Automation and the inclusion of multiple parties allow for more efficient, secure, and cheaper cooperation. This is what blockchain promises, and it is driving decentralized service and business models. What is the blockchain and how does it work in practice?
What is Blockchain?
Blockchain is a decentralized peer-to-peer communication system in which computers can be connected on equal terms in a network. A long chain of data blocks allows for the fast, decentralized storage of transaction data and encryption. It has the advantage of allowing data records to be exchanged quickly and can be verified by all parties. The process is much faster and transactions cost are significantly reduced.
In an article published in Die Zeit, Maurizio Ferris, an Italian philosopher, explained the principle in detail using the ancient technique of the “notched stick”. In this method, two sticks are placed side-by and then carved crosswise. Each notch corresponds to a debt. The debtor takes one stick and the creditor the another. Since comparing the two sticks will immediately reveal the fraud, the creditor won’t be able to add another notch. He said that it was nothing more than a global, extended notch too many computers.
What is the Name Blockchain?
It is similar to the one described above. In the blockchain, or in German “Blockkette”, the blocks are arranged in a series and cryptographically linked. The resultant chain is immutable. Each block contains certain information, including the header, ID, time value, and hash value. Each block is given a unique digital fingerprint by its hash value. It identifies each block and links it to its neighbors immutably.
What makes blockchain so secure?
Transaction data validation and storage are distributed across the network so that there is no dependency on one server. Transparently, chronologically, tamperproof, and encrypted, the transaction data are distributed on every node of this network. The data blocks are linked together using cryptographic encryption. The chaining and encryption of information make transactions immutable and traceable. They are also virtually impervious to tampering. Let’s continue with Ferraris: Instead of the notch (i.e. the bars), a large number of hard drives are used. The always possible comparison prevents additions or deletions of so-called “blocks” (i.e. in the figurative meaning, the notches).
What are the benefits of this Technology?
Processes, data, and information must always be accessible, trustworthy, and traceable to ensure perfect collaboration throughout the value chain. New business models will benefit from the transparency and decentralization of this technology.
- Time-saving This technology allows for efficient and automated processes. Smart contracts, which can be stored on this technology and executed automatically, can be used to speed up transactions.
- Cost reduction – Direct peer-to-peer interaction reduces transaction costs within a blockchain.
- Traceability Using immutable transaction information, it is possible to verify assets or products’ authenticity and prevent fraud. Companies can detect weaknesses in the branching supply chain and trace the origin of items back to their producers.
- Transparency – All transactions can be tracked by all participants so that all members of a closed group can ensure they receive accurate and timely information.
Use Cases for Blockchain
The cryptocurrency was inspired by Bitcoin, a digital token that allows monetary values to be transferred without the need for centralized banking. Its ability to store transaction data fast, cheaply, and securely, as mentioned above, provides the foundation for digital currencies.
However, it also has many potential applications in the industry. Whether you are in the energy sector, trade, or media sector, cryptocurrency can bring about significant change and offer completely new solutions to a variety of tasks.
For example, energy operations can replace costly market communication standards like supplier switching. It is possible to track the value of containers within cross-service provider processes and to trace quality in critical cold chain processes (track’n’trace) in logistics.
Cross-market proofs can be used in the food trade to facilitate the coordination of direct and indirect recall actions. It is easier to implement business models in media sectors, such as video on demand. It is also easier to handle small-scale billing of digital content like music, videos, and articles.
These examples are only a small part of the immense potential of cryptocurrency and do not give an accurate picture of its capabilities. Even though we are only talking about a “digital peak”.
Blockchain technology is a powerful and exciting technology that has the potential to transform how businesses operate and how business workflows are run. We at Erna know how to empower businesses with this revolutionary technology.
Our team of blockchain technology experts will create customized blockchain-based apps that meet the needs and complexities of your business. Blockchain technology has many applications. We can help you find and realize the potential for your business.