Introduction
The term blockchain refers to a decentralized and distributed database used in maintaining continuously growing lists called blocks. The blockchain is being commercialized in various areas given that it has far broader applications. It is generating interests in the technological circles, and beyond given the new possibilities it is opening up in financial services, the public sector as well as other areas. The blockchain is different from Bitcoin because it is used in broader contexts than Bitcoin or cryptocurrencies. You should also note that the implementation of Bitcoin heavily relies on blockchain technology. The platform endeavors in widening the scope of businesses by offering an affordable, transparent and convenient transaction platform. This paper seeks in explaining the meaning of blockchain, describing the structure of blockchain, giving a brief history of the blockchain, highlighting the significance of this platform to businesses and consumers, and finally, highlighting the prospects of the blockchain.
The structure of Blockchain
To highlight its functionality, it is essential to look at the structure of the blockchain. The blockchain is a combination of several technologies namely; public key cryptography, blockchain data structure, distributed ledgers, and consensus mechanisms. Firstly, the public key cryptography helps in ensuring that every participant in the system is identified uniquely and can validate blockchain changes using cryptography secured private key. While public key cryptography and blockchain are not unique to each other, it is an essential element that ensures the safety of blockchains, and only participants who are authorized by blockchain are allowed to make changes in the blockchain system (Wright & De Filippi, 2015).
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Basing on the blockchain data structure, a blockchain is a specialized kind of data structure, and it resembles a database. This structure is where data is build up and set in successive blocks. Every data block contains a small piece of data verifying the data provided in the previous block. For this reason, all later blocks cease to match if there were attempts of modifying previous blocks in the chain. This data has been likened to a tower of Lego pieces that follows a specific sequence red-green-green-blue-yellow-red (Pilkington,2016). The system maintaining this platform can detect and eventually reject attempts made in modifying blockchain. The blockchain data structure makes blockchain tamper-proof given that it prevents foreign invasion.
In understanding the functionality of Distributed Ledgers, it is important to note that traditionally, ledger systems require either participants to trust an integrated ledger or consequently, each participant is required to maintain their decentralized ledger. The main undoing of decentralized ledgers is that they incur many costs in managing and securing them. Also, you cannot tell when the two ledgers diverge until the pending transaction gives a distinction. On the other hand, centralized accounting requires all participants to trust the authoritative central holder, and it also creates a critical vulnerability (MICHAEL et al., 2018). The uniqueness of a distributed ledger is that each node (authorized participant), has to maintain a complete form of the ledger and every transaction, for example, proposals to modify the ledger is disseminated to all authorized participants, and its approval is only reached at after the agreement of a sufficient number of nodes.
Lastly, in the consensus mechanism, the validation of proposals of changing the blockchain is performed by the authorized parties following specific re-set rules, whereby these authorized parties agree as to whether the proposed data entry will be permitted. For example, the authorized parties may conduct a check confirming whether the node purporting to carry out a particular transaction possesses important assets in accordance to the blockchain records. Authorized participants end up with identical versions of the ledger once a transaction has been approved and consequently, after an upgraded version of the blockchain spreads to the blockchain system. Also to note, a consensus mechanism ensures that there are rigorous means that are applied uniformly by all nodes, ensuring that only valid data is channeled to the blockchain platform. This mechanism plays a gate-keeping function entrusting only a network of trustees instead of single centralized authority (Wright & De Filippi, 2015).
Brief History of Blockchain
We cannot trace the history of blockchain without discussing the genesis of bitcoin. Bitcoin was offered on the open source community after Nakamoto released the Whitepaper. Blockchain provided answers to the digital trust given its important functionality of recording essential data in the public space, and also that it allows no one to remove it. The blockchain is transparent, decentralized and time-stamped. The blockchain is essential to bitcoin as well as the internet is to the email (Wright & De Filippi, 2015).
