Chapter 5: Blockchain Use Cases
Now that we have understood the many theoretical aspects of the blockchain technology, it is important that we investigate how it is being put to real use. In this chapter, we will focus on the real life applications of blockchain and how they are disrupting the world as we know it. Starting with the most mainstream example of blockchain use cases, Bitcoin, we will move on to see how blockchain is changing anything from government and finance, to shaping the future of Internet of Things and data storage.
Blockchain Use Case Example: Bitcoin
As it stands, the most popular representation of blockchain use cases in the world is Bitcoin. In its purest form, Bitcoin mimics mainstream currencies by being a medium of exchange or a storage of value. In fact, in most modern monetary systems currency is not represented by a physical commodity, but by what is commonly known as ‘fiat’ money. Fiat money retains its value by being acknowledged by a government or an institution as a legitimate source of currency. Where Bitcoin differs from central bank-backed currency is that it uses the power of the internet as a means to operate in a transparent, encrypted and decentralized way.
As Bitcoin does not require validation by a government or a bank, how does a typical transaction work in this early blockchain example? Firstly, both parties of such transaction have a public key and a private key that provide a digital signature – a proof of ownership and a reference point for both the sender and the receiver. The sender issues a desired amount of Bitcoin to the receiver’s public address. After the transfer is completed, the transaction, digital signature, as well as timestamp, are broadcasted to all of the nodes in the network for validation. Once the network nodes confirm that the transaction is valid, the block containing the information is added to the chain of similar blocks that precede it. At this point, the transfer is irreversibly added to the blockchain and open for anyone to to view and confirm that it did take place.
Applications of blockchain: Beyond Bitcoin
While Bitcoin is definitely one of the most mainstream examples of blockchain in action, it is important to remember that this payment method is only the tip of the iceberg in current blockchain use cases in action. When we really consider the benefits of blockchain, we can envision and, in some cases, already find real practical applications for many features of this nascent technology.
The ledger for example, allows for a radically different method of storing information in the new era of data that is not monopolised by one central party, but commonly owned and authorized by a decentralized network of nodes. If we focus on the implications of this new trustless way of building databases and organisations alone, we can anticipate how applied blockchain will have a truly radical impact on a multitude of industries, markets and charitable causes. Following this, the encrypted, responsive nature of the blockchain paves new ways for storing and securing the ever more increasing networks of data exchanges, which increase in traffic and volume every single year.
The tokenization aspect also means that real life applications of blockchain technology will also help in creating new avenues of generating wealth, if we consider how various, previously solid, assets can now be liquidated and sold as fragments through a decentralized ledger. Similarly so, blockchain allows users to monetize their activity more, whether we consider selling their data to advertisers or creating their own content.
These and many more blockchain use cases will be covered in this chapter.
We are very excited to inspire potential blockchain app creators to understand the magnitude of this technological phenomenon and imagine what aspect of the modern world they want to disrupt and improve.