Blockchain uses a simple idea that may be just as revolutionary: If every member of a large network has the same data, along with a complete record of any changes made to that data, the data will be impossible to falsify.That simple idea underlies cryptocurrencies such as bitcoin and ether, but it has wide applications. A simple example might be a funds transfer. Does this person have enough assets to make the transfer? If a majority of the network agrees that they do, then it goes into a database that is synced across the entire network. The network itself verifies the data.
Areas where blockchain makes a huge difference:
1. Cryptocurrency transactions
This, of course, is what most people think of when they think of blockchain. Hundreds of cryptocurrencies exist today – not only bitcoin and ether, but also monero, ripple, zcash, and even “potcoin,” intended to serve the legalised cannabis industry. With many billions of dollars of cryptocurrency in circulation, and more than 100,000 companies, including some quite large ones, accepting various cryptocurrencies, this trend will affect many types of enterprises.
2. Transactions between organisations
Blockchain reduces costs by eliminating the need for third parties and for labor-intensive manual verification processes.
How can blockchain help support transactions between organisations? Organisations making transactions typically do it one of two ways. Either they use a third party to authenticate and verify the transaction, for example when banks use the Automated Clearing House (ACH) for funds transfers. Or, they do authentication and verification on their own, but that usually involves manual processes and is labor-intensive and therefore costly. Blockchain reduces costs by eliminating the need for third parties and for labor-intensive manual verification processes, Wong says.
3. Workflow within large organisations
Blockchain’s ability to provide authentication and verification across large networks creates efficiencies when different departments or divisions of a large organisation work together on projects. Once most organisations begin using blockchain, they find more uses for it. “Blockchain provides a transactional layer, and once you have that layer in place, companies start to think of the many different areas in the organisation where they can leverage it.
Example how blockchain makes a difference for an organisation
A distributed database is perfect for a localized organisation where all the entities trust each other but do not want to keep duplicate record of the same data, the distributed feature here effectively lets the users to maintain and operate on instances of same data sets across the organisation.
Example: A multinational bank maintains a distributed database of customer accounts, such that the bank’s various departments (KYC/Loans/Deposits) can access customer information for different purposes (Identity verification/Credit scoring)
Blockchain however comes into play when the entities cannot trust each other, that is, a consensus for who controls the network is unattainable and there is a need of a magical database that is 1) Distributed (we don’t want duplication of records) & 2) Decentralized (we don’t want tampering of records by entities in the network whom we do not trust)
Example: The aforementioned bank also frequently trades on capital markets and all of its buy/sell orders are routed through a broker on some exchange. Now this here is an ecosystem where we are faced with multiple types of entities [1) bank 2) broker 3) exchange] each of which maintains its own “distributed” database which is also “centralized” [the exchange is trusted by all] [sg_popup id=6]