Now, it is important to note that all of blockchain technology, whether it is cryptocurrencies or anything else, relies heavily on very advanced cryptography. As such, explaining how it works to the lay person can get quite technical. The following explanation is an attempt to convey the ideas behind blockchain without getting bogged down in the details.

Transactions in Blockchain

Before a transaction takes place and can be uploaded onto the blockchain, it needs to be verified. Let’s take an example. Person A wants to transfer money to Person B. The details of the transaction, along with other key information, is processed into a block. This block also contains a public key or password that every node has access to and a private key that only Person A has access to. contains the transaction information. The solving of this complicated problem simultaneously provides the details of the transaction and also authenticates it. Once the authentication is complete, everybody on the blockchain knows that Person A has transferred money to Person

This verification process involves using significant computing power and cryptographic tools to complete complex and complicated mathematical problems associated with the block that B, the quantity of that money, and that the transaction is legitimate.

The block containing the transaction information is added to the chain and becomes a permanent part of it. This is how a blockchain is created; it is literally a chain of blocks that have been authenticated.

Blockchain Use-Cases: Applications of Blockchain Technology

This kind of technology, where every transaction is transparently known to every node on the chain simultaneously and instantly, has applications in a wide range of sectors from banking to telecommunications, real estate, and the provision of government services.

Decentralised Finance (DeFi)

Decentralised Finance uses blockchain technology to remove the intermediary in financial transaction, rendering it a direct relationship between the sender and receiver. In such a system, transactions can take place quicker and can be customised as per the needs of the parties involved. That is, transactions can be much more than simply the transfer of value, but can include much more complex criteria.

When you buy a coffee at a restaurant, the payment is processed through an intermediary. However, apart from these kinds of direct purchases other financial instruments such as loans, insurance, crowdfunding, derivatives, betting, etc, are all run through large intermediaries. One of the biggest advantages of DeFi is to cut out this middle-man.

Healthcare

Blockchain technology has several applications in the healthcare sector, but one of the key areas that is generating interest is that of electronic health records. The idea is that a patient’s health records are stored on a blockchain that simultaneously authenticates the records and also makes them available to healthcare professionals around the world, should the patient choose to show it to them.

Smart Contracts

Smart contracts are the most versatile application of blockchain technology. A smart contract puts in code the stipulations of the contract so that a computer can validate the terms and conditions and trigger the contract as soon as they are met. Another advantage of smart contracts is that the computation required to authenticate a contract can be done by a third-party rather than the parties involved in the transaction.

Supply Chains

A supply chain based on the blockchain gives all participants equal and immediate access to information such as the record price, date of order, location of supply, quality, and other relevant information. Using blockchain technology for supply chains has several benefits including significantly increased transparency, reduced costs and risks, increased traceability of supplies, and reduced paperwork.

Blockchain technology has applications in a lot more areas, such as real estate (digital land records that cannot be modified without consent), and intellectual property rights (authenticating ownership and the transfer of these rights), among others.

The next article is going to deal with cryptocurrencies, the most popular application of blockchains.