Everyone who’s not been hidden away from the world in a mountaintop cabin has probably heard of blockchain and its most prevalent use — cryptocurrency. This decentralized digital currency has been responsible for making (and breaking) many millionaires. Bitcoin, its first and most prominent application, has millions of followers and proponents worldwide. A single Bitcoin at the time of writing this sits at $27,000 (approximately). At one point, a single bitcoin was worth more than $60,000. Regular readers would know that I am interested in the rise of Bitcoin technology and the blockchain. But not so many would know that I also champion the use of this technology outside of the realm of cryptocurrencies. Blockchain technology has much going for it, and cryptocurrency is just one of its many applications.
Understanding Blockchain Technology
The easiest way to understand blockchain technology is with an analogy. Let’s say you live in a small village and you own a cow. You want to trade that cow for food, but you don’t want to trade the entire cow to the neighboring farmer. You decide to trade him some of the cow (maybe the right for the milk) in exchange for food for the rest of the year. The farmer accepts and tells everyone he knows about the trade. You do the same. In the future, if you intend to trade the rights to the cow’s milk to someone else, a member of your village will stand up and say, “No, you’ve already traded that to the farmer next door.”
The concept of blockchain is that everyone has a copy stored on their own systems. Each copy is a reflection of the whole. As time passes, new parts of the chain are added, and each person’s copy is updated to show that. When someone wants to do something on the chain, they need to get permission from the rest of the chain to do so. Depending on which chain it is, this happens in different ways. The result is that you cannot spend any cryptocurrency you do not have. Most chains are publicly visible, meaning anyone can trace a wallet and its transactions. Thanks to everyone having a copy, the system is secure since it requires someone to simultaneously change half the network to cause the chain to change. This, at present, is an impossibility.
Beyond Cryptocurrency: Diverse Applications
While the above example demonstrates its use in crypto, what else is blockchain suitable for? Let’s take a look:
1. Supply Chain Management:
Blockchain revolutionizes supply chain management by providing an immutable ledger for tracking goods from production to delivery. It ensures transparency and trust among stakeholders, combating issues like counterfeit products and inefficiencies. Companies like IBM Food Trust use blockchain to trace the origins of food products, ensuring food safety and reducing waste.
Blockchain enhances healthcare by securely storing and sharing patient data, improving interoperability among healthcare providers. This technology ensures data integrity and privacy, giving patients greater control over their medical records. Healthcare projects like MedRec use blockchain to streamline record-keeping and facilitate secure data access.
3. Voting Systems:
Blockchain-based voting systems promise secure, transparent, and tamper-resistant elections. Votes are recorded on a blockchain, eliminating fraud and enhancing voter trust. Various regions, including West Virginia, have piloted blockchain voting initiatives to explore their potential in elections.
4. Intellectual Property and Copyright:
Blockchain combats copyright infringement and protects intellectual property by timestamping creations and proving ownership. Projects like Verisart use blockchain to certify and authenticate artworks, safeguarding artists’ rights.
5. Smart Contracts:
Smart contracts are self-executing agreements with predefined rules on the blockchain. They automate processes in various domains, including legal, insurance, and real estate. For instance, Ethereum’s smart contract functionality is used for decentralized applications (DApps) and decentralized finance (DeFi) protocols.
6. Cross-Border Payments:
Blockchain facilitates faster and more cost-effective cross-border payments compared to traditional banking systems. Companies like Ripple use blockchain to enable real-time, low-cost international money transfers, benefiting individuals and businesses worldwide.
Challenges and Concerns
Blockchain technology seems interesting, but there are a few challenges and concerns about realistically implementing it. As the blockchain gets larger, verification times increase. Additionally, blockchains can be substantial energy hogs because of the typical Proof-of-Work protocol used in verification. Further, for true blockchain adoption, people must understand blockchain from its basic concepts and move up. Most people aren’t concerned about how the system works. Just that it does. As a result, legislation and regulation threaten to take away one of the most prominent selling points of blockchain — its decentralization and focus on the importance of the individual.
Future Trends and Innovations
Over the last few years, blockchain development has increased with a focus on addressing at least some of these shortcomings. Layer-2 (L2) implementations have sped up transaction time across the world’s largest blockchains. New paradigms in development have seen at least one major network (Ethereum) switch to Proof-of-Stake verification instead of Proof-of-Work, reducing the blockchain’s energy consumption significantly and further speeding up verification times. Research into blockchain’s use and viability continues, but unfortunately, its use as a basis for exchange is still up in the air because of how volatile it has proven. In this case, volatility means its inability to keep a particular price over a long period.
What Does the Future Hold?
Technology is advancing even faster than we can keep up with it. That doesn’t mean we should be afraid of it; instead, we should seek to understand it. One of the things I try to do on this Medium blog is explore emerging technologies in a way that makes them understandable and approachable. I want you, valued reader, to understand the things about this technology that I do and maybe get excited enough to see it grow and change our society.
If you want to stay up to date with technology in general, especially emerging tech, feel free to subscribe to me here on Medium. I post articles like these often to keep you informed about things I’ve discovered. It’s lovely to have you reading, and hopefully, I’ll see you in my next post!