How Blockchain Works and How it Can Affect Certain Industries

How blockchain works

The arrival of cryptocurrency and the accompanying blockchain system revolutionized the entire financial industry.

No one else has tried something like this before. The decentralized nature of the cryptocurrencies has given rise to many solutions that experts in the arena have not thought were even possible given the centralized systems of most banks and financial institutions in the past and in the present.

However, blockchain is not limited to cryptocurrencies. Experts, after analyzing how the system works, have managed to identify how blockchain can “disrupt” certain industries at present. First, however, let us look at how blockchain works.

The Decentralized Ledger

In the context of cryptocurrency, blockchain is referred to as a decentralized ledger. This is because data is not managed by an entity, but by a network of users. Hence, transactions in cryptocurrencies are referred to as peer-to-peer.

When a user in the network initiates a transaction, the data is validated by a group of computers called “nodes.” This is how miners earn their bitcoins – they contribute computing power and are rewarded with a “commission” if they are able to confirm a transaction.

Once the transaction is completed, it is encrypted in a data block and added to the chain. This blockchain is hosted by the peers and is thus accessible for all through an interface. However, people cannot copy the transaction data, thus eliminating the possibility of data theft and fraud.

How It Can Affect Industries

Blockchain provides an opportunity for a publicly accessible and easily verifiable method of storing transaction data. The peer to peer network acts in place of the middle man, the broker, who, in centralized trading systems, are the ones authorized to make transactions on the trading floor.

Because of the peer-to-peer network, users are able to make transactions directly and in a manner faster than what is possible with centralized transaction systems. One only needs to make a transaction in the cryptocurrency platform, and, within minutes, the transaction is confirmed.

Industries or Activities That Can Benefit From Blockchain

As mentioned earlier, blockchain poses several benefits for certain industries simply by eliminating the need for a middle man. Here are two industries that can be positively disrupted by blockchain:

1. Music industry

The music industry makes heavy use of middle-men, especially when publishing content. In the old model, the labels acquire the rights to market the content of their artists. In return, the artist get a percentage of what their music earns. In this model, it is the label that benefits because a huge chunk of the artist’s earnings go to their bank account.

With blockchain, there is an opportunity for artists and consumers to meet in a single platform. Artists can self-publish their content and consumers can directly pay to consume the content, with only a minimal fee imposed.

2. Real Estate

Just like the music industry, the real estate industry utilizes middle men extensively. Agents are tapped by brokers in order to help them sell properties on behalf of the developers, in exchange for commissions. With blockchain, there is an opportunity to directly link buyers and developers, without the needs for brokers and agents.

3. Legal industry

Everybody knows the legal industry is, well, burdened by a lot of paperwork. There’s no need for middle men on this industry but it does take some assistant to dig up documents and records. With blockchain, however, much of that data will be available online and easily searched.

These are but three of the industries that can be positively disrupted by blockchain technology. There’s still a lot of open ground that can be explored, and the technology has a lot of promising features for the future.

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