What is blockchain? Blockchain is a decentralized database, but not in the traditional database, and peer to peer network that stores and register any transactions. Basically, one gigantic ledger. No one person owns this ledger. Everyone in the peer to peer network has a copy of this ledger. Anyone of the ledger receives an update or an insert of new transaction, everyone in the network will receive the same update or insert in their ledger. However, everyone in the network will have to agree that the change or insert is valid. If the insert or update is deemed by the “proof of work” to be an invalid changed by one of the peer in the network, this transaction will be rejected. Every transaction is written into a file and when the file gets full, it creates a new file or block and each block is chained by the used of a hash key value.
Bernie Madoff – He owned one ledger. So he is able to make the changes he wants and no one knows about it. Imagine if the ledger that Bernie Madoff is using is in the blockchain, everyone of his investors will have a copy of that ledger. And when Bernie Madoff makes a change on the ledger or blockchain, everyone with that ledger will have to agree that the change is valid. Otherwise it will be rejected.
So how is blockchain technology changing the world? The goal of blockchain is to remove the middleman and to remove centralized control. Our current system is all centrally controlled. For example banks.
All bank transactions history like deposits, withdrawals, new accounts, account inquiries are all saved in a centralized database. The bank owns these data and they can do anything they want to these data. Blockchain eliminates the middleman and it creates a system where everyone has the same data and any changes to a record must be consensus. The data is replicated and stored all over the blockchain network.
The benefit of blockchain: Reduce cost and complexity, trusted record keeping, improve discover-ability and shared trusted processes
What is a smart contract when used in the blockchain?
A smart contract contains all the elements of a traditional contract like mortgage loan, contract of a rental car, or real estate offer on a house being sold. It has rules and conditions that is written in software code. Because of this, conditions can automatically be enforced by some algorithm. Imagine the one benefit of this would be an alert being sent by a contract object that will be sent to all parties involved in a contract warning of a pending due date that can put all parties in breach of a contract. Thus avoiding costly lawsuits. Smart contract aims to optimized cost, time, and route.
Have a look at Uber without smart contract
Uber owns the data and it is centrally controlled. Now Uber with smart contract on a blockchain.
The smart contract can trigger automatically a series of rules and regulations and with AI, can optimized route. Though UBER can do this, with blockchain, both the driver and the passenger owns and can be sure that the transaction and route data is really theirs. Saving time and cost.
● Supply Chain Management
● Walmart in partnership with IBM is able to track pork products across China
● Reduced time it takes to track food from days to minutes
● 1% reduction in food borne disease in USA = $700B in savings
● Saving lives as well. 48M people in the USA will become ill due to food borne diseases
● Real Estate ANZ and Westpac partnership with IBM
● Digitized commercial property lease garauntess
● Increased transparency
● Reduced risk and fraud
● Insurance with Maersk with Microsoft
● Better handle shipping insurance
● Successful 20 week proof of concept made auditing aspects of shipping supply chain easier
● Improve tamper resistance
● Sharing data in real time
● Certificate of Authenticity
● DNV in partnership with Deloitte established instant verification of certificates on a blockchain
● Able to add 90K certificates which improved tamper resistance and reduced fraud and counterfeiting
● Humanitarian Aid
● United Nations World Food Program uses Ethereum to Aid Syrian Refugees
● Fed 10K Syrian refugees living in Azraq
● Blockchain increased transparency, fraud and lowered intermediary costs
The possibilities of a smart contract on a blockchain technology provides so many opportunities.
● With smart contract, applications are able to track items in real time and know that the data is genuine. Perfect for supply chain management systems
Companies will be able to identify a diamond that we wouldn’t want to be coming from conflicted areas, like blood diamonds.
And with the Internet of Things, IoT, devices can utilize smart contracts base on environmental conditions.
Authors Bio: Jayper Sanchez is the Director of Training Programs for The Blockchain Academy. He is also the CEO of J4 Interactive Inc, a consulting firm specializing in mobile development, Big Data applications and Blockchain DApp. Jayper has over 20 years of experience in consulting as a software developer. Jayper believes that continuing education and training is essential in any industry specially in the tech industry. He likes to say ‘You never stop learning in our field’ ‘”