Blockchain has a strong image of crypto assets such as Bitcoin, but did you know that it is currently being used in a wider variety of business areas? In this article, we will provide an overview of the technical characteristics and strengths of blockchain, and explain how it can be used in business.
Table of contents
- Blockchain Overview
- What are the benefits of blockchain
- Disadvantages of blockchain
- Future Blockchain Prospects
A blockchain is a distributed database shared between nodes in a computer network.
This means that the blockchain has no specific owner and multiple nodes can always have a synchronized copy of the same data. Blockchain is best known as a mechanism that plays an important role in maintaining safe and decentralized records of transactions in the virtual currency (crypto asset) Bitcoin.
The main difference between common databases and blockchains is the way data is stored. Blockchain stores and stores data in groups called “blocks”. It is then linked with past blocks through cryptographic technology to form a series of data connections called a “blockchain”.
As we will see below, blockchain is used in many ways today, but by far the most common use is as a ledger of transactions. Blockchain is characterized by the ability to record and distribute digital information, but not edit it in any way. For this reason, blockchain was used to store transaction records as a highly reliable ledger that cannot be changed or deleted.
For this reason, blockchain is sometimes called “distributed ledger technology”, as it is a distributed network as mentioned above. As mentioned above, blockchain has traditionally been known as a new core technology for bitcoin operations, but it is now being used in a wide range of business areas.
Blockchain in business
How has blockchain been used in business areas other than Bitcoin? Blockchain is evolving according to its utilization method and can be roughly divided into three stages.
The first stage is “Blockchain 1.0”, which was mainly used by Bitcoin. After that, it advanced to the stage of “Blockchain 2.0”, which is applied to remittance in the financial field. And now, the usefulness of blockchain has become even more widely known, and it is being used in business areas unrelated to Bitcoin and the financial sector. This is the stage called “Blockchain 3.0”.
“Blockchain 3.0” is being used mainly to share ledgers and ensure the authenticity of data. For example, some companies use it for real estate transactions and food management.
What are the benefits of blockchain?
Next, based on the above characteristics, we will introduce the merits of using blockchain in business.
Avoid data tampering
The greatest advantage of blockchain is its robust security that prevents fraudulent activities such as data tampering. Blockchain encrypts transaction data using a hash function and links each data. This effectively makes it impossible to subsequently modify or delete the data stored in the block.
Even if it is possible to tamper with the data, the data is distributed and saved in each node, and the change history is also accurately recorded, so it is easy to detect unauthorized tampering operations. In other words, an attacker must have access to all distributed data to tamper with records and completely erase their tracks. And that is virtually impossible.
This property of blockchain can be exploited for a very wide range of applications. For example, it could be used to prevent employee fraud. In this case, blockchain can provide a secure and accurate record of all financial transactions that take place within the company. This makes it very difficult for employees to hide fraudulent transaction data.
The next benefit is that you can ensure a very high degree of stability (zero downtime) in terms of network and data utilization. If a particular server manages the network and that server fails, the entire network will go down.
However, as mentioned earlier, the blockchain is composed of a distributed network (P2P: peer-to-peer), so even if one node fails, other terminals can compensate without waiting for its recovery. , you can continue to process the data. In other words, the characteristics of a distributed network not only prevent data tampering but also strongly guarantee the continuity of system functions.
Disadvantages of blockchain
While there are strong advantages, blockchain also has some disadvantages that can be said to be its side effects.
Data continue to multiply
The first disadvantage is that the data will continue to multiply. In principle, the data stored in the blockchain cannot be erased, so the more users use it, the more the amount of data increases irreversibly. If the amount of data increases too much, it may not be possible to secure the data area or the processing may be temporarily slowed down.
Data cannot be deleted when a mistake is made
The second disadvantage of blockchain is that it is difficult to delete or modify data even if there is a mistake. In the case of blockchain, if you make a mistake, such as a remittance processing, you cannot undo the operation, so you need to be very careful when operating. Rather than a reversible mistake like an incorrect account number in a bank wire transfer, it will result in a permanent loss of assets and information. The same applies if you have saved information that should not have been entered there.
In other words, the robustness of blockchain, which preserves data in its original form, is also a double-edged sword in that it cannot be operated flexibly. Therefore, it is necessary to carefully consider when to use it.
Future Blockchain Prospects
As mentioned above, blockchain started with Bitcoin and has expanded its application to the financial and other fields. For example, the robustness of Bitcoin’s data management can be utilized in the areas of food management and distribution services. With blockchain, all data can be managed securely and chronologically without worrying about falsification, so it is suitable for tracking historical information of specific targets.
It is also said to be compatible with the medical and healthcare fields. As is well known, medical data is personal information that requires particularly careful handling and requires the highest level of security against unauthorized manipulation such as data falsification. However, when data is managed using a normal centralized method, the security, and handling of information depend on a specific business operator. In that respect, by utilizing blockchain and managing medical information in a decentralized manner by multiple administrators, it is possible to prevent the falsification of medical information at the highest level while forming a medical network that transcends the boundaries of hospitals.
In addition, blockchain is attracting attention from many business fields such as the real estate industry, and further utilization is expected in the future.
Blockchain is a technology that enables secure data management using a decentralized network. Blockchain was initially attracting attention in connection with Bitcoin, but its application is expanding to the financial and other business areas. The expansion of this application area is expected to continue in the future.