Blockchain technology: Principles and application in a digital world

Blockchain is a decentralised permanent public ledger of all transactions across a peer-to-peer network. It has many benefits, including scalability, increased transparency and improved security, though the full scope of its use is still in research, testing, and development phase due to the technology being complex and unregulated.

In this blog, we’ll outline the key principles of this potentially revolutionary technology and explore its possible application to many industries.

Are Bitcoin and blockchain the same thing?

Bitcoin and blockchain aren’t the same thing, but Bitcoin relies on blockchain in its usage. Created to improve the concept of digital cash, Bitcoin is a decentralised currency, or cryptocurrency, which eliminates the issue of potential double-spending. 

Bitcoin blockchain uses a consensus-based proof of work. It is exchanged, created, and stored electronically on the blockchain which uses cryptographic techniques to verify fund transfers and algorithms to control the creation of new monetary units.

What are the principles of blockchain technology?

Blockchain implementation has some underlying principles. These principles are largely regarded as benefits, and set them apart from current alternatives.

Decentralisation

By decentralising the technology, no central authority or single user or participant controls the transactions within it. Instead, power is distributed amongst all of the participants in a network, eliminating the possibility of a single stakeholder hacking, manipulating, or closing the chain of blocks. This distributed mechanism keeps all the transactions in a blockchain free from fraud as no records can be changed once they’re submitted.

Integrity

There is no hierarchy in blockchain-powered networks as all participants have equal rights to make decisions. Trust is totally guided by user intuition. Every user also gets incentivised for their efforts in how the network functions.

Fair cryptography

Tight-knit security and data integrity is ensured by the power of cryptography. While blockchain systems reward authentic users, it is also harsh on reckless users. This allows the system to be fair and rewarding to good users and bad users are penalised.

Security

Blockchain uses authentication via the public key infrastructure (PKI) encryption mechanism, meaning transactions are highly secured so long as no user shares their own private keys. Any hacks will be limited to that single person, as it’s impossible to hack the whole blockchain using one key.

Inclusivity

Everyone is welcome to participate in blockchain, regardless of wealth status, without any discrimination in the global economy. There is no need to have a bank account to use it, and transactions go directly from person to person, removing any transaction fees usually found in typical banking.

Privacy 

Blockchain’s Strong Hash Key encryption enables users to change data over the internet without disclosing their true identity. It has smart contracts which allows for transactions to go through when certain predefined benchmarks have been agreed upon and reached by both parties involved.

What are the types of blockchain networks?

There are four different blockchain networks currently available: public, private, hybrid, and consortium.

Public blockchain

Public blockchain is where Bitcoin originated and helped to popularise distributed ledger technology (DLT). It doesn’t store information in one place, instead distributing across a peer-to-peer network. As it is decentralised, it requires a method of verifying data such as proof of work and proof of stake. Anyone on the internet can join a public network and access current and past records.

Private blockchain

Private blockchain operates in a restricted environment, such as a closed network, and requires less computational power than public blockchains. It can also be under the access control of a single entity. It operates similarly to a public blockchain in that it uses decentralisation and peer-to-peer connections, but will typically be on a much smaller scale, usually within a company or organisation. These networks are also known as permissioned blockchains or enterprise blockchains.

Hybrid blockchain

Hybrid blockchain combines elements of both public and private blockchain. Organisations are able to set up a private, permission-based system alongside a public permissionless system which allows them to control who can access specific data. Transactions are still unalterable and transactions can still be verified when needed.

Consortium blockchain

Consortium blockchain, also known as federated blockchain, is similar to hybrid in that it also has elements of both public and private blockchains. It enables multiple members within multiple organisations to collaborate on a decentralised network, but has limited access to a particular group of participants.

Application of blockchain technology across industries

Blockchain technology has the potential to positively disrupt multiple industries. At its core, it is a collaborative technology and a next-generation business process improvement piece of software.

Supply chain management

Blockchain shows a lot of promise when applied to supply chain management as it is an industry with multiple moving parts and multiple stakeholders to manage.

Blockchain can help supply chain management by:

• Enabling faster and more cost-effective delivery of products
• Enhancing traceability of products
• Improving collaboration and coordination between partners
• Aiding access to financing

Healthcare

By decentralising healthcare records, they can be more secure and reliable, enabling multiple healthcare providers to update and access a patient’s records for better care.

Ways blockchain can help the healthcare sector include:

• Maintain medical records with more secure data storage
• Robust communication network between all healthcare providers
• Prescriptions that are informed by pharmaceutical supply chains

Voting in elections

The principles and benefits of blockchain technology make it a viable option should governments opt to digitise voting.

Blockchain-based voting could:

• Allow voters to digitally verify their identity in advance
• Maintain anonymity and ballot secrecy
• Lower the chances of vote tampering

Financial services

As blockchain first originated in financial services, in the form of digital currency and cryptocurrency, it is no surprise that its application can go further in this fintech space. Trust is built between participants, and not needing a bank account to operate it means it’s open to everyone.

Some ways blockchain can revolutionise financial services include:

• Cross-border payments
• Digital wallets
• Streamlining lending services and reducing risk
• Real-time asset management systems
• Faster verification of financial documents

Set yourself up for success in revolutionary digital technologies

The University of Wolverhampton offers a 100% online and part-time MSc Computer Science, perfect for professionals looking to develop their knowledge alongside their current role and commitments.

On this degree, you’ll gain a thorough grounding in core computer science principles, while exploring exciting topics such as cloud computing, artificial intelligence, machine learning, big data, and the Internet of Things (IoT). Upon completion, you’ll be poised to enter sought-after roles in digital transformation and blockchain application at both large organisations and startups. 

You’ll learn real-world skills and knowledge by exploring a variety of use cases from professors with industry knowledge, and will build an understanding of the current computer science ecosystem, enabling you to progress in your career.