Guide to Blockchain Technology Business Benefits & Use Cases

Categories: BlockchainTechnology

Blockchain is best known for its usage in cryptocurrency, where it provides each network that uses it with a digitally distributed, decentralized, public ledger for tracking holdings and transactions. 

However, blockchain technology has a variety of applications in many industries, including healthcare and pharmaceuticals, financial services, cybersecurity, manufacturing, and supply chain management. Anywhere transactions occur, blockchain can help improve security, privacy, and data transparency.  

Businesses of all kinds are transitioning to this secure infrastructure to reduce the costs of the traditional transactional model, automate processes, strengthen security, protect personally identifying and other sensitive information, and improve security. It’s no wonder the global blockchain market, valued at USD $7.18 billion in 2022, is expected to grow to USD $163.83 billion by 2029.

What exactly is blockchain, and how does it work? This unique technology has already changed how many businesses operate, from financial transactions to smart contracts. In this article, you’ll learn about blockchain, its advantages and disadvantages, different types of blockchain applications, and how various businesses currently use it. 

What is Blockchain Technology?

Blockchain is a decentralized, distributed ledger that records transactions in a fixed format across multiple computers on a network, providing organizations with a way to securely track and verify digital transactions. 

Blockchain enables participants to keep track of their assets without relying on a centralized authority or intermediary. Transactions are verified by computing power provided by the network rather than depending on manual verification or any third-party source. In addition, the entire network is constantly updated and monitored, ensuring transparency and accuracy of the record-keeping process.

What is Tokenomics?

Tokenomics refers to the study of the economics and mechanics of cryptocurrency tokens. It combines the terms “token” and “economics” and describes how a token operates within a blockchain ecosystem. Tokenomics involves the creation, distribution, and management of tokens, as well as how they are used and exchanged.

It includes factors such as token supply, demand, utility, and value, and the incentives for users to hold or use the token. Tokenomics also helps establish the governance of a blockchain network and the rules that govern the behavior of participants in the network. Overall, tokenomics plays a critical role in the success and sustainability of a blockchain project.

Recommended reading: Tokenomics with Blockchain: GlobalLogic’s Tokenomics Position

Blockchain Myths & Misconceptions

These are some of the more persistent myths around blockchain technology:

  1. Blockchain is only used for cryptocurrencies: While it is true that blockchain technology was first used for cryptocurrencies, it has evolved to have many other applications, such as supply chain management, voting systems, and smart contracts.
  2. Blockchain is completely anonymous: Although blockchain is based on a decentralized system, transactions are recorded on a public ledger that can be traced back to their source.
  3. Blockchain is completely secure: While blockchain is highly secure due to its decentralized structure, it is not completely immune to attacks. There have been cases of hackers exploiting vulnerabilities in the system to steal cryptocurrencies.
  4. Blockchain is only for tech-savvy people: While blockchain technology is complex and may seem intimidating, it has become more user-friendly with the development of user-friendly interfaces and applications that make it accessible to the average person.
  5. Blockchain is a magic solution to all problems: While blockchain has many potential benefits, it is not a cure-all solution. It’s important to carefully consider the specific needs and limitations of each use case before deciding to use blockchain technology.

Advantages of Blockchain Technology

The advantages of blockchain technology are continuously expanding. By operating on a decentralized, distributed ledger system, blockchain technology offers unprecedented security and accuracy, surpassing most traditional methods. In addition: 

  • The digital nature of the ledger allows for faster transaction times and lessens the need for intermediaries to facilitate transactions.
  • Blockchain technology is highly scalable and can easily expand to accommodate more users and transactions. 
  • Blockchain networks are resilient against cyber-attacks due to their distributed architecture and consensus mechanisms.
  • Because of its open-source nature, anyone can develop applications on top of a blockchain network without relying on a third party or centralized authority. 

These advantages make blockchain technology attractive for many industries looking to increase efficiency and reduce costs.

Limitations and Disadvantages of Blockchain Technology

The disadvantages of blockchain technology are mostly related to its data storage limitations and cost. In addition, blockchain networks require a large amount of computing power and energy to operate, which can be costly and difficult to scale up as demand increases.

Many blockchain systems aren’t designed to handle large amounts of data, which can lead to slower transaction speeds. Since the technology is relatively new, there are still some unknowns about how it may be impacted in future by regulations and laws in different regions.

As blockchain technology matures and more companies become involved in its development, these issues should be addressed and resolved. At GlobalLogic, we’ve researched blockchains’ ability for large-scale interoperability and have discovered solutions like introducing a third party and identifying the state distribution between permissioned and permissionless ledgers.

Types of Blockchains

Several different types of blockchains offer varying levels of security and access.

Public Blockchains

Public blockchains are becoming increasingly popular due to how data is stored, managed, and transferred. With no central authority, these blockchains allow anyone with an internet connection to view or add information to the ledger. In addition, public blockchains are highly secure and don’t require third parties to verify transactions.

