Introduction
In an era of technological accomplishment, one of the critical milestones for humanity has been the development of blockchain, a special system of digital communication between users. Strictly speaking, blockchain should be described as a distributed blockchain technology that contains some information and allows data exchange. Such a system has a broad potential for practical application, which is a notable feature. It allows blockchain to be used as a database for anything from cryptocurrency transactions and clinical records to information about store-supplied products and library information.
This paper will critically discuss the conceptual basis of blockchain technology, describing its practical value now and in the future. In addition, the paper discusses any obstacles and challenges that blockchain may face. The research paper proves helpful to students and anyone interested in the technology.
Brief Background Information
There is no consensus in academic and public discourse on precisely how blockchain should be defined. For example, Chen et al. (2019) define blockchain as “a system for storing and sharing information that is secure because of its transparency” (p. 17). McKinsey & Company (2022) describe the technology as “a type of distributed database or ledger…which means the power to update a blockchain is distributed between the nodes, or participants, of a public or private computer network” (para. 3). Moreover, Bhutta et al. (2021) agree with them, reporting that “blockchain is a revolutionary technology that is making a great impact on modern society due to its transparency, decentralization, and security properties” (p. 48). Thus, it is correct to summarize that blockchain is an advanced database that stores information in blocks linked together in a chain.
Several attributes of this system ensure the security of such a database. First, the data are arranged in chronological order, which makes it impossible to change previously recorded information without reaching the consensus of the entire network, which is a virtually unplayable event (Bhutta et al.). In other words, all data recorded in the blockchain is stored forever and cannot be changed, deleted, or modified after the fact. Second, blockchain is a transparent technology, which means that information about transactions is accessible and easily verifiable.
This raises a natural concern about the privacy of actions – if an individual has made a purchase, they are unlikely to want all users to know about it. Although blockchain is not an anonymous network, it uses pseudonyms, which means that only the wallet address from which the transaction was made is accessible, ensuring the user’s privacy (Bao et al., 2019). An important observation is the decentralized nature of the blockchain system since no one owns it, and no one can have unified control over it. The lack of centralized blockchain management also implies that there are no intermediaries, be they states, banks, or organizations. These attributes underscore blockchain’s security and relevance to today’s society, which is focused on the digital economy and virtual activity.
The technology’s cybersecurity is ensured by a cryptographic hashing procedure for each block in the system. Hashing is a logical algorithm for converting input data of any size into fixed-size output information (Kuznetsov et al., 2021). Remarkably, every incoming data in the blockchain acquires a unique cryptographic hash, which creates a vast variety of hashes for each block.
In particular, information is transmitted between users in an encrypted form. Once the hash check on the recipient’s end has been performed, they can be assured that the information sent has not been altered at any stage, and thus no one has control over it. In an entire blockchain system, each block contains the cryptographic hash of the previous block, creating a chain of time-immutable blocks that are protected and cannot be tampered with.
Current and Future Use of Blockchain
The attributes described above for defining blockchain as a secure and tamper-resistant system create a broad practical potential for blockchain. One of the key uses of blockchain is in the cryptocurrency marketplace, where users can buy, sell, and exchange cryptocurrency (Ratta et al., 2021). Making purchases with blockchain-based cryptocurrencies guarantees the anonymity, security, and safety of transactions that cannot be undone post-facto. This implies that once the user receives money, for example, for a conversion transaction (USDT to USD), they cannot lie and cancel the transaction. However, cryptocurrency exchanges are not the only ones using blockchain technology.
The blockchain system is helpful for any activity for which it is essential to record transactions without the possibility of later modification. For example, supply chains in which many stakeholders, be they suppliers, vendors, consumers, or producers, already use blockchain technology for seamless data control (Chang & Chen, 2020). Thus, blockchain is helpful in this industry because it guarantees security and transparency, which means commodity tracking becomes available at every stage of the supply chain.
