Blockchain use cases: examining industry applications for blockchain technology

Source: technofaq.org

How does blockchain work?

In the most simple terms, blockchain technology is a public ledger that records transactions. Copies of that ledger are stored on thousands of computers all around the world, known as nodes. Anyone can become a node and participate in the network.

The ledger is also publicly accessible, but items on the ledger cannot be edited, altered, or deleted by anyone.

The blockchain is automatically updated any time a transaction is made – when a user uses their public and private keys to send or receive funds on the network. That transaction becomes part of a block, and new blocks are automatically dispersed to every node on the network.

Consensus mechanisms

So how do the nodes verify all these transactions? This is where consensus mechanisms come in. Two of the most popular ones are proof-of-work (PoW) and proof-of-stake (PoS)

Bitcoin uses PoW, a system where some nodes on the network engage in a process called “mining” to verify transactions and make sure the rest of the nodes aren’t trying to trick the system.

Mining essentially involves computers solving complex cryptography puzzles. When a correct answer is found, the miner is rewarded with some cryptocurrency – in this case, Bitcoin.

Every block in the blockchain is tied to the one before and after it through hashes. Hashes are long strings of alphanumeric characters that act as timestamps for the blocks. Mining involves using these hashes in equations to solve for a specific number. When that number is found, then the block is verified.  

Security and decentralization

A key concept in the blockchain industry is decentralization. The fact that these networks use thousands of nodes means no single entity is in charge of the network. Consensus mechanisms ensure the system stays regulated without the need for an overarching authority.

This is why security is one of the most well-known blockchain use cases. Blocks on the chain are unalterable and irreversible because of the hashes. If any part of a block were to be altered, it would completely change that block’s hash.

And because that block’s hash is tied to the blocks before and after it, it would change the entire chain. Nodes would have to reach consensus all over again by solving entirely new equations.

This means that while it is technically possible for a block to be edited, that edit will be worthless because all other nodes on the network agree to the original version of the block and have used consensus to verify that original block.

Therefore, they possess a more accurate copy of the ledger, and that change won’t be accepted.

On top of that, the decentralized nature of the technology means that hackers would have to take over 51% of nodes on the network if they wanted to take over the system.

Nothing can ever be guaranteed to be 100% hack-proof. But for a network with as many nodes as Bitcoin, a hack becomes an extremely difficult challenge.

Source: artandlogic.com

History of blockchain

The first description of blockchain technology was in a 1982 dissertation by David Chaum. Chaum is a computer scientist and expert in cryptography. His dissertation contained the computer code needed to build his blockchain protocol idea.

This protocol described all the elements of blockchain Bitcoin currently uses, except for the proof-of-work consensus model. For this reason, Chaum is known as the “godfather of cryptocurrency.”

Further work on the concept of blockchain and blockchain use cases was done in 1991 by computer scientists Stuart Haber and W. Scott Stornetta, with help from mathematician Dave Bayer. Their work focused on making the timestamps of records stored on the chain unalterable, thus ensuring the security of blockchain technology.

They also added Merkle trees into their idea of blockchain, which allowed several records to be stored on one block. This improved the efficiency of the technology.

The next major milestone for blockchain technology came in 2008 when Satoshi Nakamoto published his famous whitepaper for Bitcoin. The Bitcoin whitepaper used Haber’s and Stornetta’s ideas as a foundation but improved upon them by adding the concept of hashes.

Nakamoto added a proof-of-work consensus method, which used hashes to timestamp blocks. This allowed the blockchain to remain truly decentralized. Nakamoto’s ideas were put to the test a year later when he launched Bitcoin, the first cryptocurrency built on blockchain technology.

Since its creation, Bitcoin has achieved a market cap of $777,164,356,330, with a single Bitcoin worth around $40,000 at the time of this post (its all-time high was around $67,000 in late 2021).

While Bitcoin has seen a lot of success and institutional interest, its creation has helped launch a thriving blockchain industry full of innovative projects looking to compete with it.

Ethereum, Solana, Avalanche, and Cardano are just a few of the top cryptocurrencies looking to compete and improve upon Bitcoin. These blockchains have structural differences such as different consensus methods, organizational structures, or whether they operate publicly or privately.

Source: Photo by Pascal Bernardon on Unsplash

Why is blockchain seeing more interest from industries?

Now that you know more about blockchain, you might be wondering what the appeal is for so many different industries and how many blockchain use cases there are.

Blockchain can help solve many problems holding those industries back, or bring innovation to outdated systems and processes.

This is especially true in the financial system, where blockchain can bring more security. Because blockchain is decentralized, it eliminates the need for individuals to trust middlemen with their funds and sensitive information.

In addition, decentralization means information is not stored in a single centralized location, which can be far more vulnerable to hackers.

Protecting sensitive information is necessary for many other industries, like law and healthcare. Blockchain can be used to help these industries store this data online in a safe way, eliminating the need for bulky files that take up physical space.

It’s also possible to set up private blockchains instead of public ones for added security.

Next, blockchain’s immutable nature makes it a good tool for record-keeping. It provides a searchable ledger database where records can’t be altered or erased.

Bblockchain can also help with tracking the movement of physical products. This can be done through a process called tokenization, which is when digital representations of physical assets are stored on the blockchain.

We’ll get deeper into how this works and how it can benefit certain industries later in the series!

What’s next in the blockchain use cases series?

The future of the blockchain industry is promising. People typically only associate blockchain with cryptocurrency and don’t realize it can be applied to various industries. But as more discover the value blockchain can bring, it has the potential to revolutionize everything from film and music to law and supply chain management.

In the next part of the series, we’ll start our deep dive into blockchain use cases by examining how it can transform the real estate industry.