Blockchain is a decentralized and immutable ledger that records all transactions within a business network. Blockchain technology came into existence for the use of cryptocurrency. Today, the technology can be applied to other industries too.
To understand “what is blockchain technology” and its various applications, you must first understand the different facets of the new technology.
What is Blockchain Technology? How Does Blockchain Work?
Blockchain technology uses “blocks” to store clusters of data. Each block has a unique identifier and history. The blocks store transaction information in a secure fashion. The creation of blocks starts with an initial block called the Genesis block. Blocks are linked to form the blockchain.
Blockchain technology has four underlying elements. They are,
- Distributed Ledger Access
Every member of the network has access to a distributed ledger that includes all transactions. Transactions are recorded only once. No single party controls the ledger.
- Peer-to-peer Transmission
Every permissible member of the network can directly record a transaction and verify records of transaction partners. The requirement for a third party is eliminated.
- Immutable Ledger
The transactions recorded in the ledger are permanent. To rectify an incorrect record, another record is created. All records are permanent, chronologically ordered, and available to every member of the network.
- Smart Contracts
The smart contract refers to a set of rules/conditions stored in the blockchain and executed automatically.
Essential Applications of Blockchain Technology
Now that you are entirely aware of “what is blockchain technology,” explore four of its essential applications in detail.
1) Insurance Claims
Blockchain solutions can be applied to the KYC(know-your-customer) processes, claims handling, payment processes, and fraud detection.
Blockchain technology offers the following benefits in the insurance industry.
- Blockchain solutions for KYC data handling speed up the process and make it simpler too.
- The greater degree of transparency offered by blockchain solutions improves customer engagement.
- Smart contracts automate the claims handling and underwriting processes.
- Blockchain makes the detection of fraudulent claims easier.
- It enables the delivery of cost-efficient products and services in emerging growth markets.
2) Supply Chain Management
Financial ledgers and ERP systems are not 100% reliable in allowing the different supply chain entities to view the flow of inventory transactions and money. The use of blockchain technology can eliminate the problem.
A blockchain-enabled supply chain allows the participants to record information obtained from different sources such as mobile devices, IoT devices, etc. The information is then pushed into the blockchain ledger.
The real-time availability of information enhances traceability of the material supply chain, lowers the chance of loss of product in the gray market, and improves visibility and compliance over outsourced contract production. It also allows a business to take the position of a more responsible manufacturer.
3) Real Estate
The real-estate industry has always been about face-to-face engagements. Blockchain has been a game-changer for the industry by allowing the use of smart contracts.
Blockchain eliminates the trouble of dealing with fragmented listing data. A blockchain-enabled Multiple Listing Service (MLS) can provide better control over data. It allows more straightforward and more efficient property search. It enhances the efficiency and accuracy of the due diligence process. Smart contracts allow easier, more straightforward, and more transparent management of the property and cash flows.
In the real-estate industry, decision-making is often delayed due to the absence of comprehensive, real-time data. Blockchain technology provides a more open and shared database for all entities involved in the business. The real-time recording and retrieval of data improve data quality and managerial decision-making.
4) Payment Systems
As the world is moving towards cashless economies, blockchain payment systems are gaining momentum. Blockchain technology avoids the need for intermediaries and authorizations while making payments (payment gateways, exchange mode, etc.). Though intermediaries take the responsibility of payment authenticity, they are not always reliable. Also, they increase the transaction time and charge extra fees.
Blockchain technology can settle transactions quickly and securely. They continue to maintain payment authenticity without the interference of a third entity. They offer a high level of transparency. Anyone can view information stored in the “block,” and it is immutable too.
Blockchain technology is also helpful while making cross-border payments. While moving funds from one country to another using blockchain, you do not lose heavy amounts in commission and enjoy greater transparency and safety of critical information.
To recognize more applications of blockchain technology, you must have a deeper understanding of “what is blockchain technology” and its multiple benefits.