It is reasonable to assume that blockchain can also help maintain clinical records. In practice, medical organizations use blockchain as a database to store and manage digital patient data or in-house operations (Ratta et al., 2021). For example, patient history, family history, and past medications are stored on a blockchain and cannot be faked, but can be expanded. This ensures that clinical data is kept secure and confidential. Blockchain ensures that prescriptions cannot be tampered with in the same industry and controls their distribution.
Despite the practical applications of blockchain, the system’s potential is much broader. It could include any industry in which the benefits of the technology would be helpful. In particular, blockchain is useful for electronic voting systems, which must respect the confidentiality of data and ensure that it cannot be altered. In the past few years alone, more than 1.4 thousand cases of voter fraud, including duplicate voting, false registrations, and ballot stuffing, have been officially reported during voting in the United States (The HF, n.d.). Implementing blockchain into the voting process will ensure transparency, preserve the secrecy of the vote, and ensure that no one can alter it.
Blockchain can also reconstruct the financial system, protecting banks and users from fraud and unauthorized access to financial data. Eliminating the need for intermediaries could reduce transfer costs and speed up transactions, as people from different countries would be able to transact with each other seamlessly. Indeed, this would disrupt the current banking systems and decentralize the economy, which could negatively affect stakeholders, be they banks, financial agencies, or market exchanges.
Blockchain could also be a solution to real estate fraud problems. Technology ensures that all parties’ rights are protected and that unilateral changes cannot be made to the blockchain (Saari et al., 2022). Under current circumstances, having received money, a real estate seller or realtor may cheat by claiming that he did not receive it. Blockchain will create the conditions in which both parties must approve the transaction before it takes place and thus confirm receipt of the benefit. Thus, any discrepancy in the data becomes a reason to revise it and amend or terminate the transaction.
Barriers and Obstacles
Blockchain technology has many advantages that create a range of useful, practical applications for the system in reality. However, technology adoption has been slow partly because of the barriers and obstacles to blockchain’s successful development. This list of barriers can be divided into technological and regulatory ones, depending on the limiting factor. For instance, as more users connect to the system, blockchain experiences congestion, which significantly affects the speed of transactions and can lead to server crashes (Ratta et al., 2021).
The scalability problem is particularly acute in industries where speed and continuity of transaction recording are key needs, including the financial sector. At the same time, the increase in the number of system users comes at the expense of the emergence of new blockchain platforms. Interoperability between such systems is difficult or impossible, hindering the ability to exchange data between blockchains efficiently. It is also worth noting that blockchain requires a large amount of energy to operate continuously, which could cause negative impacts on climate change and the deterioration of ecosystem efficiency (Egiyi & Ofoegbu, 2020). However, not only technological but also regulatory barriers prevent the successful expansion of the practical application of blockchain.
It is also worth emphasizing that the use of pseudonyms and the preservation of user privacy can be not only advantages but also weaknesses of blockchain. These attributes allow it to be used in the darknet for illicit and illegal goods and services transactions, making it difficult for law enforcement (Ratta et al., 2021; Alfieri, 2022). Moreover, the lack of regulation and regulatory frameworks complicates the use of blockchain at government levels and may increase illicit enrichment and corruption by public officials. It is also worth noting that public awareness of blockchain principles may be pretty low, which will cause a natural fear of the unknown. The lack of digital literacy and knowledge regarding the benefits of blockchain may thus inhibit the rapid growth of the technology.
Conclusion
Blockchain technology is highly secure and preserves data because previously entered information cannot be corrected or modified after the fact. The advantages create a wide range of practical applications for the technology: Current uses include cryptocurrency exchanges, healthcare, and supply chains.
In the future, applications of the technology could be much broader and include electronic voting systems, transaction management, and the reconstruction of financial systems. Despite the benefits discussed in this research paper, blockchain faces serious obstacles that create barriers to the rapid development of blockchain in various industries. Among the key obstacles are technological and regulatory barriers, namely environmental damage, high energy consumption, and the lack of a regulatory framework.
References
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