This means businesses can save time and money while providing a safe environment for their customers. Additionally, public blockchains offer transparency, as all users can view all transactions on the chain. Cryptocurrencies Bitcoin and Ethereum are two well-known examples of public blockchain technology.

Private Blockchains

Private blockchains allow businesses to keep their data secure while still providing control over the access and permissions of who can view and add information to the ledger. Private blockchains enable companies to manage their records and transactions without relying on third parties, making them more efficient and cost-effective.

Additionally, private blockchains offer extra security as only those approved by the company can access or make changes to the chain. This makes it easy for businesses to protect sensitive data from unauthorized access or malicious attacks. 

Private blockchains are an ideal solution for businesses looking for a secure way of managing digital records without sacrificing privacy or security. Tracr, a system developed by De Beers for verifying the provenance of diamonds and tracking them to eliminate “blood diamonds” in the value chain, in an example of a private blockchain. 

Consortium Blockchains

Consortium blockchains, also known as federation blockchains, allow companies to retain control over who can access or make changes to the ledger while enabling them to collaborate with other companies or institutions to share computing power or resources. This allows organizations to work together without sacrificing their security measures.

Additionally, consortium blockchains are an ideal solution for businesses looking for an efficient and secure way of managing digital records without sacrificing privacy or security. Hyperledger, Quorum, and Ethermint are all consortium blockchains. 

Hybrid Blockchains

Hybrid blockchains are for organizations looking for a secure and private way to manage digital records. Hybrid blockchains allow companies to take advantage of both public and private blockchains, allowing them to keep sensitive data securely within their network while benefiting from the added security of a public blockchain.

Furthermore, hybrid blockchains provide organizations with an efficient way to manage digital records, streamlining internal processes and reducing costs associated with third-party intermediaries. IBM Food Trust – where farmers, distributors, and wholesalers can transact privately and securely – is a great example of a hybrid blockchain. 

Components of a Blockchain System

A blockchain system comprises several key components that all work together to ensure the security and integrity of data stored on the network.

Digital Ledger

A digital ledger is a powerful and secure way to store data online. It is composed of a distributed database that records transactions immutably. In addition, cryptographic algorithms verify transactions, ensuring the integrity of the data stored on the ledger.

Each node in the network has its own copy of the ledger, creating redundancy and ensuring the data remains secure even if one node goes offline or malfunctions. This makes digital ledgers ideal for the use of all blockchain types.

Businesses can create smart contracts, record keeping in supply chains, and power digital currencies. Digital ledgers are changing record keeping with their trustworthiness and reliability, making them an essential technology for many industries today.

Decentralized Network

Decentralized networks are the backbone of blockchain technology and its rise in popularity. By leveraging the power of distributed computing, decentralized networks enable data to be stored, shared, and processed securely and reliably.

A decentralized network comprises multiple computers that work together to process transactions and store data on a shared ledger. This makes it virtually impossible for any computer or person to control or manipulate the data, creating a more secure environment than centralized systems.

Decentralized networks also require less computing power, giving them an advantage over centralized systems in terms of scalability and cost-effectiveness.

Shared Ledger / Public Ledger

A shared ledger, also known as a public ledger, is a digital record of transactions that can be used to store and share data across multiple parties. The data is stored in a distributed database, meaning any single entity does not control it. This makes it virtually impossible for anyone to manipulate or control the data, creating a secure and trustworthy environment. As a result, a shared ledger has many advantages over traditional centralized systems, such as improved security and scalability, cost-effectiveness, and greater privacy.

By leveraging the power of distributed computing and cryptography, shared ledgers are revolutionizing how we store and process data. With their ability to provide greater trust between users and organizations, shared ledgers are quickly becoming the preferred method for storing and sharing information in various industries.

The use of shared ledgers is changing how we store and process data, giving us a secure, trustworthy and cost-effective alternative to traditional centralized systems.

Distributed Consensus Protocols

Distributed consensus protocols are an integral part of blockchain technology. They provide a secure and reliable way for multiple computers to agree on the contents of a digital ledger or database. This allows for increased security, as all parties in the network must approve any changes to the data. These protocols also help ensure that only valid transactions are recorded on the ledger and that all users have access to the same version of data.

The most popular distributed consensus protocol is called Proof-of-Work (PoW). It requires network participants to solve complex mathematical problems to validate transactions and create new blocks on the blockchain. As more computers join the network, more computing power is needed to secure it, making it highly resistant to malicious attacks.

Distributed consensus protocols are essential in facilitating trust and ensuring the integrity of public ledgers. By providing a secure and reliable way for multiple computers to agree on data stored within a blockchain, they facilitate trust between parties, reduce costs associated with maintaining records, and help prevent fraud and other malicious activities from occurring within networks.

Cryptography and Digital Signatures

Cryptography and digital signatures are two essential components of blockchain technology. Cryptography is used to secure data by encrypting it so that only users with the correct key can access the information. It also helps prevent malicious actors from changing the data stored in a blockchain network.

Digital signatures verify the authenticity of transactions and ensure that they have not been altered or tampered with. The signature is created using a combination of public and private keys, ensuring that only authorized users can change the ledger.

