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As Blockchain Technology begins to gain more and more popularity, many people struggle to form a clear distinction between Cryptocurrencies, Blockchain Technology, and Bitcoin.
While all these are technically similar, they are not necessarily the same. First, let us look at Cryptocurrencies. Cryptocurrencies are digital currencies that verify transactions and maintain records using cryptography rather than a centralized authority. In simple terms, the money is free from any government entity. Cryptocurrencies have no physical counterpart and are borderless, making them less restrictive for worldwide transactions. Also, cryptocurrency transactions are irreversible. The nature of cryptocurrencies makes tracking considerably more difficult when compared to the fiat system (more privacy).
Now, let us look at Blockchain Technology. Essentially, a blockchain is a database. It can store all sorts of digital data. But unlike conventional systems, a blockchain is made up of multiple copies of a specific database. In other words, it is a network of synchronized databases. So, imagine thousands of computers replicating the same computer program or file, and they communicate to ensure that everyone is on the same page and that the information is valid.
We call it a blockchain because it consists of a chain of linked blocks. But now, let us imagine that this distributed database is a ledger. Who can tell me what a Ledger is? A Ledger is a book that records financial transactions (e.g., debits, credits, balances, and dates). But a blockchain ledger is unique in that it can record and transact any digital data (not only money). And even more important, the data is immutable because it is part of a tamper-proof system → blockchain data can only change if all the network participants agree (reach consensus).
To illustrate, imagine that we have six participants that do not know each other. Each participant holds a copy of the ledger, recording the system transactions and balances. Note that there is no single person in charge. The data is verified and validated by all participants equally. What happens if someone tries to cheat the system? For example, trying to spend the same funds twice (we call it a double-spend). Since each participant holds a copy of the distributed ledger, they reject the fraudulent move, and the network removes the bad actor. In other words, the honest participants will stop listening to what that bad actor has to say. As a result, we have a tamper-proof database.
Now that we have covered all the bases, let us look at 3 Blockchain Technology Uses Cases.
Blockchain Use Cases – Remittance
Remittance is the transfer of money to a distant location, usually between individuals that live in different countries. In most cases, remittance consists of an immigrant worker sending money to their home country.
Today, remittances represent a large flow of funds into the developing world, surpassing foreign direct investments and official development assistance. According to the World Bank Group, the remittance industry grew in the past years, up 8.8% in 2017 and 9.6% in 2018.
Unlike traditional services, a blockchain network does not rely on a slow process of approving transactions, which usually goes through several mediators and requires a lot of manual work. Blockchain technology may solve some of the major problems faced by the remittance industry, such as high fees and long transaction times. The operational costs can drop substantially simply by reducing the number of intermediaries.
Blockchain Use Cases – Supply Chain
A supply chain is a network of people and businesses involved in creating and distributing a particular product or service – from the initial suppliers to the end-users and customers. A basic supply chain system often involves the suppliers of food or raw materials, the manufacturers (processing stage), the logistics companies, and the final retailers.
Currently, the supply chain management system lacks efficiency and transparency. Most networks face difficulties when trying to integrate all parties involved. Ideally, the products, materials, money, and data, need to move seamlessly throughout the various stages of the chain.
Since blockchains are highly resistant to modification, they can suit very well on supply chain networks. A blockchain consists of a chain of data blocks linked through cryptographic techniques that ensure the stored data cannot be altered or tampered with – unless the whole network agrees.
Therefore, blockchain systems provide a secure and reliable architecture for conveying information. Although often used for recording cryptocurrency transactions, blockchain technology can secure all kinds of digital data. Applying it to the supply chain network can bring several benefits – it can reduce the number of intermediaries, prevent fraud, and reduce labor work and delivery times. All of these benefits ultimately increase efficiency while drastically reducing costs.
Blockchain Use Cases – Healthcare
Some features that allow cryptocurrency blockchains to act as a secure record of financial transactions are also applicable to storing medical data. Since most blockchains systems have distributed means of recording and protecting files, they are difficult to hack or manipulate. The immutability of blockchain technology can enable the creation of incorruptible databases for medical records.
Also, blockchain peer-to-peer architecture allows all copies of a patient’s record to be synchronized with one another as updates are made – even though they are stored in different computers. Each network node holds a copy of the entire blockchain, and they communicate regularly to ensure data is up to date and authentic. So, decentralization and data distribution are also important aspects.
It is worth mentioning that blockchains are distributed but not always decentralized (in terms of governance). Decentralization is not a binary thing. So, depending on the distribution of nodes, these systems may present variable degrees of decentralization.
In the context of healthcare, blockchains are built as a private network, as opposed to the public ones used as cryptocurrency ledgers. While anyone can join and contribute to the development of a public blockchain, private blockchains versions require permission and are managed by a smaller number of nodes – for example, the Hospital Administration team.