- April 19, 2021
- By Joshua Reid
- Blockchain Technology , Technology , What is...?
- blockchain , blockchain network , blockchain networks , blockchain technology , business , crypto , cryptocurrency , pandemic
What Blockchain Technology Is and How It Is Used
According to IBM’s website, blockchain technology is “a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.” Essentially, blockchain technology is a digital book that allows a company to record and track transactions between their tangible assets (i.e. cars, houses, cash, etc…) and their intangible assets (i.e. copyrights, property, etc…) This allows a company to “reduce risk and cut costs.”
Because businesses, due in part to the Coronavirus pandemic, are increasingly virtual, blockchain technology has actually been a boon to companies. It allows them to keep track of their assets and who currently holds them. Additionally, blockchain technology “is ideal for delivering that information because it provides immediate, shared and completely transparent information stored on an immutable ledger that can be accessed only by permissioned network members.”
But how does blockchain technology work?
Blockchain Council’s website explains in three steps:
- The user creates a transaction over a blockchain network, known as a “block.”
- The requested transaction, as the website states, “is broadcasted over the peer-to-peer network, consisting of computers, known as nodes, which then validate the transaction.”
- After the transaction is verified, it’s placed with similar blocks to create the data necessary for the ledger.
It’s important to note that “with each new transaction, a secured block is created, which are secured and bound to each other using cryptographic principles. Whenever a new block is created, it is added to the existing Blockchain network confirming that it is secured and immutable,” as Blockchain Council’s website states.
What exactly does this mean for clients?
It means that, whether using cryptocurrency, records, contracts, or any other type of information, it will be kept safe and secured. Of course, some of the other benefits of blockchain technology according to IBM’s website include greater trust and efficiency. As a client of a company that utilizes or is thinking of utilizing blockchain technology, the client should be assured that their information won’t be given out, except to the people the client specifically lists.
But how does this technology help companies develop better strategies?
That depends on how the company chooses to use the blockchain tech. According to IBM, there are four types of blockchain networks, including public, private, permissioned, and consortium blockchains. Each one of these types of blockchain networks, while all having advantages that could be helpful to a company and its clients, also have several disadvantages that companies should look out for if they are interested in working with blockchain technology. Several disadvantages that companies should keep in mind about blockchain technology include:
- Little to no privacy about transactions
- One organization governing the network, giving them the ability to determine not only who is allowed to participate through services like Bitcoin, but also to maintain the shared ledger.
- Restrictions can be placed on who is allowed to participate in a private blockchain network and in certain transactions. This would require participants to request permission or be invited. While in some cases, this may be an advantage, it can also be a disadvantage because of the levels of bureaucracy that permission must travel through.
- Multiple organizations share the responsibilities of maintaining the blockchain. These organizations would be pre-selected and given the right to determine who can submit transactions or access the data.
Each of the disadvantages presented above should be weighed against the advantages that blockchain tech gives to companies before they invest in something like this. If not, you as a company could be hurting your changes of keeping the clients you already have and drawing in new clients. However, what are some advantages of blockchain technology? According to 101Blockchains, several advantages include:
- Better Transparency
- Enhanced Security
- Reduced Costs
- True Traceability (allowing people to trace where a product or good is going.)
- Improved Speed and Higher Efficiency
What is Blockchain Technology? IBM, https://www.ibm.com/blockchain/what-is-blockchain. Accessed 23 March 2021.
Geroni, Diego. “Top 5 Benefits of Blockchain Technology” 101Blockchains, https://101blockchains.com/benefits-of-blockchain-technology/#:~:text=Advantages%20of%20Blockchain%20Technology%201%20With%20blockchain%2C%20your,centralized%20entities%20or%20intermediaries%E2%80%99%20services.%20More%20items…%20 . Accessed 13 April 2021.
Srivastava, Nitish. “WHAT IS BLOCKCHAIN TECHNOLOGY, AND HOW DOES IT WORK?” Blockchain Council, https://www.blockchain-council.org/blockchain/what-is-blockchain-technology-and-how-does-it-work/. Accessed 23 March 2021.