What is Blockchain Technology
Blockchain, also known as Distributed Ledger Technology (DLT), uses decentralization and cryptographic hashing to make the history of any digital asset unchangeable and transparent. A Google Doc is a basic comparison for understanding blockchain technology.
When we produce documents and share them with individuals, the paper is distributed instead of duplicated or transferred. This creates a decentralized distribution chain in which everyone has concurrent access to the document.
Blockchain is an up-and-coming and revolutionary technology since it reduces risk, eliminates fraud, and provides transparency in a scalable manner for various applications.
How Does Blockchain Work?
Blockchain consists of three key concepts: blocks, nodes, and miners.
Every chain consists of multiple blocks, each of which has three essential elements:
The block contained the information.
When a new block is add the nonce is generated randomly, resulting in a block header hash formation.
The hash is a 256-bit number that is link to the nonce. It should start with a many number of zeroes.
A nonce generates the cryptographic hash when the first block of a chain is form. Unless mined, the data in the block is considered signed and is forever link to the nonce and hash.
Through a process known as mining, miners add new blocks to the chain.
Every block in a blockchain has its unique nonce and hash, but it also refers to the previous block’s hash, making mining a block difficult, especially on big chains.
Miners utilize specialized software to solve the exceedingly difficult arithmetic issue of generating an acceptable hash with a nonce.
Because the nonce is only 32 bits long and the hash is 256 bits long, there are roughly four billion nonce-hash combinations to search through before finding the right one.
Miners are consider to discover the “golden nonce” when this happens, and their block is add to the chain.
Making a change to any block earlier in the chain necessitates re-mining the affected block and all subsequent blocks. This is why manipulating blockchain technology is very difficult. Consider it “safety in math” because identifying golden nonces takes a long time and many computational resources.
When a block is thoroughly mine, all nodes in the network acknowledge the change, and the miner compensates financially.
Decentralization is one of the essential concepts in blockchain technology. A single computer or entity cannot own the chain. Instead of that the nodes connecting to the chain form a distributed ledger. Any electronic equipment that saves copies of the blockchain and keeps the network running is referr to as a node.
Every node has its copy of the blockchain, and for the chain to be updated, trusted, and confirmed, the network must algorithmically approve any newly mined block. Every action in the ledger can be quickly reviewed and examined since blockchains are transparent.
Blockchain technology in healthcare
All healthcare billing in the country works on a blockchain, and 95 % of health data is store on a ledger, with 99 % of prescription data being digital.
Hospitals and clinics face significant obstacles in managing, maintaining, and repairing medical treatment systems, necessitating important financial and human resources.
Example of blockchain in healthcare
Securing patient data
The most popular blockchain healthcare use right now is keeping our sensitive medical data safe and secure, which is unsurprising. In the healthcare industry, security is a very big issue. Between 2009 and 2017, data breaches exposed over 176 million patient records. The criminals stole credit card and banking information and health and genomic testing records.
Because blockchain can preserve an incorruptible, decentralized, and transparent log of all patient data, it’s ripe for security applications. Furthermore, while blockchain is visible, it is also private, hiding any individual’s identity behind complicated and secure algorithms that can preserve the sensitivity of medical data.
Patients, doctors, and healthcare providers can all share the same information swiftly and safely, thanks to the technology’s decentralized structure.
Blockchain technology in banking
Here are the key advantages of implementing blockchain for banks.
The real benefit of blockchain is its technique of validating and monitoring transactions—it allows people and businesses to perform transactions without a third party or a central bank. Several institutions have begun to employ the technology as an alternative to systems that rely on intermediaries and third-party transaction confirmation.
Instead of a single central authority controlling everything, blockchain creates a shared infrastructure by spreading control among all the peers in the transaction chain. Counterparty risk is reduced or perhaps eliminated as a result of this. Users can rest comfortably that transactions will be carried out following the protocol, obviating the need for a third party.
Blockchain is intrinsically secure because once data is recorded in a block, it cannot be changed retroactively. Because it is shared among many users and maybe watch by anybody who uses the system, it is impossible to shut down or hack.
Because of the decentralized nature of the networks, blockchain does not have a single point of failure and can thus survive attacks more efficiently. The usage of unique digital signatures that rely on public and private decryption codes to exchange transactional value in the blockchain is govern by tight cryptographic regulations. This lowers the fraud risk.
