What is Blockchain Technology?
Blockchain is a decentralized digital ledger that records transactions, makes financial records more transparent, and builds trust among members of a computer network. While it’s famously known as the technology behind cryptocurrency, blockchain has far more applications.
This blockchain technology overview will reveal:
- Blockchain basics
- How blockchain technology works (and how blockchain protocols streamline business processes)
- Blockchain uses and industries it serves
Blockchain Technology Explained
Blockchain is a shared, unalterable digital ledger that can store data of any kind. The technology has a built-in mechanism that makes it almost impossible to modify records. It’s also easy to audit trails of transactions and verify data integrity in the blockchain network.
Typically, people use blockchain for recording cryptocurrency transactions like Bitcoin. However, businesses can also use it to securely store data in the process of collecting client signatures electronically. Blockchain helps to capture when and where someone signed a document.
Elements of Blockchain
- Smart contracts are rules inside the blockchain system that can self-execute when parties meet specific predefined conditions. In an insurance company, for instance, manually counterchecking the terms of an insurance policy when validating an insurance claim can be time-consuming. Smart contracts can automate the validation process by comparing the details of an insurance claim with the terms and conditions of the insurance policy. If the claim meets the requirements, smart contracts automatically trigger a payout to the policyholder.
- Distributed ledger technology (DLT) decentralizes blockchain. Instead of keeping records in a central database, the blockchain ledger stores data in multiple computers (nodes) across the entire network. To successfully compromise blockchain data, hackers must breach all or most of the computers in the blockchain network. This makes the technology very secure.
- Unchangeable records (immutability) prevent anyone from modifying or deleting a record after its creation. If a record has an error, one must create a new one to correct the mistake. Both the original and new records will be visible in the blockchain to ensure transparency.
How Does Blockchain Work?
- The digital ledger records data as a “block” in the blockchain. The data block can record any details, such as the transaction of a tangible (car) or intangible (intellectual property) asset. The data block can also record client details when collecting electronic signatures. For example, it can capture the time, location, and device a client used to submit a signature.
- Data blocks interconnect to create a chain. Once a block records new information, it connects to the one before and after it. This forms a chain of data that tracks the movement of a document or asset from one point to another in a computer network.
- The chain of data is immutable. A decentralized ledger technology and consensus mechanism make it nearly impossible for a cybercriminal to alter or compromise data inside the blockchain. Immutability makes blockchain a technology businesses can trust to store even their most sensitive data.
Types of Blockchain Networks
There are four main types of blockchain networks:
Public Blockchain Networks
Private Blockchain Networks
Permissioned Blockchain Networks
Consortium Blockchain Networks
Benefits of Blockchain Technology
Businesses often rely on intermediaries to verify transactions or processes, making operations more complex, slow, and costly. Many organizations also use outdated technologies that only meet the bare minimum security standards or fail to satisfy regulatory requirements.
As a result, complying with strict data privacy laws and defending against advanced cyberattacks becomes difficult. Businesses need a robust solution that’s faster, safer, more cost-effective, and, above all else, reliable.
Blockchain for business allows participants to limit the digital ledger to permitted network members. They can control access to specific information and each participant’s action in the blockchain. A members-only blockchain ensures sensitive information is only visible to participants with access to the network.
Enhances Data Security and Privacy
Blockchain creates immutable records secured with advanced encryption to protect confidential data from unauthorized access. Additionally, blockchain is decentralized—data is stored in multiple computers across a network instead of a central database. This means there’s no single point of failure in the network, making it nearly impossible to tamper with blockchain technology.
Blockchain users who deal with sensitive data, such as a client’s personal details, can anonymize the information in the network or use permissions to control access.
Automates Operations to Unlock More Speed and Efficiency
Smart contracts in a blockchain network can self-execute to trigger an operation. For instance, insurance companies can use smart contracts to settle claims automatically once someone provides all the necessary details and meets all the requirements when filing a claim.
Automation speeds up transactions, reduces administrative costs, and eliminates the need for third-party validation. As a result, operations are more efficient and cost-effective.
Enhances Auditing and Transparency
Blockchain records transactions sequentially and irreversibly. The transactions are also date- and time-stamped. This provides an audit trail for tracking the movement of assets and critical documents in business workflows. Additionally, participants in the network can see the full history of a blockchain transaction.
Blockchain Technology Applications and Uses
Blockchain has a wide range of uses across different industries because of its security, transparency, and decentralization. Here are some of the most notable blockchain applications:
Cryptocurrency is one of the most common blockchain applications. Blockchain uses cryptographic techniques to ensure Bitcoin transactions (and other digital currencies) are secure. Each transaction is encrypted and linked to the previous one, creating a chain of blocks that others can’t easily alter.
Additionally, blockchain decentralizes cryptocurrency transactions, eliminating the need for central authorities like banks. This makes transactions faster and more efficient since users have full control over their digital assets without relying on intermediaries.
2. Supply Chain Management
Another application of blockchain technology is a traceable supply chain. Stakeholders in the supply chain can access real-time data about the status, location, and condition of goods. This makes it easy to track the origin of a product, which is critical for industries like food and pharmaceuticals.
