What Is Blockchain Technology and What Does it Mean for Business?
Blockchain is the technology that underlies virtual currencies such as Bitcoin. While the concept can be traced back to the 1980s with the introduction of the now-defunct electronic cash system called e-cash, the blockchain came into its own in 2009 with the introduction of Bitcoin. If you follow news on blockchain and cryptocurrency today, you can see this technology has been developing at a very fast speed.
Today, businesses of all kinds are exploring the possibilities of blockchain technology in order to reduce operational costs, increase transparency, and create faster, more secure transactions. What is blockchain? How is it different from other technologies used for the same purposes? And how can businesses get started using blockchain technology to meet their goals?
This article provides an overview of blockchain technology and its potential applications in business.
What Is Blockchain Technology?
Blockchain technology is a digital ledger that records transactions across many decentralized computers. A record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network. Blockchain is decentralized, meaning no specific entity or organization owns the chain of blocks. The ledgers are managed collectively by the network users, collectively known as the blockchain community.
How Does Blockchain Technology Work?
Blockchain works as a database technology to create a record that can’t be altered retroactively without the alteration of all subsequent blocks and the consensus of the network. Put simply, blockchain is a distributed ledger that stores information across many decentralized computers.
Beyond this basic functionality, however, blockchain technology employs several other features to enhance the potential uses in business.
First, it is a decentralized ledger. This means that blockchain technology does not rely on one central server to store information and validate transactions; instead, data are stored across the network of computers or nodes where each node must approve any changes for them to be enacted in the system. This decentralization makes tampering with records virtually impossible because anyone who tries would need access to all these scattered systems simultaneously–a nearly insurmountable feat given how fast blockchains can update themselves (every 10 minutes).
Second, blockchain offers cryptographic security by mandating advanced cryptography techniques for validation purposes which make hacking difficult if not impossible without possessing an immense amount of computing power capable of breaking through sophisticated ciphers.
Thirdly: since there’s no hierarchy involved among participants other than being part of a peer-to-peer network with shared interests in recording validated transactions securely, every participant has equal say as well as equal responsibility when it comes time to vote on potential updates made possible via consensus methods such as proof-of -work or proof-of -stake algorithms—giving everyone at least some measure control over their own destiny.
How Can Blockchain Technology Help Businesses?
These are just a few of the many ways that blockchain technology can help businesses. As you can see, blockchain has the potential to enhance many aspects of business operations, including reducing costs, improving customer experience, and enhancing security. But how do these potential advantages relate to the original goal of blockchain technology?
Blockchain technology can reduce business costs by increasing efficiency across all departments of an organization. Furthermore, the transparency brought about by blockchain technology can lead to significant reductions in operational costs, such as with employee time and management.
Improve Customer Experience
Customer experience can be enhanced through the use of blockchain in a number of ways. For example, a company could use blockchain to record the provenance of their products, from the planting of a seed to the fabrication of a final product, to provide transparency for future customers.
Security is enhanced through the use of blockchain in multiple ways. For example, a blockchain could be used to store sensitive information such as medical records. Or a company could use a blockchain to keep track of assets across suppliers to enhance security and compliance.
Blockchain technology can reduce the time taken to complete transactions through a number of means. For example, a business could use a blockchain to keep track of source materials, prevent fraud or tampering, and ensure accurate and efficient record-keeping.
Blockchain was born out of a need to create a more secure, efficient, and transparent digital monetary system. As you can see, blockchain has the potential to enhance many aspects of business operations.