Important considerations of the blockchain
There some important things to keep in mind about the blockchain, which are as follows:
- It is used in large, collaborative environments, such as those used in our example. In other words, blockchaining allows for parties who do not know physically know each other to be able to engage into a series of trusted transactions with 100% confidence in the integrity and security of the digital assets that are being exchanged.
- It is used primarily on digital media, not on actual physical documents. In these instances, watermarks, signatures, embossed seals, etc. can used to confirm the authenticity.
- Blockchaining is typically used in computerised, closed loop systems (prime examples of this are Dropbox and the Microsoft OneDrive) that are decentralised. In other words, these are synchronised file-sharing systems. So, as changes and revisions are made to each and every iteration (or versions) of a particular document, all of the relevant parties are provided with the latest version, as well as the appropriate private key to unlock it.
- No alterations, revisions, or edits can be made to previous versions of a document – only the latest version can be modified. Using our previous example in Part 1 of this article series, Version 1, Version 2, and Version 3 of the financial spreadsheet cannot be modified in any way shape or form. Only Version 4 can be changed.
- With blockchaining, a distributed record keeping system is utilised, called a “ledger”. This is not centralised by any means, but it is distributed to all of the relevant file sharing systems, thus creating an irrefutable audit trail.
- The integrity of all of the document versions are confirmed by using the digital signatures that are provided by the private keys that have been assigned to them. If all them are the same, then the appropriate parties that are involved with creating the document are ensured that no unauthorised changes or revisions have been made. But, however, if all of the digital signatures do not match up with another, this is then evidence that a non-authorised party had (or has still has) access to the various document versions.
- Depending upon the level of sophistication of the private key, it could take more processing power of the relevant parties’ computer to solve the underlying mathematical algorithm of it. Once this has been accomplished, the private key is then unlocked, and the latest version of the document can then be accessed and modified (this is where the concept of “mining” starts to come into play.
There are two types of blockchain environments:
In this particular situation, there are no restrictions as to whom can view, download, and modify and/or revise the document (or any other digital asset for that matter). This type of environment typically implemented in those making use of virtual currencies, such as Bitcoins and Ethereum.
This is where explicit permissions are required and established to the relevant parties that need to have access to a document (or any other digital asset). This is the kind of environment that is typically by most businesses and corporations, as well as used in our illustration of the blockchain.
The industries that make use of the blockchain
As mentioned, since blockchain is used in those environments where a large of amount of collaboration and feedback is required amongst people, it works best in the following types of industries:
1) Supply chain management:
When blockchain is applied here, there is a much greater threshold for traceability, and making production processes cost effective. For example, it can be used by the large freight and trucking carriers such as UPS and FedEx in order to track packages, their points of origination and destination, the total number of products ordered, etc.
2) Quality assurance:
In these instances, blockchain works very well for such industries as manufacturing and pharmaceutical. It can enhance the existing QA checks in place, by providing details every step of the way in which a certain product was produced. As a result, any defects can be tracked from the very beginning, and corrected early on instead of waiting until the very end, which can be very costly.
The use of blockchaining drastically reduces the chances of any mathematical errors from being made, as there is now a system of checks and balances being put into place, which also provides a detailed audit trail. High levels of accuracy will also be ensured because the financial information and data is confirmed and checked as they are passed from one block node to the next. As a result, a business or corporation will not have to maintain financial documents and records in different electronic locations, they can all be centrally stored.
4) The creation and execution of electronic-based contracts and agreements:
There is no doubt that developing and executing contracts can be a very time-consuming process for any organisation. The trend now is to create these types of documentation electronically. By using the concepts of blockchain here, contracts and agreements can be very quickly validated, signed, executed, and even legally enforced. In the case of any disputes, there is a secure version history in place that cannot be altered in any manner and can thus quickly provide any evidence that is required by a court of law.
5) Electronic voting:
One of the biggest security issues here is that of fraud, and the lack of trust amongst the many polling places. When blockchaining is used here, not only will fraud go down, but the levels of trust will also correspondingly increase as well, because there is now a record of each and every vote that was cast, which cannot be maliciously altered in any way. This concept was recently tested in the local elections that were held in Moscow, Russia; as well as the NASDAQ for conducting shareholder votes.
6) Conducting electronic-based trades on the stock exchanges:
Blockchain is already being used quite heavily here in the United States to secure the financial transactions that are taking place with the virtual currencies, with the prime example being that of the Bitcoin. This concept is also being tested in the financial institutions of other countries, with another example being that of the Australian Stock Exchange.
7) Energy and power consumption:
The principles of Blockchain can be used to track the levels of energy/power consumption at the local, state, and even national level. The ability to accurately keep accurate records on all of this can lead to what is known as the “microgeneration of energy resources.” For example, households all over the world are now starting to create their own power supplies and turning over to solar energy to fill in those gaps where traditional electrical supplies may not even exist. In this instance, the blockchain can be used to keep a close eye on the smart meters which are being used to record the levels of power that are generated and consumed by microgeneration. Some of examples of this are Powerpeers (based out of the Netherlands) and Exergy based out of New York City.
The secure sharing of confidential information and data of patient records is becoming of utmost concern today amongst hospitals, healthcare providers, healthcare workers, and even the medical insurance industry. By making use of the blockchain here, the authenticity as well as the integrity of digital signatures are guaranteed, thus allowing only authorised individuals and entities to gain access and view patient records. With this, the chances of fraudulent medical insurance payouts taking place is greatly reduced.
Our next article will further examine the benefits of using blockchain technology.