Furthermore, blockchain platforms for supply chain management reduce administrative overhead costs and accelerate transactions by automating and streamlining processes through smart contracts. This can make supply chain operations more efficient.
3. Blockchain-Based Electronic Signatures
In the US, the federal eSign (Electronic Signatures in Global and National Commerce) Act governs electronic signatures a business collects from its clients. It outlines requirements businesses must meet to make an electronic signature legally binding. Blockchain can help companies meet these standards.
Capturing and proving a signer’s intent
For the law to recognize an eSignature, the signer must explicitly consent to using the electronic signature in a legally binding document. A blockchain-based eSignature solution like jSign can capture and prove a signer’s consent.
For instance, a business can include a mandatory button asking the signer to confirm their consent before adding their signature to a specific document. Throughout the process, jSign captures a time-stamped record of every step a person takes when signing an agreement electronically.
Providing irrefutable legal proof of the authenticity of customers’ signatures
One of the biggest concerns with electronic signatures is that a client or customer can willingly sign a document but later deny signing it. Without the right technology to prove the authenticity of a signature, a business may not be able to challenge such customers in court. In that case, blockchain provides a unique advantage because it captures enough verifiable data, making it impossible to dispute the signature’s authenticity.
Blockchain-based eSignature solutions like jSign capture every detail of each electronic signature, including the signer’s device ID, time stamp, IP address, and the signing location. Then, the eSignature application records this information in an unalterable, tamper-proof blockchain database.
Complying with data-privacy laws (even the strictest ones)
In most cases, electronic signatures attach to documents containing sensitive information about a patient or customer. How a business stores and protects them can be the difference between compliance and noncompliance with industry regulations.
Blockchain is a feasible solution for storing and securing electronic records because it’s one of the most sophisticated data-protection solutions. Blockchain’s unalterable digital ledger helps businesses demonstrate to auditors that their customers’ or patients’ data is secure and tamper-proof.
Industries Blockchain Technology Serves
Industry leaders leverage blockchain technology to streamline processes, protect businesses from legal issues, and unlock new opportunities. Here are some industries taking advantage of blockchain:
Blockchain streamlines property transactions by recording and storing ownership, titles, and contracts in a highly secure database. This makes the technology suitable for staying on top of compliance with data privacy and security regulations for realtors.
Blockchain’s immutability and decentralized nature allow for storing sensitive documents in a tamper-proof database. Realtors can use it to prove to regulators and clients that they keep records in a sophisticated system that is difficult to compromise.
While most companies take advantage of cloud technology, some financial firms still rely on old, time-consuming processes like collecting client signatures physically on paper. With jSign’s blockchain-based electronic signature solution, financial companies can make it easy for clients to sign legally binding documents online. This eSignature solution also helps businesses comply with data privacy and security regulations thanks to the tamper-proof nature of blockchain.
Additionally, jSign saves signed documents in the cloud for easy reference in case of legal issues. It also enables location restrictions to manage who can and can’t sign the document online, depending on laws in different jurisdictions.
Blockchain secures patient data, streamlines record-sharing among healthcare providers, and ensures data integrity. It also helps in tracking the pharmaceutical supply chain, allowing players to know the source of health products.
Blockchain Technology FAQS
The identity of the person who created the blockchain is unknown. However, blockchain development is credited to an individual or a group that uses the pseudonym “Satoshi Nakamoto.” In October 2008, Nakamoto published a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” which introduced blockchain as the underlying technology for the cryptocurrency Bitcoin
Blockchain aims to provide a highly secure, transparent, and decentralized ledger for recording data and verifying digital transactions.
Blockchain and cryptocurrency are different. Cryptocurrency is a digital currency like Bitcoin, while blockchain is the distributed ledger system that powers cryptocurrencies.
Yes, blockchain is decentralized. It operates on a network of computers (nodes) without a central authority, ensuring that no single entity has complete control over the system. However, blockchain for business offers some level of control over who joins the network and what data they can access.
The cloud is a network of remote servers that enable businesses to store, manage, and process applications (and data) without relying on on-premise physical infrastructure. On the other hand, blockchain is a decentralized, immutable ledger technology that records transactions across a network of computers. Businesses can use a cloud infrastructure, which is easily accessible, cost-effective, and highly scalable, to host their blockchain networks.
The Future of Blockchain Technology
Many blockchain networks are standalone systems with their own protocols and consensus mechanisms. In other words, they are inflexible by design, making it difficult for one blockchain to interact with another. This inflexibility can pose challenges in use cases where different blockchains need to communicate or share data.
As blockchain projects, such as cross-chain bridges, aim to connect different decentralized networks and enable them to work together seamlessly, the future of blockchain is interoperable. A solution will likely emerge to facilitate building flexibility into the fundamental design of blockchain technology. Additionally, blockchain will become a critical, if not a must-have, component of storing and securing data in a tamper-proof manner, especially for businesses that collect client (or patient) signatures electronically.
As these businesses continue to discover the hidden benefits of blockchain, they will understand that it is the ideal mechanism for recording, safeguarding, and storing data in the entire eSignature process. Companies in healthcare, finance, real estate, and other industries will likely abandon eSignature apps powered by old technologies with weak security measures and embrace alternatives based on blockchain, such as jSign.