When entrepreneurs realized the significance of blockchain, they embraced it widely, and today, it is being used in healthcare systems, supply chains, transport systems, insurance, contract management, voting, and many areas. Studies indicate that currently, about 15% of financial institutions have embraced blockchain technology. Dubai is laying down plans to be the first nation in the world powered by blockchain by 2020 (Feng et al., 2018).
Impacts of blockchain to consumers
Given its enormous potential, blockchain is changing customer experience for the better; making business more accountable, increasing security in all forms of transactions and improving accessibility to disadvantaged customers. Below, I have discussed the contribution of this platform for improving customer experience.
To begin with, blockchain has revolutionized the payment process. Bitcoin together with other forms of cryptocurrencies are using this platform in sending money from one party to the other. Basing on the fact that this platform is secure and transparent, and there is no need of the central bank validating its transactions, it allows strangers to exchange freely without the intervention of a third party. This has given consumers who formerly were relying on banks, a convenient transaction method, since banks are not perfect and they take a considerable time in approving international payments (Feng et al., 2018).
Secondly, Underwood (2016), states that blockchain has also improved the process of sending and receiving products. Given that the Internet of Things is getting bigger, when this technology is used in tandem with blockchain, it is allowing significant improvements in how people pay and receive their products. Many times, people usually complain about paying for products or services they are yet to receive; these complaining customers are an opportunity lost for businesses.
Thirdly, blockchain has also improved smart contracts. The same way the Internet of Things partnered with blockchain in transacting with physical goods, there is a possibility of negotiating with non-physical items as well. Using the blockchain platform, contractual obligations are tied on specific actions, by means of an "If/Then'' model. These actions are triggered after the conditions of the contract have been verified by blockchain if they have been met or not. All parties are tied and held responsible since the transaction is publicly verified and it cannot be altered (Mainelli & Smith, 2015).
Lastly, blockchain is also handy in customer record keeping. There are many cases of companies failing in keeping customer data safely. Whether this data is personally identifiable information, sensitive health records, passwords, or even political related details, customers and businesses are concerned about the safety of customer data. For example, Factom has decided to use blockchain in storing healthcare records, concerning patient-physician communication, and medical bills. On the same note, the Civic Company is using blockchain in storing identity information for customers (Angraal et al., 2017).
How Bitcoin has improved businesses
Blockchain has revolutionized business by promoting commerce and the banking industry. As an example, blockchain has brought tremendous changes in auditing given its capability of offering permanent records of transactions. These records are essential for auditors as they lessen the work of compiling supporting documents for verification. Blockchain guarantees accuracy and reduces the hustle of pulling documents from different sources for auditing (Zheng et al., 2017.
Blockchain services are also significant in quality assurance of various companies. Since firms have a link of every facet of the supply chain, blockchain offers a contiguous and definitive ledger identifying the problem in cases of recalling and investigation. It helps in tracing discrepancies in the system that can affect the businesses (Angraal et al., 2017).
To add on that, blockchain also guarantees quicker trading on the stock exchange market, whether in commodities and securities. Its distributed nature makes processes that previously, were taking days to be affirmed and securely finalized within minutes. Blockchain-based trades happen automatically compared in the later stages when validation was to be done in a few days. This improvement has widened the scope of trading business given the convenience and transparency in transactions (Yli-Huumo et al., 2016).
Blockchain has also improved the digital marketing platform. Blockchain marketing platform allows high security and transparency standards that enable marketers in assessing audience factors like demographics quickly. In accomplishing this, blockchain uses Basic Attention Tokens that allows end users to be paid on ads they view, while the advertiser is selling directly to the public (Angraal et al., 2017).
Conclusion
The blockchain is a database that is solving double spending problems without a third party, opening up a new range of possibilities. The most critical aspect of this technology in the business arena is that it can be used in storing critical, business data safely and released timely when needed. Also, it has revolutionized the transaction system by ensuring transactions are conducted faster and safely without a third party. All Businesses should embrace the blockchain model to keep with the pace of the changing business world.
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