Blood substitute (also called blood surrogate) is the name for a number of substances that can perform some functions of blood. Blood substitutes are often used in blood transfusions where real blood is not available. Losing a lot of blood can mean there is not enough blood left to keep up the oxygen transfer to certain organs, or the brain. This state is a medical emergency, as it can lead to organ failure and death. Blood substitutes can help in these situations.

Types 
There are two basic types of blood substitutes:
 Liquids that act as blood thinners, but that do not have any physiological function
 Blood substitutes in the narrow sense, which can take the some of the functions of blood

An oxygen-carrying blood substitute, or artificial haemoglobin, is an artificially made red substitute whose main function is to carry oxygen, as does natural haemoglobin.

The first goal of oxygen carrying blood substitutes is just to mimic blood's oxygen transport capacity. Unfortunately, oxygen transport, one function that distinguishes real blood from other "volume expanders", has been very difficult to reproduce.

Reasons for use 
There are some good reasons why the world needs blood substitutes:
 Blood donations are increasing by about 2–3% annually in the United States, but demand is climbing by between 6–8%. An aging population needs more operations. These often use blood transfusion.
 Although the blood supply in many countries is very safe, this is not the case for all parts of the world. Blood transfusion is the second largest source of new HIV infections in Nigeria. In certain regions of southern Africa, it is believed that as much as 40% of the population has HIV/AIDS, although testing is not financially feasible. A disease-free source of blood substitutes would be incredibly beneficial in these regions.
 In battlefields it is often impossible to give rapid blood transfusions. Medical care in the armed services would benefit from a safe, easy way to manage blood supply.
 Great benefit could be got from the rapid treatment of patients in traumas. Blood substitutes can be used without immune reactions.
 Blood substitutes can be stored for much longer than transfusable blood, and can be kept at room temperature. Most haemoglobin-based oxygen carriers in trials today carry a shelf life of between 1 and 3 years, compared to 42 days for donated blood, which needs to be kept refrigerated.
 Blood substitutes allow for immediate full capacity oxygen transport, as opposed to transfused blood which can require about 24 hours to reach full oxygen transport capacity. Also, in comparison, natural replenishment of lost red blood cells usually takes months, so an oxygen-carrying blood substitute can perform this function until blood is naturally replenished.
 Oxygen-carrying blood substitutes also would become an alternative for those patients that refuse blood transfusions for religious or cultural reasons, such as Jehovah's Witnesses.
 Synthetic oxygen carriers may also show potential for cancer treatment, as their reduced size allows them to diffuse more effectively through poorly vasculated tumour tissue, increasing the effectiveness of treatments like photodynamic therapy and chemotherapy.

Since oxygen therapeutics are not yet widely available, the United States Army is experimenting with varieties of dried blood, which take up less room, weigh less and can be used much longer than blood plasma. Saline has to be added before use. Dried blood is better for first aid during combat than whole blood or packed red cells.

References 

Physiology
Blood