Thanks to the recent popularity surge of digital cryptocurrencies like Bitcoin, the term “blockchain” has gone from obscure technical jargon to one of the most bandied-about buzzwords in business and financial news. However, the concepts behind blockchain remain widely misunderstood, and most people still think its uses are limited to counting digital coins.
In fact, Bitcoin is just the beginning point for blockchain technology, which has a range of applications that extend far beyond the cryptocurrency world. In this article, we’ll explain how blockchain technology works and explore some of its potential uses for forward-thinking companies who want to improve security and efficiency.
How the Bitcoin Blockchain Works
The main purpose of blockchain technology is to enable peer-to-peer transactions that are transparent, secure, and almost instantaneous. Blockchain technology was invented by “Satoshi Nakamoto,” which is the name used by the unknown person or group of people who developed Bitcoin and published the original whitepaper that described the currency’s underlying technology.
Although blockchain technology now exists independently of Bitcoin and has applications outside the cryptocurrency world, the Bitcoin blockchain is still the best-known example of blockchain technology in action. So, we’ll first examine how the Bitcoin blockchain works and then describe some ways in which the model can be adapted to other industries and use cases.
The Bitcoin blockchain is essentially a digital database of Bitcoin transactions, not unlike a giant spreadsheet. In blockchain terminology, this database is called the “ledger” — so when you hear the term “ledger” in reference to Bitcoin or any other cryptocurrency, that term refers to the blockchain and vice versa. Data about each transaction in the ledger is combined with other transactions to create a “block,” and since the blocks are linked together in a continuous record of transactions, they’re called a “blockchain.”
Unlike traditional records, the Bitcoin ledger isn’t stored in a central location, either digital or physical. Instead, it exists on a network of many connected computers, which are typically called “nodes” in blockchain language.
The other major difference between the Bitcoin blockchain and a typical database is that the records in the blockchain are connected and protected using cryptography, which means they’re encrypted and decrypted using codes that rely on complex mathematics.
In practice, this means that when a transaction gets added to the Bitcoin ledger, it requires a node to solve a complex math problem to verify the transaction and add a new block to the chain. In the case of the Bitcoin blockchain, nodes compete to be the first to solve this problem, and the winner gets an amount of brand-new Bitcoin. This work of competing to solve math puzzles and verify transactions is called “mining,” and it’s how new Bitcoins come into existence.
Blockchain Advantages Include Reliability, Efficiency, and Trustworthiness
Moving beyond Bitcoin, blockchain technology offers a package of benefits for recording transactions and data entries that no other technology can claim. This is why blockchain has generated so much excitement in the business and technology worlds. The most notable advantages of blockchain technology include:
- Simplicity and Cost-Effectiveness
Proprietary systems for data storage make it difficult for businesses to share data with one another, but blockchain technology provides a way for businesses to easily make important information available to one another while maintaining security. And blockchain removes the need for a third party to provide secure data storage, which also eliminates the costs of hiring those third parties.
- Reliability and Availability
Since a blockchain is a decentralized database, there’s no single point of failure. In fact, with blockchain technology, the entire record exists on each node in the network, so the records in the blockchain always remain accessible unless every single node fails.
- Security and Trustworthiness
Blockchain’s combination of cryptography and decentralization creates an unparalleled degree of security. The encryption protects the identities of users and makes transactions safe and secure. Meanwhile, the fact that that the blockchain is spread across many nodes means that even if a hacker breaks into one node and tries to make unauthorized changes to the database, the other nodes will see the discrepancy and refuse to accept it.
Beyond Cryptocurrency: Business Applications for Blockchain
Since blockchain is a relatively new technology, many of its applications are still in the early stages of development and refinement. However, forward-thinking businesses are already starting to incorporate blockchain technology into their business models in meaningful ways. Below are a few examples of potential business uses for blockchain.
Delivering Secure Payments in Real Time
The current delays associated with traditional payments and fund transfers represent a major point of inefficiency for businesses. Since blockchain technology enables real-time payments, it can streamline everything from vendor payments to company payroll processes.
Improving Supply Chain Efficiency
Today’s supply chains are exceptionally complex and opaque. However, blockchain technology has the potential to not only help companies track inventory and assets efficiently and reliably but also allow them to communicate that information securely so partner companies can view inventory and track orders in real-time. (One area of blockchain R&D that we’re investing in right now at Stratus Innovations Group is food traceability and food safety.)
Enhancing Security in IIoT Systems
The industrial internet of things (IIoT) offers enormous potential for forward-thinking businesses, but the level of security in IIoT devices varies widely. However, an IIoT system could use a blockchain to register and verify devices in an incorruptible and decentralized database, which would minimize the risk of unwanted intrusions into the system.
Making Contracts Smarter
Blockchain technology opens the possibility for “smart contracts,” which are software codes that define agreements between multiple parties. Not only does this approach protect agreements against revision or deletion, but it also allows for their execution to become fully automated. For example, a business could set up a payment agreement so that a vendor receives payment instantly and automatically when the business receives an item and adds it to their inventory.
Stratus Innovations Group: True Experts in Cloud Computing Solutions
At Stratus Innovations Group, we focus exclusively on providing leading-edge cloud solutions. That’s why we continually monitor the latest developments in up-and-coming technologies like blockchain so we can provide our clients with custom-crafted, innovative cloud computing solutions to stay ahead of their competition.
To find out how Stratus Innovations Group can help your business implement customized cloud-based IT solutions that deliver immediate business value, call us at 844-561-6721 or fill out our quick online contact form and let us know what you need help with. Our sole purpose is helping your business become more profitable and efficient, and we look forward to helping you bring the power of machine learning and cloud computing to your organization!