheme works with other intellectual property as well.

Authentication

The fact that the information in the blockchain cannot be hidden, and any updates are simultaneously available to all chain participants, helps to resolve the trust issue between the parties (this concerns both B2B and B2C).

For example, the blockchain-based platform TrustChain is used to track the origin and logistics of valuable jewelry—from mining to product creation and delivery to the point of sale. With the help of the platform, market participants can follow each other’s work, see how the participants of the whole chain fulfill their obligations, and see the results of quality checks made by independent companies.

And buyers can see public information—for example, a unique product identifier, which can be used to identify a fake.

Secure data storage

Due to the complex system of generating blocks based on encryption, changing history is impossible—this guarantees the protection of reports and other data.

Smart contracts

A smart contract in a blockchain network is an algorithm that triggers the automatic action execution when certain conditions occur. It allows deal participants to be confident in the fulfillment of obligations by the other party.

Simplified data management

The bureaucracy can be minimized since there is no need for intermediaries to confirm the operation.

Where Blockchain Can Be Used

There are “public” and “private” types of blockchain:

1. Public blockchain – a public network, the data is potentially open to all, each participant has the ability to record data. On its basis, cryptocurrencies such as Bitcoin work. Another famous example—the Ethereum platform.

2. Private blockchain – can be deployed in a private company, in a state organization. It is used as a control system for business processes. Data can be opened publicly, but the rights to all operations within the database belong to the company. Only authorized participants with necessary levels of access can connect to the network.

What we at Soft Industry are ready to offer to our customers is a private blockchain.

These are just some examples of where blockchain technology can be used:

Automation of business processes

Organization of electronic document circulation (For example: If a company has many branches), simplifying the process of coordination and approval, maintaining complex accounting, generating documents and reports, and increasing supply chain transparency and efficiency.

  • Finance. Financial transactions’ automation, cryptocurrency, e-wallets.
  • Jurisprudence. Creating legal records, court decisions, real estate transactions, certifying transactions, managing data registers, copyright protection, anti-counterfeiting, etc.
  • Education. The authenticity of the diplomas, awards, etc.
  • Scientific research. Results of performed experiments.
  • Trade, insurance. Smart contracts, mutual settlements between the parties.
  • Attracting investment. Crowdfunding, ICO (instead of placing shares, you create a cryptocurrency for your project, which investors can buy).
  • Charitable funds. The blockchain provides transparent e-government systems (you can show proof of the targeted use of funds).
  • Projects at the state level. Verification of voters and voting results safety, registers of property rights, voters, civil status, public and private auctions, public databases of driver’s licenses, issued fines, state registers of the land bank (cadastre).

Summary

The emergence of the blockchain has resonated around the world since this technology opens up innovative new opportunities: to exclude a third party when performing certain operations, to transfer property rights directly and across any distance.

You no longer need to have a judge in the game, because the blockchain will control the implementation of the rules.

Today, companies have the opportunity to get the following advantages with blockchain:

  • Reliability. It is almost impossible to change the data since all operations are checked and confirmed by several nodes of the system. Loss of several nodes will not affect the integrity of the database since each one has its own copy.
  • Easy to validate data in case of a contentious situation.
  • Exclusion of the human factor in the process of monitoring compliance with the terms of the contract (laws of the country, any “game rules,” etc.). It is only necessary to formulate correctly the request and the rules for its implementation in the blockchain.

Note that this tool, like any other, is not suitable for every project:

  • The technology involves numerous nodes in the system and the presence of complex verification algorithms, which means that the network runs many times more operations than with client-server architecture. This process requires more time to calculate and verify, high power demands and very significant costs for electricity. It would be reasonable to use this technology for companies with three or more branches and a staff of at least 300 employees.
  • Difficulties may arise in the process of formulating the “game rules”.

We at Soft Industry strive to provide our customers with all the latest technologies and, accordingly, opportunities. We can offer high-tech solutions to modern problems using blockchain technologies.

Our team can offer:
– Private blockchain deployment;
– Development of a technical side for ICO;
– Smart contracts development.

These will be described in further articles.

Let’s work on it together!

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