As the world’s fascination with cryptocurrency rages on, the technology that underpins it is also attracting more mainstream attention. Blockchain and the philosophies, products and services it has spawned are as ubiquitous as they are useful. But how does the revolutionary technology work? And what does this look like in practice, for individuals and the industries they work in?
Blockchain is a distributed ledger technology that abolishes the need for a central authority, transforming the way data is exchanged by increasing efficiency and transparency. Trust is established between nodes on a peer-to-peer network, and these decentralized nodes are used to verify transactions. Put simply, blockchain comprises a chain of blocks, each containing information. This string of information-containing blocks is held together by cryptographic keys called hashes. Once data has been recorded inside a blockchain, it’s very difficult to change it, making it an immutable source of information.
While blockchain is best known for its role as the foundation of cryptocurrencies, it could soon underpin more of everyday life in multiple industries.
1. IoT Cybersecurity
Ostensibly, the concept of a centralized security architecture appears to offer fewer inroads to attack than a distributed architecture. Offering just one singular location for compromise to take place, aren’t centralized communications and security architectures like public key infrastructure (PKI) the obvious choice compared to their distributed counterparts?
When it comes to IoT security, the answer is a resounding no. PKI leaves IoT systems vulnerable to man-in-the-middle attacks, as well as single points of failure across distributed networks. This is where blockchain comes in. Using multiple, decentralized nodes to establish trust on a peer-to-peer network means that even if an individual network goes down, transactions can still be verified. Resilience of this distributed edge security is enhanced by blockchain’s cryptographic hashes, which tie blocks in a sequence; transactions are validated using a shared history, insulating against man-in-the-middle attacks.
There’s a scalability element to it too: the more nodes on a blockchain network, the more resources are applied to verify a given transaction, the greater the security. When it comes to blockchain-based security solutions, there’s safety in numbers.
2. Financial Services
Having first attracted attention in the shadowy realms of cryptocurrency, it didn’t seem likely blockchain technology would seep into the mainstream financial services industry (FSI). Now everything from fintech to financial regulation is being overhauled by the technology, with its emphasis on security, transparency and efficiency.
Blockchain heralds a new age for digital finance. Banking using blockchain – with its combination of encryption and distributed storage – is not just faster and cheaper than traditional banking models, but also allows for accurate record-keeping and an exceptionally high level of security. FSI is beholden to more stringent regulatory standards than many sectors. Blockchain’s multi-faceted security enhancements, notably its undisputed audit trail, make for a symbiotic partnership.
With digital banking formerly the domain of clued-up millennials, legacy banks – historically slow to innovate – are increasingly looking to digitize their services, streamline operations, cut infrastructure costs and maximize profits, utilizing blockchain as a means of doing so.
3. Healthcare
As an immutable, decentralized log of transactional data, blockchain is the perfect candidate for storing – and critically, securing – healthcare data. Patient information goes beyond medical records and test results, spanning personal data including contact details and payment methods. The scope for damage should healthcare data be breached by a malicious third party is significant, so the tamper-proof record offered by blockchain is an invaluable asset in the healthcare industry.
Blockchain’s lack of reliance on a central repository – and the ensuing burden on that centralized authority to store, manage and own that data – makes it easy for healthcare providers to refer to patient information quickly and safely. No matter how many times you change doctors, your patient information will remain accessible and incorruptible.
4. Digital Identification
Blockchain’s historic use in cryptocurrencies means there is often a misguided belief that the technology is used to hide users’ identities. However, its ability to create an irrefutable record means it can play a key role in digital identification on an international scale.
The incorruptible nature of blockchain technology enables people to prove they are who they say they are online with relative ease. This has a democratizing impact on access to identification, allowing people who may have lost documentation while fleeing war zones or natural disasters, for example, the opportunity to prove their identity. In turn, this empowers displaced people to register for school or college, get a job or open a bank account.
5. Supply Chain Management
As the past year inhibited many from browsing neighborhood shops and buying local, a proliferation of online shopping meant the far-flung supply chain became more important than ever before. With humans unable to overwrite blockchain records, the technology offers an indisputable transaction log that makes it well-suited to track supply chains.
Smart contracts – programs stored on the blockchain that can trigger the execution of an agreement once certain conditions are met – can be put to good use during supply chain management too. For example, when a shipment of goods reaches its agreed upon destination, a smart contract could be used to log this fulfillment and launch a cascade of next logistical steps.