Blockchain technology has emerged as a possible game-changer in many different sectors. The most noteworthy use of this emerging technology so far has been in the field of cryptocurrency, with Bitcoin leading the way. But blockchain is more than just a way to facilitate alternate currency—it has many different applications capable of altering the landscape of sectors outside of finance.
What Is Blockchain Technology?
Blockchain is a different method for storing information in a database or electronic ledger. Typical databases store information digitally in tables for easy access via various sorting tools. Blockchain stores its information into blocks of data in chronological order. When one block is filled up, it is locked and a new block is started. Blocks are given timestamps when they are locked so that there is an irreversible chronology to the data.
Blockchain technology has been key to the rise of the cryptocurrency market, most notably Bitcoin. Because blockchain creates a permanent, verifiable timeline, investors can see the exact price fluctuations of Bitcoin and make informed decisions about the future without having to bring in a third party to verify the data.
Blockchains can be set up, as Bitcoin did, in a decentralized manner. This splits the data across numerous computer nodes located in different locations, ensuring that no one user has control of the whole database. This has two practical effects. First, the data is better protected because no one node contains the entire database. Second, any alteration of one particular node will be detected by the other nodes working in concert with each other. The continuous recording of every change in the blockchain creates transparency for all users, as they can trace every transaction back to the beginning of the entire blockchain.
Blockchain can be more efficient than traditional databases, too. The shared information eliminates the need for continuous reconciliation of records across multiple nodes. Basic, often-used processes can be programmed automatically to speed up transactions and save valuable time. This is referred to as a smart contract, and it can be set up to automatically set particular terms for an insurance contract, for example.
Why Blockchain Is Important
The increasing problem of cybersecurity makes blockchain a serious option for data protection. Hackers cannot simply alter the data at one node because the majority of other nodes will show the changes the hacker made. To circumvent this, a hacker would need to alter the majority of nodes to conform to their desires, and that would require a major operation over multiple sites on multiple computers. The amount of resources needed to do this might well render any profit from the operation negligible or even cost the hacker money.
Any industry that deals with a large amount of stored data can benefit from adopting blockchain technology. The healthcare industry, for example, can place patient records into a blockchain for protection and to establish a chronological record of prescribed medicines, operations, medical history, etc. The blockchain can be set up so that only certain individuals can access a patient’s data, protecting their privacy.
The food industry is beginning to use blockchain to track products from their origins on farms through the distribution chain to the final consumer. This makes it easier to track any problems, such as food contamination, and quickly determine where and when the problem began, making it simpler to issue public warnings and recalls.
What Are Blockchain’s Downsides?
A major downside to blockchain technology is that while it can be used to protect sensitive data, it can also be used illegally to make illicit, untraceable purchases. Authorities looking to break up an organization using blockchain technology for their transactions must gain access to over half of the nodes to make sure the data cannot be altered. In some cases, these nodes may be located in different countries across the world, each with different laws and regulations. Law enforcement could run into bureaucratic nightmares trying to sort out all the red tape needed to seize the evidence.
Because blockchain is relatively new, different industries are just beginning to understand how to use blockchain and weigh the benefits of transferring their databases over to it. Current trends are leaning toward widespread adoption of blockchain technology across the entire spectrum of economic sectors, but there is no guarantee that this will continue. If it does, investment in blockchain could be a very lucrative enterprise.