How Blockchain works...

How Blockchain Works

A blockchain is an ever-growing list of records called blocks which are linked using cryptography. Cryptography is a process which encrypts and secures data communication to prevent third-parties from reading private messages. Blockchain technology is most commonly used by cryptocurrencies. This technology has been adapted by Satoshi Nakamoto to create and implement the cryptocurrency called Bitcoin. Blockchain is a distributed ledger available to everyone. Once the data has been recorded in a place, it will not be changed. It works just like a digital notary with timestamps to avoid tampering of information.

A blockchain is simply a chain of blocks that contains information. Each block has a cryptographic hash of the previous block, a timestamp, and transaction data.

Although the design is simple, it is this design that makes Blockchain invulnerable to data tampering.

Blockchain technology is an open distributed ledger that can record transactions of two parties securely and efficiently. As it is distributed, Blockchain is typically managed by a peer-to-peer network working simultaneously together to solve complex mathematical problems in order to validate new blocks. Once recorded, the data in any given block cannot be updated retroactively without changing all subsequent blocks, which requires the confirmation of the majority in the network. This is the main reason why blockchain technology is secure and not susceptible to hacking.

Difference between the banking system and the blockchain technology

The technology is highly secure as it is almost impossible to tamper or hack the transactions. It provides users with the complete transparency on where their funds go; it is a fully secure authenticated tool which can act as an auditing mechanism, recording and detailing all transactions that have occurred on the relevant chain. Furthermore, transferring funds using Blockchain only takes a matter of minutes.

Banking, on the other hand, is a centralized institution whereby a core institution or group of institutions controlled by the government or a large entity manage all transactions centrally. In this type of system, all data is stored in a centralized data storage available to only the entity with a lack of transparent information accessible to the public. Since it is controlled by a single entity, it is open to hacking, fraud, internal system errors, corruption, and data manipulation. The banking process is also very costly and slow. This can be illustrated when considering the process of sending international payments, for example. Correspondent banks are usually needed so that the beneficiary bank can receive the transfer. Correspondent banking works through an agreement between a foreign and domestic bank whereby a mutual trust is established to enable the domestic bank to make payments or money transfers on behalf of the foreign bank. What is actually happening in the background is the payment is being passed from one bank to another as it is not feasible for other banks to partner with other 1000+ banks worldwide.

How is Blockchain being used in business

When blockchain is used to secure information in a contract it can't be changed in any way.

Blockchain use allows them to receive the information they need without seeing the information that is sensitive.

When blockchain is used to secure information in a contract it can’t be changed in any way. This could be a major advantage for businesses that must deal with many contracts at any given time. Examples include retailers with many suppliers and real estate agencies just to name a few.

There is another advantage for multiple businesses in a chain. Blockchain use allows them to receive the information they need without seeing information that is sensitive.

International Transactions

Due to the encryption in the blockchain it is ideal for monetary transactions. This makes its use for international transactions desirable as well.

Payments and transfers can be done faster, more accurately, and at a reduced cost using blockchain technology. Additionally, banks would not be necessary to handle the transactions.

Audits

Because information is basically unalterable in a blockchain it can make tracking easier. If your business is conducting an internal audit, it can speed it up. Information should be more accurate and easy to find making the process much easier.

Risk Management

Do you remember the Listeria contaminated ice cream that killed 3 people in Kansas a few years ago? Such events are tragic, of course.

However, blockchain use in businesses could have made tracking the origination of the bacteria faster. Within minutes every carton could have been pulled from store shelves to prevent new illnesses from occurring.

Insurance Claims

Businesses today usually carry more than one type of insurance. For example, they may have liability insurance to cover accidents. But they may also have workers compensation insurance as well as vehicle insurance and others.

Using blockchain for the contract as well as claims filing ensures the accuracy and quick return of payments. It also allows for quicker settlements of the claims and any legal suits attached.

This makes both businesses and claimants happy because they can put unfortunate events behind them quicker. Insurance companies also benefit because use of blockchain can prevent payment of duplicate claims.

Taxes

Other than tax preparers, not a lot of people enjoy doing taxes. It’s cumbersome, time consuming, and a general pain in the neck. Image how blockchain could change all of that. It could be used to automate the entire process.

Human errors would be prevented, time could be saved, and refunds received much faster.

Car and Land Titles

Car and land titles could also be filed more efficiently with Blockchain. For instance, proving your identity would be nearly effortless and there would be no disputes over it.

Processing time would speed up. This would allow you to receive your title much quicker.

Clearly there are much surprising business uses for blockchain. Now, if only we could use blockchain to automate and speed up the widespread use of blockchain.