Let us start with what is a block, in order to be able to understand what is blockchain. A block is like a book that stores and records some part or the whole part of your transaction. A transaction can only be verified by nodes for recording. Once the transaction is recorded, it cannot be altered in any way- this provides stability as well as security in the blockchain. In order to verify a transaction, every node has to solve a complex problem and in return for solving the problem, the reward is bitcoins.
Every block contains one part of the previous block. Each and every time a block is completed, it is linked to its previous block and one new block is created. This forms a long chain of blocks which is called as blockchain. A blockchain can record all transaction no matter how old they are. That is the entire transaction history from the very start is always available for verification. To secure the transactions they are encrypted so that no alternations can be done to the stored data. The information in the blockchain can be distributed but it cannot be copied. cryptocurrency ensures that. Blockchains are secure because of its distributive nature. Each ledger is checked by the entire network in order to maintain it. If one node ends up having a different ledger than the rest of the blocks, it is removed from the network.
Public Blockchain - It is a platform where anyone can have access to read or write to the block provided they can show proof of the work. Public Blockchains are considered to be fully decentralized.
Private Blockchain - This type of blockchain only allows access to the owner to be able to make any changes. This reduces costs and increases efficiency at the same time. This technically provides financial institutions with private blockchain operations.
Why Blockchain considered as Important?
The blockchain is important because of the fact that it is not a centralized database which ensures that no one, be it be an individual or company can modify or tamper with the stored data. This removes the need for the third party to ensure its security for all the transactions that take place. This brings transparency in view.
Blockchain Technology allows everyone to make transactions in a transparent manner which eliminates the need for a mediator or third-party. This makes the entire process of transaction between two people easy and cheaper. This technology is applied to the entire digital world to ensure all kinds of transactions to be safe and secure.
Benefits of blockchain technology
- Blockchain records and validates each and every transaction that takes place which makes it reliable and secure.
- The transactions that take place are authorized which ensures no threat of hacking or tampering with the stored data.
- It discards the need of any third-party or centralized authority for any end to end transactions.
Application of Blockchain Technology in FinTech
FinTech- It is short for Financial Technology: It is an industry that is composed of companies that use new technology or innovation. They belong to the financial sector and the banking sector. competing with the financial institutions for delivering the services. The FinTech technology is advancing at the rate of 25% by each passing year.
The FinTech Industry came into existence due to a Global Financial Crisis that occurred in the year 2007-2008 when all the financial companies were fading slowly. The reason for its rise was:
- Customers being unsatisfied with the banking systems, for its limitations on customer support and the lack of transparency.
- Due to the lack of advancement in technology.
- Lack of trust with the bank and financial institutions.
Blockchain in FinTech
The rise of FinTech companies took place as innovation stopped taking place in the banking system. One of the biggest challenges in the FinTech company is trust. It is important to make people trust them with 100% transparency, safe and secure financial product. FinTech companies lack fund which is why it restricts them from developing and having a high-security system. This is where blockchain technology comes to the rescue.
Blockchain Technology is comparatively cheap and easy to develop which provides high security. The FinTech company made use of this technology to secure its financial products easily. Now FinTech companies can make various products with a considerate budget in order to serve its customers. As Blockchain is basically a series of connection between blocks, it tracks the entire cycle of a financial transaction. It provides safe and secure financial products and hence has brought innovation in this financial sector.
Application of Blockchain Technology in E-Commerce
E-commerce faces a number of challenges in the industry. Let us have a look at them.
Challenges in E-Commerce:
- Trust - This is a very important factor in the e-commerce industry as it requires total transparency between the buyer and seller in order to have a complete transaction. Without transparency, they tend to rely on a third party for ensuring secure transaction which benefits the third party as it comes at a cost to both the buyer and seller.
- Fraud - E-commerce industry faces huge problems related to frauds and mishaps due to unbalanced regulations which ultimately diminishes the brand's name and image.
- Slow Transactions - The e-commerce industry has a complicates supply chain which involves shipment tracking, ordering, delivering, settling costs which adds to the unnecessary worries and complications and hence can delay transactions for weeks or months.
- Other Costs - E-commerce currently has involved in different modes of payment like cash on delivery (COD), Mobile wallets, Credit/Debit cards, etc. But all of the mentioned modes draw a nominal fee from both the buyer and seller. It also includes a lot of risk like delay in the settlement, counterparty risk etc.
Let us see how Blockchain Technology has revolutionized the E-commerce
- Cheaper Transactions - Blockchains enable smart contracts that self-execute instructions for themselves which significantly reduces the cost and complexity of transactions or transfers.
- Faster Transactions - The smart contracts in blockchain enables storage of documents, delivery, shipping and all options that can affect the financial status in any way. In this way, every company or individual can make the data transparent to others which ultimately lowers the dangers of delay, disorganization and helps in speeding up the process of the transaction.
- Transparency - Blockchains store the entire transaction history no matter how many times the product is purchased or bought. This helps in eliminating frauds and brings transparency to the consumer and merchant.
The Blockchain Technology has ultimately bought a whole new level of digital transaction system and currency which can be identified by everyone with safe and secure ends. The contracts are embedded in the codes that are stored in the databases where they are protected from any loss, tampering.
Application of Blockchain Technology in Finance
We need an intermediary in order to transfer money from one person to another. They ensure that money transferred is secure and safe from one end to another. The dependency on the third party has increased which has given rise to a value of the transaction. Banks are the third party intermediaries.
With the introduction of the blockchain technology, it became easy to eliminate the third party and decentralize the transactions. The popular application of blockchain is bitcoin. It makes transactions easy and simple from one end to another. The encrypted blocks ensure that no one can access the information stored and allows only the owner to be able to make any kind of changes. This is a risk-free solution to all the problems that were faced before.
Application of Blockchain Technology in Insurance
Insurance companies all around the world are looking for ways in order to have a streamlined operation, to create cost efficiencies and build a greater trust in the digital ecosystem. To be able to do this, blockchain technology comes to view. It ensures speed in the business with complete transparency and trust. Various insurance companies are opting for this technology as it has a wide range of uses. It ensures visible transactions between all parties.
Few things that the blockchain technology can influence the insurance background are:
- Alleviating paperwork.
- Minimizing frauds in the company.
- Improving the quality of data.
- Creating systems that can automatically claim the transactions.
Application of Blockchain Technology in Healthcare
Blockchain has the potential to be implemented across all diverse sectors such as banking, insurance, finance, health. In the field of healthcare, with the introduction of big data, artificial intelligence, the dishonest is increasing in a smarter way which ultimately needs a database to record the patient's medical condition and blockchain is turning out to be the perfect platform to this. This will reduce all sorts of errors and will provide the most accurate data on patients.
This technology has the ability to revamp the entire present system to a fully automated manual process which will eliminate all kinds of frauds by controlling the issues. The implementation of the same across the diverse sector will be the solution to various problems that are faced by mankind. Blockchain will soon be the perfect platform to transform the economy driven by knowledge to a fully digitized industry.