Cryptocurrency is decentralized digital money. Its cryptographic proof of value comes via transactions — verified and recorded on a blockchain — a distributed digital ledger that provides a permanent and unchangeable record of transactions.
A blockchain can record information about cryptocurrency transactions, ownership of NFTs, (non-fungible tokens) or smart contracts. An NFT is a crypto asset which uses blockchain to record the ownership status of digital objects, such as images, videos and text. While anyone can view the item, only the buyer of an NFT has the recognition of being its owner. NFTs are created on the blockchain as unique tokens that can’t be duplicated.
By distributing identical copies of a database across a network, blockchain is difficult to hack. Transactions are recorded in “blocks” linked together on a “chain” of previous cryptocurrency transactions, so everyone has their own copy of the ledger to create a unified transaction record. Software logs each new transaction with all copies of the blockchain simultaneously updated.
The most prominent use of blockchain is in virtual goods with cryptocurrency being the most prominent. This virtual currency can be bought, sold and stored in crypto exchanges. The benefit to using blockchain in cryptocurrency systems such as Bitcoin, is it verifies when a secure transaction has occurred between two or more parties.
In health care, blockchain can secure sensitive data and ensure authorized access to electronic health records. This technology allows patients to control their data and access it from a computer or smartphone. Blockchain also offers a safe way for doctors to share medical data without compromising patient privacy.
In a vaccine distribution network, for example, manufacturers can monitor for adverse events of a treatment. Distributors can respond to supply chain disruptions. And dispensers can improve inventory management.
A smart contract is software that runs on a blockchain with predefined conditions that the contracting parties have agreed to such as releasing funds to one of the parties. Smart contracts can streamline supply chains, allowing customers to purchase from suppliers without intermediaries such as lawyers, banks or central authorities.
Smart contracts have the potential to revolutionize logistics and trade by making transactions faster, cheaper and more efficient. Given the backlog of ships waiting to enter U.S. ports, American industry benefits from a digital means to solve its sticky supply chain woes.
How so? Goods must be transported around the world as fast as possible due to the rapid interconnected growth of manufacturing and increased demand for goods. Using blockchain, the solution can trace the path of a product, from its starting point to the customer’s address, and make adjustments if necessary. All the parties collaborating in the supply chain journey can use the blockchain platform to reduce time delays, trim costs and decrease human error.
Blockchain technology also makes it possible for games to exist in which players own and employ digital assets, and can exchange these assets by selling or giving them to other players online via secure transactions.
Similarly, blockchain technology is used in the banking industry. A traditional bank transfer must pass through intermediaries before reaching its destination and accounts reconciled across a global financial system. Blockchain increases the safety of transactions and allows banks to store their private keys using digital signatures. Incorporating blockchain into banking systems could also allow people without bank accounts to make transactions.
Practically speaking, to pay a retailer, a cryptocurrency wallet is required. This software program interacts with the blockchain and allows users to send and receive cryptocurrency. To transfer money from your wallet, simply scan your recipient’s QR code or enter the wallet address.
Still don’t believe virtual currency is reliable and trustworthy? In March, President Joe Biden issued an executive order, “Ensuring Responsible Development of Digital Assets,” that directed two dozen government agencies to study the benefits and detriments of blockchain for the American economy. So…ready or not, here it comes.