Cryptography and digital signatures are two important components when implementing blockchain technology. By understanding how they work together, organizations can ensure their data is secure, and transactions remain trustworthy.

Use Cases for Blockchain Technology

From financial institutions to supply chains, blockchain has given organizations the tools to track and manage their records securely.

Financial Transactions and Banking Systems

Financial transactions and banking systems have traditionally been time-consuming and expensive. However, with the emergence of blockchain technology, these processes are becoming much more efficient.

Users can securely store and transfer digital assets using a decentralized ledger system without needing a third-party intermediary. This eliminates transaction fees associated with traditional banking systems, making it an attractive option for those looking to make financial transactions quickly and sec

Furthermore, blockchain technology is more secure than traditional methods as it eliminates the risk of fraud or data manipulation. With its ability to create an immutable record of all transactions, blockchain provides greater transparency into the financial sector while ensuring all parties involved follow through on their commitments. Blockchain offers a cost-effective solution for those looking to streamline their financial transactions and banking processes.

Supply Chain Management & Traceability Solutions

Supply chain management and traceability solutions through blockchain are vastly growing. With the emergence of blockchain technology, companies can securely track the movement of products from their origin to their destination. This allows for greater transparency in the supply chain process, ensuring all parties involved follow through on their commitments.

Recommended reading: Strengthen Your Supply Chains with Blockchain

Using a digital ledger system, people can easily verify product authenticity and track any changes made throughout the process. Furthermore, it eliminates the risk of fraud or data manipulation as every transaction is stored immutably on the blockchain. As a result, blockchain provides an efficient and secure solution for those looking to streamline their supply chain management processes.

Digital Identity and Authentication Services

With blockchain technology, users can quickly and securely verify their identity without sharing personal data or information. This process is done through a unique private key linked to each user’s digital identity. In addition, the private key allows for secure access to online accounts while ensuring that only authorized users can access them.

Additionally, this system eliminates the need for passwords, making it even more secure than traditional authentication methods. This technology provides a safe and secure way to protect your data from malicious actors and hackers.

See how Hitachi digitized its contract process with an electronic signature service secured on the blockchain using Hyperledger Fabric here.

Digital Coupons

Digital coupons are becoming a norm for customers and businesses in recent years. As a result, companies can efficiently distribute coupons through their website, apps, and social media for customers to redeem effortlessly.

They can also use third-party services with blockchain, distributed ledger technology, and smart contracts to reduce the cost of coupon management and distribution.

Incorporating blockchain technology into coupon marketing strategies offers companies many advantages and use cases. However, understanding the critical components behind blockchain technology is essential to creating impactful coupon campaigns.

Smart Contracts and Automated Business Processes

Smart contracts and automated business processes are influencing technologies that can help streamline and simplify how businesses operate. They are digital agreements, or contracts, that are written on the blockchain. 

Smart contracts execute automatically when pre-defined conditions are met, making them incredibly efficient and secure. And because they exist on a decentralized network, there’s no need for a third-party intermediary – meaning faster transactions with lower costs.

Automated business processes also leverage blockchain technology to create more efficient operations. By utilizing smart contracts to automate mundane tasks like document management and payment processing, businesses can save time and money while improving accuracy and transparency.

Cross-Border Payments and International Remittances

Blockchain technology makes global payments faster, easier, and more secure. In addition, by leveraging smart contracts, payments can be automatically executed when predetermined conditions are met – meaning transactions occur without needing a third-party intermediary.

Additionally, because all data is stored on an immutable ledger, users can trust that their transactions are secure and traceable. From faster, more secure payments to lower costs and improved traceability, blockchain technology is improving the global payments platform.

Recommended reading: Real-Time Payments Lessons from India’s Wildly Successful UPI

With its versatile capabilities, businesses of all sizes now have the opportunity to make their international remittances easy and efficient – without compromising on security.

Data Privacy & Protection Solutions

Data privacy and protection are of utmost importance in today’s digital world. But with increasingly sophisticated cyber threats, how can businesses ensure their data is secure?

By leveraging the power of a decentralized network, blockchain provides an immutable record of transactions that is tamper-proof and highly secure. Additionally, using smart contracts, businesses can control access to their data and set parameters for who can view it. This ensures that only authorized users can access sensitive information – making it impossible for unauthorized individuals to gain access.

Finally, with end-to-end encryption and cryptographic hashing, businesses can rest assured that their data is safely stored on the blockchain – making it virtually impenetrable. So if you’re looking for a reliable solution to keep your data safe and secure – look no further than blockchain technology.

Final Takeaways

Blockchain technology is a powerful tool that can transform how multiple industries function. Whether for finance, healthcare, logistics, retail, or elsewhere, implementing blockchain helps improve your systems’ security, scalability, and data transparency. 

As an experienced, proven digital engineering partner, GlobalLogic can provide the proper support to seamlessly integrate blockchain technology into your operations and business strategy. Contact us today, and let’s see how we can help you.

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Author

Harun Rashid

Associate Vice President, Marketing

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