How can it be used and what problems does it solve?
In simple terms, blockchain is a distributed database that everyone can get a copy of. Every person with a copy can add new records to this database but cannot change any record once it’s in there. This property makes a blockchain great to record data in a transparent way because everyone gets to see what’s in it. So how can it be used?
Let’s start with the most obvious and most popular application of blockchains and that is cryptocurrencies. When Bitcoin launched in 2008 it allowed people to directly transact with one another without having to trust third parties like banks. Since then over 1000 different cryptocurrencies have been created. But let’s look beyond cryptocurrencies.
Note that these are not my ideas. They are from news, events, and online resources of information.
An interesting application is digital voting. Right now voting happens either on paper or on special computers that are running proprietary software. Voting on paper costs a lot of money and electronic voting has security issues. We could use blockchains to cast and store votes. Such a system would be very transparent as everyone could verify the voting count for themselves and it would make tampering with it very difficult. You can check out the Swiss company Agora regarding this matter.
There are many challenges regarding blockchain-based voting systems. First, you have to be able to identify voters without compromising their privacy. Secondly, if you allow people to vote with their own computers or phone, you have to take into account that those might be infected with malware designed to tamper with the voting process. Thirdly, a system like this also has to be able to withstand denial-of-service attacks because that could render the whole thing unusable. Definitely, a tough nut to crack but if it becomes reality, it could make for a more transparent and practical voting system.
Blockchain technology can be used to track their food products from the moment they are harvested or made, to when they end up in the hands of customers. Every year almost half a million people (420,000) die because of food-borne diseases and that’s partly because it takes too long to isolate the food that is causing harm. Blockchains could help us to create a digital certificate for each piece of food, proving where it came from and where it has been. So if a contamination is detected, we can trace it back to its root and instantly notify other people who bought the same batch of bad food. Walmart and IBM have made some moves to make this practical. It allowed them to trace the origin of a box of mangoes in just 2 seconds, compared to days or weeks with a traditional system.
By tampering with the odometer someone can make a car appear to be newer, resulting in customers paying more than what the car is actually worth. One solution to this problem is by collecting the mileage of cars when they get a safety inspection but that’s not enough. So instead we could replace regular odometers with smart ones that are connected to the internet and frequently write the milage of the car to a blockchain. This would create a secure and digital certificate for each car. And because we use a blockchain, no one can tamper with the data and everyone can look up a vehicle’s history.
Besides odometers, you can also keep track of things like intellectual property, patents, or it can even function as a notary. A notary is someone who can confirm and verify signatures on legal documents. But we can just as well use a blockchain for it! The online website stampd.io for instance, allows you to add documents to the Bitcoin or Ethereum blockchain. Once added, you can always prove that you created a document at a certain point in time much like a notary although right now blockchains aren’t on the same level as notaries from a legal perspective.
Another idea would be to track packages and shipments by using a blockchain. That is something that IBM and container shipping giant Maersk are working on: a decentralized ledger to help with making the global trade of goods more efficient. So far we have looked at ways blockchains can be used to keep track of information and verify its integrity.
But blockchains can be even more powerful when we add smart contracts to them. These contracts are tiny computer programs that live on the blockchain and can perform actions when certain conditions are met. Insurance companies could use smart contracts to validate claims and calculate a payout. Or they could allow us to only pay for car insurance when we’re driving.
With smart contracts, we can secure our own data on a blockchain. They could for instance allow us to store our medical records on a blockchain and only allow doctors to access them when we approve them with a digital signature. In the same fashion, you could store your personal identity on there and choose what data you want to reveal. Ordering alcohol in a bar for instance only requires you to prove that you’re over the legal drinking age and with smart contracts, you can deliver that proof without revealing anything else.
Think about collecting royalties for artists. A future streaming service could set up two smart contracts: one where users send their monthly subscriptions and one that keeps track of what the user has listened to. At the end of each month, the smart contract that holds the subscription fee can automatically distribute the money to artists, based on how many times their songs have been listened to.
Thanks for reading. I write on money (passive income, cryptos, business, personal finance) and having a healthy lifestyle. You can follow and subscribe to stay updated.
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