Beyond Bitcoins - How Blockchain Technology Can Transform Businesses

Blockchain - the
technology behind the virtual currency bitcoin - might sound new to you today,
but it has all the potential to transform your world once it is widely adopted. 

In this blog, we will get familiar with the widely used bitcoins and blockchain
technology, how they have evolved together to create a disruption in finance
markets and the unanticipated impact of blockchain technology on businesses.

Beyond Bitcoins - How Blockchain
Technology Can Transform Businesses?

Blockchain - the
technology behind the virtual currency bitcoin - might sound new to you today,
but it has all the potential to transform your world once it is widely adopted.

In this blog, we will get familiar with the widely used bitcoins and blockchain
technology, how they have evolved together to create a disruption in finance
markets and the unanticipated impact of blockchain technology on businesses.

But wait, to start with, what are Bitcoins?

Simplifying bitcoins

Bitcoins are
digital currency created and held electronically. They serve as the backbone of
digital value transfer. According to a public survey by one of the block
explorer services, “There are over 10 million bitcoin wallets in the world.”

Bitcoin
transaction system is like a "trustless" system that implements its
own credit. It is not subject to any laws or regulations and is implemented
through machine languages. Credit is insulated from user influences during
system runtime and cannot be damaged.

Sounds amazing?
Yes? Then, the technology behind it will blow your mind!

Blockchain - Technology[1] [2]  that Powers up
the Ubiquitous Bitcoins

Blockchain is a
distributed, decentralized database or data structure that makes it possible to
create a digital collection of accounts and share it among a distributed
network of computers. Information or records are stored in blocks and chained
to the next one using cipher signatures. These blockchains have full copies on
each of the nodes in the system, and all the information is timestamped and
traceable.

Thanks to the Internet, the blockchain
system is easy to use and can now cover every corner of the world.

Features of Blockchain
Technology

DACT refers to the four major elements of the blockchain concept:

1.   Decentralization
of Blockchain: Refers to the
fact that the nodes on the entire system are equivalent, and every node can
join or leave freely without any impact on the system operation.

2..   Autonomous (No
need for Management Organizations): All nodes follow a standard rule and reach a
consensus.

3.  
Contractual (No third-party arbitration
needed): All transactions
and processes in the system observe a certain rule or contract.

4.  
Trackable: All transactions are traceable and irreversible.

Let’s
look at the benefits of Blockchain:

The following
benefits make blockchain-based systems stand out from other similar systems:

1)Global

Blockchain nodes
are available around the globe through open source communities to ensure
independent execution efficiency. This is due to the distributed design of the
system that means applications don't need to connect to all the nodes, but to
the nearest node to obtain required information.

2)Secure

Blockchain nodes
don’t allow any data tampering as any addition of transaction information
requires system consensus. Furthermore, blockchain-based systems have strict
permission settings. After a protocol is written into code, the encrypted data
of the system is made accessible to only a few users with appropriate
permissions. Even nodes participating in system operation cannot access the
data, which ensures maximum security in blockchain-based systems.

3)Open and
Transparent
Changes to public
blockchains can be publicly viewed by all parties to ensure transparency. In
fact, once data is stored in the blockchain system, all transactions are
traceable with complete copies of timestamped transactions available on each
node in the system. This ensures no loss or incorrect transaction results.

4)Immutability
All transactions
are immutable, which means they cannot be altered or deleted.

5)Faster Processing
and Transactions
Transactions
completed using blockchain systems are significantly faster and processed 24x7. 

While blockchain
technology application is best known in the financial services world, it can be
used in other industries as well to enable faster transactions that would be
impossible otherwise. It is believed that all transactions that require
authenticity identification, multiple-party involvement, source tracing, and
compliance must adopt well-known term of art - ‘smart contract’.

Understanding Smart Contract: An Advanced Concept

Many blockchain
researchers and practitioners consider an interconnection between blockchain
technology and smart contract. Though the early articles by Satoshi Nakamoto
never mentioned any such relationship, it is believed that blockchain
technology is the best choice when implementing the smart contract. Based on
trusted sources, the first person to propose the term, "smart
contract" was Nick Szabo, a computer scientist. He intended to realize
e-commerce relationships between strangers as being similar to legal contracts.  Szabo defined smart contract as a
computerized transaction protocol that executes the terms of a contract. The
objectives of designing the smart contract are to: 

1.Satisfy contract terms

2.Exclude possibility of unexpected
situations, whether malicious or unintentional

3.Avoid need for any intermediate third
party

Szabo believes
that through cryptology protocol and digital safety technology, smart contract
can be effectively implemented on the Internet to reduce fraud and lower
arbitration and transaction costs.

Let’s understand this smart contract concept
using an example of shared transactions:

Assume that Peter
has 100 Facebook shares in his account, with each share valued at about $100.
Jeff has $4,000 in his savings account. The status of their accounts look
something like below:

Let’s say; Jeff bought 40 Facebook shares from Peter at $100 per share. When
the $4,000 is transferred from Jeff's account to Peter's account, the smart
contract will find the condition met and transfer 40 shares from Peter's
account to Jeff's account. After the smart contract is executed, their account
status become:

This shows the
smooth execution of the smart contract. If the smart contract had not existed,
an intermediate third party would have been required for the transaction.

Why Smart Contract?

If you want to utilize the cryptography principle and electronic contract to
protect data from third-party tampering in a blockchain system, it will require
smart contract.
All transactions that require authenticity identification, multiple-party
involvement, source tracing, and compliance must adopt smart contract to
maintain reliability and ensure the security of data. Smart contract is
entirely based on blockchain technology.

While we have seen the transformation that Bitcoin has brought to the finance
industry, innovators are now more interested in the design philosophy of
blockchain technology and its application in various fields. Blockchain
technology is surely going to lead the wave of information technology in the
upcoming decades.

Future
of Blockchain

Blockchain
technology has the capability to optimize global infrastructure and efficiently
deal with issues when compared with current systems.

It can bridge the
gap between borders with shared ledgers of transactions and goods. It can be
used to develop a new bond trading system or to provide common platforms for
deposits across multiple banks. In fact, World Economic Forum estimates that
‘80 percent of banks are actively working on blockchain projects’.

Blockchain can
even be used to increase efficiency in the process of buying a house by
simplifying multiple processes related to banks, attorneys, title companies,
insurers, regulators, tax agencies, and inspectors.

It is already being used by a ride-sharing app, allowing drivers and customers
to connect without the need for a third-party ride-sharing company.

The Economic Times predicts,
“Blockchain technology is one of the crucial technologies that can even boost
replacements of bank staff and intermediaries of financial transaction system
by robots in the near future.” 

Exciting, right?

Is your company
also utilizing blockchain technology? Share your experiences with us and let
the world know!