Blockchain is a data collection technology that can be conceptually compared with the ledger. However, unlike a traditional book, nobody can simply "tear out the page" out of it, since the recorded data remains in it forever and cannot be deleted. This distinguishes blockchain from any other means of collecting information about transactions since such a solution is a guarantee of transparency, which, in turn, inspires confidence. Therefore, both the manufacturer and the consumer benefit from this.
This is a digital, decentralized, peer-to-peer block database (without central computers) that contains detailed, chronologically structured, and immutable information related to the operation. Here are examples of data that can be found in the blockchain: amounts, dates, or participants in the transaction, certified by special electronic signatures.
The blockchain consists of related blocks containing information. New blocks or "links" are added sequentially to an existing chain when a transaction is made. This creates a consistent history of all activities related to a particular item. The use of blockchain technology guarantees access to the full history of transactions related to a certain transaction, including the dates when the relevant actions took place. Each new activity, such as a change in product ownership, will be recorded in a digital registry.
Blockchain can be defined as a functional technology for data collection. In addition to the main purpose of recording information, the blockchain offers many other useful functions. The capabilities of the original, most famous version of blockchain technology - Bitcoin, were limited to the transfer of cryptocurrency. Nowadays, some blockchains can be used to transfer data, create software, and some even can be used to execute contracts (the so-called smart contracts).
There are two types of blockchain: open, accessible to everyone from a personal computer and not verifiable, and closed, dependent on the administrator. If you are going to use the technology in question, you first need to think about what it is intended for in your particular case, and then choose a version of the blockchain with the functionality that will best suit your stated needs. For example, if the technology will be used as an invoice, you need to find a blockchain that allows you to load data that will be included in the invoice. The blockchain is used by the shipping company Alibaba in this manner.
Blockchains can also be created from scratch, and this is how they began to appear. However, today, fewer organizations are putting their effort into creating their technologies, preferring to use publicly available ones, of which there are more and more.
There are many types of activities in which you can successfully use the blockchain: the banking sector, the health sector, transport, and real estate. Blockchain can even be used for elections.
Mass production is considered a highly unecological and often unethical activity. The ecological consciousness of society in the world is constantly growing. People have a growing desire to take care of the environment, and at the same time have high-quality goods. All this makes the consumer of the 21st century more demanding.
The buyer wants and has the right to know where and how the product was produced, where the materials used to create it came from, what the working conditions of the factory where it was manufactured were, and what the environmental impact of the production was. These needs characteristic of the modern consumer can be successfully satisfied using blockchain technology. This tool allows companies to store and communicate product history with complete transparency with smart labels.
The use of smart labels was implemented in 2017 by designer Martina Yarlaard in collaboration with the Provenance application. The fruit of the collaboration was a mobile application that reads the blockchain from NFC tags sewn by the designer into the tags of the clothes she made. After applying such a label to the NFC reader on the phone, the application, reading the product identification number, could also read the information about it collected in the database.
Thus, the application user gains access to the entire production history from the raw materials used to create the item, the places where it was located during transportation, to the final product on the store shelf.
Providing access to clear and reliable knowledge about the composition and origin of materials used in production inspires trust and a sense of security and, therefore, helps build relationships with consumers, who are convinced that they are investing in products that reliably meet their expectations and will be more likely to trust the brand. Both sides of the transaction benefit from such a decision.
Blockchain can be used as an electronic invoice - in this case, you can track the entire delivery route from the supplier to the buyer. This solution can replace the traditional CRM system, that is, the international invoice management system. Moreover, the new technology has an advantage over the old one. CRM is susceptible to data hacking, modification, or deletion. After being placed in an open blockchain, the information remains in it and cannot be deleted.
An example of an organization using blockchain as a bill of lading is the transport company Alibaba, associated with the well-known Chinese sales service AliExpress. Thanks to this solution, Alibaba, its employees, and subcontractors can track the flow of transport products and their number in circulation online, but they cannot make changes to a specific register. According to the same principle, blockchain is used by large clothing brands, which in this way can control the entire process of delivering goods.
Blockchain technology can be extremely effective when detecting counterfeit products. Most often, manufacturers of luxury goods — for example, fashion designers — suffer from such a problem. The consumer is also not always sure of the authenticity of the goods. Blockchain product authentication protects both the brand and the customer. This solution was used by LVMH (French concern Louis Vuitton), Microsoft, and Consensys to create the Aurora platform, which helps the luxury industry in monitoring and track goods.
LVMH Group uses blockchain technology in almost 60 of its brands and plans to expand the functionality of blockchain by protecting intellectual property and preventing advertising fraud. Many other luxury brands followed suit by providing their products with proof of authenticity, which allowed them to be quickly identified. Thus, the sales sector can promote and test ethical production, while proving its sustainability.
