In a world where contracts are embedded in digital code, every transaction is recorded in a transparent and shared database, and everything can be verified and logged, the blockchain promises to transform how we do business.
In the Italian province of South Tyrol, civil servants are using blockchain to streamline citizens’ engagement with the government. It helps them comply with European data sharing regulations and simplify transactions, such as transferring a deed to a property.
Secure
Blockchain isn’t immune to hackers, but it’s more difficult to manipulate because of its decentralized and distributed nature. To alter a blockchain, a hacker would need to control more than 50% of the computing power on the network (which is unlikely).
The key to blockchain’s security is that it encrypts all transaction data in blocks, which then get merged into a chain that can’t be altered. Each node constantly organizes new data into blocks, which are then locked into a chain that can’t be changed.
The append-only structure of a blockchain is also an important part of its security. When a block is added, it can’t be changed or deleted until someone else in the network does. This means that if one hacker is able to manipulate a block, everyone else in the network will see it as illegitimate because everyone’s copies will have been aligned. This is a self-reinforcing cycle that ensures the security of a public blockchain.
Transparent
Transparency in blockchain is a core feature that has led to its popularity. It makes the technology highly secure, as no one is able to change any data stored within it, once it has been validated by the network.
In theory, transparency allows parties to trade with complete confidence without the need for third-party verification. This is important for businesses that want to avoid costly fees, such as a bank or payment-processing company, or for consumers who would like to protect themselves against identity theft.
The transparency that blockchain provides is also important for the public services sector. For example, a government could use blockchain to record a deed to a house or a product inventory.
In the case of a fraudulent product supply chain, for example, the ability to track a food item’s journey from its origin all the way through each stop it makes on the journey to its destination could help identify a problem sooner and potentially save lives.
Efficient
Blockchain is a powerful, efficient technology that has the potential to transform many industries. By eliminating middlemen, blockchain transactions lower costs and speed up processes.
Using a blockchain to track inventory and information across supply chains is an especially good example of how this technology can improve efficiency. In this way, manufacturers and suppliers can verify the status of products in real time and share data and financial flows more quickly.
For example, a manufacturer of swimming pool equipment could use blockchain to keep track of machine time and inventory at various stages in the production process, ensuring that they’re reliably assigned to customer orders.
Companies like Emerson, a leading manufacturer of HVAC and refrigeration equipment, are exploring how they might apply blockchain to improve their business. They are developing systems to track inventory and machine time across their supply chain, reducing the possibility of double-spend or erroneous allocations of capacity.
Scalable
Blockchain scalability is the ability for a blockchain network to handle an increasing amount of data. This is accomplished by adjusting the network’s capacity, such as the number of nodes or transactions it can process.
Scalability is a critical aspect of the blockchain because it allows for increased usage without suffering performance problems. When new users join a network, the proof-of-work (PoW) algorithm automatically adjusts difficulty levels and may support more nodes than previously.
Transaction speed is another significant factor that affects a blockchain’s scalability. Although a blockchain’s throughput can be high, its confirmation time can still cause issues when compared to more traditional payment methods.
A large range of solutions exist to address these scalability challenges. These include layer 1 solutions, off-chain solutions, and scalable consensus methods.