Banks can dramatically reduce transaction fees by eliminating third-party intermediaries and administrative costs for exchanging assets by utilizing the distributed ledger technique to establish a system that decentralizes trust. Processes including cross-border payments, trade, and settlement have become faster, more reliable, and less expensive due to the removal of the middle man. Furthermore, by eliminating the need for costly proprietary infrastructure, blockchain lowers material prices. It lowers regulatory compliance expenses in areas like Know Your Customer (KYC) activities by reducing risks due to improved data integrity.
Blockchain reduces the danger of duplication and errors, making it perfect for updating various digital operations. The elimination of intermediaries reduces settlement and transaction times to seconds and minutes, respectively. It also allows transactions to handle 24 hours a day, seven days a week. It also enables fully automated transactional operations, from payment to settlement, and eliminates any documentation delays caused by duplication. The data on the blockchain is complete, accurate, and trustworthy. Adding all transactions to a single, publicly accessible ledger is also a good idea.
Blockchain in banking case study
1. Faster payments
Banking institutions can employ emerging technologies to promote speedier payments and cheaper processing fees by providing a decentralized channel (e.g. crypto) for prices. Banks might introduce a new level of service, launch new goods to the market, and eventually compete with innovative fintech firms by delivering more robust security and lower payment costs.
Furthermore, by implementing blockchain, banks will reduce the requirement for third-party verification and speed up the processing of traditional bank transfers. By 2025, 90 % of European Payments Council members predicted that blockchain would profoundly disrupt the business.
2. Clearance and settlement systems
Blockchain, a distributed ledger technology, could allow banks to settle transactions directly and keep track of them better than conventional systems like SWIFT. Because our financial system was established, a typical bank transfer takes a few days to settle.
Many banks face logistical challenges when it comes to moving money around the world. Before reaching its destination, a simple bank transfer must transit through a sophisticated series of intermediaries, such as custodial services. Additionally, bank accounts must be reconcile across the global financial system, which includes a vast network of funds, asset managers, dealers, and other entities.
For example, suppose you want to move money from a German bank account to a bank account in the United States. In that case, you’ll use the Society for Worldwide Interbank Financial Communications (in short, SWIFT). SWIFT members send 24 million communications to more than 10,000 different organizations per day!
The centralized SWIFT protocol handles only payment orders. A system of intermediaries is use to process the money. Each one comes at a premium and takes a significant amount of time.
A decentralized transaction ledger, such as blockchain, could allow banks to maintain all transactions in a public and transparent manner. Banks will no longer need to rely on the SWIFT network of custodial services and regulatory authorities. They may use a public blockchain to settle transactions.
3. Buying and selling assets
Blockchain decreases asset exchange fees and minimizes the volatility of the traditional securities market by eliminating the middleman and transferring asset rights. Moving securities on a blockchain, according to one source, may save $17 to $24 million per year in worldwide trade processing costs.
Keeping track of who owns what while buying and selling assets like stocks, commodities, or debts is essential. A sophisticated network of exchanges, brokers, clearinghouses, central security depositories, and custodian banks helps financial markets do this. All of these different parties have been made on an antiquated paper ownership system.
As you can expect, the system is not only slow but also prone to trickery and blunders.
Electronically executing such transactions is problematic since most buyers and sellers don’t use the same custodian banks. These banks don’t always rely on trusted third parties to hold all of the paper certificates.
It’s worth noting that the German government now permits banks to provide crypto currency-related services. Ukraine is also on this track.
If you’re buying or selling something, will route your order through several different parties. It’s for this reason that transferring ownership is so tricky. It’s worth noting that each party keeps track of its version of the truth in its ledger. Not only is the system inefficient, but it is also inaccurate.
By building a decentralized database of digital assets, blockchain will transform financial markets. A distributed ledger enables the transfer of asset rights via cryptographic tokens that can be used to represent assets off-chain.
With purely digital assets, currencies like Bitcoin and Ethereum achieve this. Still, many blockchain businesses are currently working on solutions to help us tokenize real-world assets like gold and real estate. By eliminating the middleman, will reduce asset exchange expenses will significantly accelerate the process.