Blockchain authentication is also used in the gem industry. It was presented by the Tracr platform, designed for the diamond industry. Using the blockchain, the platform allows you to determine the authenticity of natural diamonds by assigning them individual numbers. A registered diamond with such a digital number can be identified by checking its origin and related transactions.
Cryptocurrency in E-Commerce
Cryptocurrencies raise many questions that are crucial for the reliability of economic transactions using such assets, in particular about their legal nature and related tax issues. Nevertheless, they are very convenient for buyers and owners of online stores: cryptocurrency payments in online stores are already becoming common.
Blockchain can also be used by online platforms using service tokens. The payment tokens can be used as loyalty points, that is, instead of traditional loyalty points, tokens are used that are stored in the blockchain. Thus, the fear of losing the loyalty card disappears. The online store, instead of using e-commerce solutions, can implement blockchain technology and use tokens to tokenize its business. In the same way, blockchain can be used as a payment system on the Internet platform. Instead of paying with traditional currency, payment is made by tokens.
Advantages and Disadvantages of Blockchain
Let us find out what advantages and disadvantages blockchain technology has.
Blockchain technology has a huge number of advantages. Let's name them.
- Transparency of transactions. All blockchains are in the public domain, that is, any user can track the chain of transactions from the very beginning.
- Data security. Data is stored in blocks on the computers of many users. This reduces the risks of hacker attacks, as well as technical failures. For example, even if several computers fail, the information will not be affected. Blocks are created in chronological order. They cannot be deleted or modified. Therefore, blockchain technology is actively used, for example, in traditional finance to prevent fraud.
- Security. Blockchain technology uses various cryptography algorithms. These mechanisms make the network virtually invulnerable.
- Independence. In the blockchain network, transactions occur without intermediaries, as well as third parties, that is, the blockchain is not controlled and controlled by a company, bank, or state, which means there is no possibility of interference in the process.
- Speed. Transactions in the blockchain only take a few minutes to complete.
- Low fees. There are many times fewer fees for transactions in the blockchain without intermediaries compared to bank commissions.
Blockchain technology also has some drawbacks:
- Firstly, the size of the blockchain and the high consumption of electricity. Since each network user stores all the information in the blockchain, the storage capacity should be large enough. By the way, according to the site crypto.ru the weight of blockchain Bitcoin in November 2021 exceeded 360 GB. Volume increases as transactions on the network increase. For example, it may take more than a week for a user to synchronize this amount of information on the network. Blockchains using the Proof-of-Work concept for mining are ineffective due to the consumption of a huge amount of energy.
- Secondly, the 51% attack. What a 51% attack is can be found in this article. Blockchain Bitcoin is considered the most secure and secure during attacks by intruders. Other blockchains have relatively low hash power to protect the network.
- Third, transparency of transactions. This property of the blockchain can be attributed to both the advantage and the disadvantage of the network. Since all transactions are in the public domain, anyone can see the user's transaction history if there is an owner's wallet address.
Despite some shortcomings, blockchain technologies are now firmly rooted in our daily lives. Blockchain is used not only in the transfer of digital money but also in many areas of activity, such as the field of cybersecurity, in the banking sector, with the help of identity cards, and many others.
The most recognizable examples of the use of blockchain technology are Bitcoin and other cryptocurrencies, but the blockchain is much more than the crypto industry. This is an extremely interesting technology recognized in many industries: from legal services to health care, trade, and even government. If we carefully monitor the development of this technology in the world, we can assume that in the future the blockchain will gain an increasing influence on the global economy.
Blockchain technology allows you to create an innovative and transparent business. By using this technology, the manufacturer meets the needs of a modern, knowledgeable, and demanding consumer. The potential of this technology is well known to sales giants such as Louis Vuitton and H&M, who were the first to introduce it into their activities.
In Conclusion: The Future Of Blockchain Technology
Blockchain technology has existed for more than ten years. Nevertheless, in many countries, it is still a novelty, and its use is not sufficiently regulated by law. Taking into account the functionality of the blockchain and its many applications in many industries, including the trade sector, the development of the discussed technology and regulations related to it should be expected shortly.
Blockchain is a challenge for both legislators and practitioners, requiring new legal solutions, new legal skills, and cooperation between legal and IT communities in the creation and application of the law. In the market, effective blockchain integration will certainly be an easier task for large conglomerates with the resources to invest in new technologies. It will be much more difficult for small brands to take advantage of the technology.
Only the future will show whether blockchain technology will revolutionize trade at the global level.