Blockchain technology has been in the limelight for over a decade now. First, as the underlying technology behind the first successful cryptocurrency, Bitcoin. And now, as a technology that can revolutionize multiple industries.
What Is Blockchain Technology?
It is a decentralized digital ledger mechanism that stores encrypted data in multiple blocks and those blocks are connected with each other in a chronological order, forming a chain. This is why it is called Blockchain. Data is encrypted in the form of hashes and then stored on a block in the blockchain. Each hash is a unique identifier of the data stored in the blockchain.
Hashes in a blockchain are created using cryptographic algorithms. The secure chain in a blockchain is created using these hashes. It is possible because each block in the blockchain consists of the hash of the previous block.
The cryptographic algorithms used to create these hashes are also responsible for secure transactions, identity verification, and data protection.
Key Features of Blockchain Technology
Have you ever wondered what exactly makes blockchain technology so important in today’s digital world?
Along with its decentralized nature and data protection, here are some features that make blockchain highly desirable.
- It offers greater transparency, meaning that each transaction within a blockchain is recorded in a permanent yet transparent manner.
- Due to its decentralization, blockchain does not require any third parties to facilitate transactions. It also eliminates the monopoly of complete control over the entire system by a single entity.
- Faster transaction times is another key feature of blockchain. It facilitates a smoother and faster transaction due to the consensus algorithms used in it.
- Transactions carried out using blockchain technology cost less than traditional methods.
- The cryptographic techniques used to encrypt data into hashes and immutability that come as a by-product make blockchain highly secure.
- Every transaction within the blockchain is permanently recorded, and thanks to its decentralized nature, everyone can view it. This also makes it next to impossible to alter.
- Data tracking is another feature of blockchain that makes it highly sought after in industries other than cryptocurrencies. Since data is encrypted within a specific hash, these hashes serve as a unique identifier for that transaction or data. This makes data tracking easier.
- Blockchain now is not limited to cryptocurrencies only. Due to its highly secure nature it is being used in industries such as Fintech, Healthcare, and Data management among others. Making blockchain a multi functional and versatile technology.
Other key features of blockchain include hampered counterfeiting and improved concurrency.
Importance of Blockchain Technology
Blockchain technology is revolutionizing multiple industries like Finance, Healthcare, data management, and supply chain management. It also has the potential to positively impact many other industries, making it highly sought after in today’s digital economy.
Apart from this, there is another crucial factor that you should always consider when determining the importance of blockchain technology. That factor is cyber security. We live in a world where we are always at a risk of data breaches and cyber attacks. There has been a 28% spike in the number of cyber attacks from the last few months of 2023 to the 1st quarter of 2024.
This accounts for 1308 cyber attacks per week, per organization. Making it, proverbially, an Avengers-level threat. In other words, ensuring cybersecurity is now beyond human capacity. Lucky for us, blockchain is all the ‘Avengers’ we need to deal with this threat. And this Avenger has been doing a pretty good job, so far.
Blockchain technology is important today, for many other reasons as well. Let’s take a look at them.
1- Builds Trust in Governments
Cyber Attacks have not only put small businesses at the risk of data breaches. In fact, government agencies and public sector services are at greater risk. Just in the second quarter of 2023, there were 1.5 million cyber attacks on government agencies and public sector services. According to the cases reported by the US government, around 15 million individuals were affected due to data breaches in 2023.
This has negatively affected the public perception of the government, regarding data security among other things. Another reason for distrust among the public is the lack of transparency.
Governments can benefit from blockchain powered solutions in this regard. Governments can offer transparency using blockchain. Due to its decentralized nature it’ll allow all stakeholders to view and verify data.
Blockchain can also support official processes in public sector services. For example, blockchain based land registries are being experimented in Sweden. This could lead to quick resolution of any property disputes.
2- Data Security
Government databases are at constant threat of data breaches and hacking attempts, both from individuals and agencies around the world. Blockchain can also help keep official data and public information secure from data breaches and hacking attempts.
It is because blockchain technology eliminates any single point of failure, making data breaches next to impossible. The Department of Homeland Security is actively exploring blockchain technologies in this regard. They want to use this technology to bolster data security, improve operational efficiency, and streamline service delivery.
Since blockchain stores data in hashes, it can help streamline service delivery. Governments can store citizen documents on blockchain. This will allow them to provide a verifiable digital document when needed.
Apart from Government agencies and public sector services, blockchain is also considered critical to success across multiple sectors.
3- Supply Chain Management
The transparency, traceability, and efficiency offered by blockchain is vital for supply chain management. Blockchain can be used to enable end-to-end traceability of products. This allows participants or managers to effectively track the origins and movement of goods throughout each stage of the supply chain.
You can record transactions and any other relevant data on the blockchain. This helps stakeholders effectively verify the quality of the goods and services.
4- Healthcare
In the healthcare system, patient data is invaluable. Unfortunately, it is also most easily accessible for hackers since it is stored in a physical memory system. Given the strong security features of blockchain technology, the healthcare industry is also moving towards blockchain powered solutions.
Although it is still in the early stages, the possibilities are huge. Patients have to connect with their hospitals whenever they need their medical data. However, with blockchain powered solutions, they’ll easily be able to collect their data directly. It is because the decentralization of blockchain technology eliminates the need for a middleman.
5- Fintech
Fintech or financial technology is perhaps the industry that has benefited the most from the inception of blockchain. Blockchain has changed the way we manage our finances. Without the use of blockchain, sending money becomes challenging due to the difference in exchange rates. Other than this, transaction fees are also a nuisance when it comes to moving your own money.
Thanks to blockchain, you can now send money from one place to another more effectively and at a relatively low cost. This is because blockchain eliminates the banks from the equation. Blockchain promotes a peer to peer payment system that is more secure and costs less than traditional methods.
Some other industries blockchain has the potential to revolutionize are;
- Real Estate
- Voting
- Gaming
- Stock Trading
- Cybersecurity
You might be thinking, if blockchain is that important or crucial to these industries, why aren’t we seeing more of it being used in our everyday lives. It can surely help streamline our day-to-day processes as well, right?
Yes, that’s a possibility. However, blockchain also has its own set of challenges.
Blockchain Challenges
The significant challenges within the blockchain industry include;
- Scalability: Scalability is an issue in the realm of blockchain. As more and more people are getting used to it, naturally the average transactions have also increased. Blockchain uses multiple complex algorithms to process a transaction. This makes it challenging for the blockchain to effectively cater to a high number of transactions simultaneously.
- Complex to Understand: To effectively use blockchain, you need a digital wallet. You also need to add some crypto currency that is supported by the wallet to perform transactions. This makes the entire process highly complicated and difficult to understand for the general public. It is also a reason why blockchain is not being used by the masses.
- Lack of Regulatory Oversight: The whole point of blockchain is to get rid of a central controlling body. However, this also makes it challenging to keep it clear of any shadow dealing. Where blockchain has facilitated transactions for us, it has also made it easier for hackers and other dark web users. This makes the entire blockchain industry highly volatile.
- Privacy Concerns: Yes blockchain technology is highly secure, but it is also a digital ledger that anyone can access. Although they can not alter it, they sure can view the information that is stored there. This raises many privacy concerns among users. To deal with this users need to have a private blockchain network, which is not quite feasible for all.
Final Verdict:
Blockchain technology is still in the early stages of development. It needs much more polishing and regulatory infrastructure for it to be used as a mainstream medium across industries. As to if it is important or not?
There is no doubt that it is important for many industries, like cybersecurity, but needs much more to be considered invaluable for other industries. But one thing is certain, blockchain is here to stay and is not going anywhere anytime soon.
