What is blockchain technology?
It is the question everyone has been asking and we hopefully will be able to clarify a few things for you and make the question of what is blockchain technology a bit clearer. So here goes…
Blockchain is an undeniably brilliant invention! We could go into the details of how and who created it, but you don’t need to know that. We just need to know what it is and how it is being used right now to verify information across lots of different industries.
So blockchain by allowing digital information to be distributed but not copied, blockchain technology has created the backbone of a new type of internet. It was originally devised to verify transactions for the digital currency, Bitcoin, but now the tech industry is finding lots of other potential uses for the technology.
What It Is
Blockchain is a public record of transactions. But it’s also distributed, so instead of one person controlling everything, there are thousands of computers around the world connected to a network, and these thousands of computers together come to an agreement on which transactions are valid transactions and which ones are not.
Whenever someone makes a transaction, it is broadcasted to the entire network, and the computers run complex algorithms to determine if the transaction is real. If it is, they add it to the record of transactions, linking it to the previous transaction. This chain of linked transactions is known as the blockchain.
Since the transactions all reference the one before them, you can figure out which ones came first, thus ordering them. Just like when we take money out the bank, our account in frozen at that point of time, and then once we money is taken our account balance is then revalued to include the money that’s been withdrawn.
Blockchain technology is like the internet by storing blocks of information that are identical across its network, the blockchain cannot:
- Be controlled by any single entity.
- Has no single point of failure.
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” Don & Alex Tapscott, authors Blockchain Revolution (2016)
Have a look at this explainer video about blockchain. It will give you a much better understanding of how the technology works and how it is being used across the world right now.
Other uses for blockchain technology
So for a minute just picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.
Information held on a blockchain exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. There is no centralised version of this information for a hacker to corrupt. Blockchain data is hosted by millions of computers simultaneously and its data is accessible to anyone on the internet.
To go in deeper with the Google spreadsheet analogy. Read this piece from a blockchain specialist:
Blockchain as Google Docs
“The traditional way of sharing documents with collaboration is to send a Microsoft Word document to another recipient, and ask them to make revisions to it. The problem with that scenario is that you need to wait until receiving a return copy before you can see or make other changes because you are locked out of editing it until the other person is done with it. That’s how databases work today. Two owners can’t be messing with the same record at once.That’s how banks maintain money balances and transfers; they briefly lock access (or decrease the balance) while they make a transfer, then update the other side, then re-open access (or update again).With Google Docs (or Google Sheets), both parties have access to the same document at the same time, and the single version of that document is always visible to both of them. It is like a shared ledger, but it is a shared document. The distributed part comes into play when sharing involves a number of people.
Imagine the number of legal documents that should be used that way. Instead of passing them to each other, losing track of versions, and not being in sync with the other version, why can’t *all* business documents become shared instead of transferred back and forth? So many types of legal contracts would be ideal for that kind of workflow.You don’t need a blockchain to share documents, but the shared documents analogy is a powerful one.” William Mougayar, Blockchain expert.
How is Blockchain being used right now:
So not only is blockchain a technology that is being used right now to verify information within the cytocurrencies arena it is also being used in lots of different industries. Listed below are so more potential uses for blockchain technology.
Payment processing and money transfers – the most logical use for blockchain is as a means to expedite the transfer of funds from one party to another. With regulated banks removed from the equation, and validation of transactions ongoing 24 hours a day, seven days a week are done with blockchain within seconds.
Monitoring supply chains – Blockchain can be used to monitor supply chains. By removing paper based trails, businesses should be able to pinpoint inefficiencies within their supply chains quickly. Blockchain would allow businesses, and possibly even consumers, to view how products performed from a quality-control perspective as they traveled from their place of origin to the retailer.
Retail loyalty rewards programs – Blockchain could further revolutionise the retail experience by becoming the go-to for loyalty rewards. By creating a token-based system that rewards consumers, and storing these tokens within a blockchain, it would incentivise consumers to return to a certain store or chain to do their shopping.
Digital IDs – More than 1 billion people worldwide face identity challenges. Microsoft (NASDAQ:MSFT) is looking to change that. It’s creating digital IDs within its Authenticator app — currently used by millions of people — which would give users a way to control their digital identities.
Data sharing – Cryptocurrency IOTA launched a beta version of its Data Marketplace in November, demonstrating that blockchain could be used as a marketplace to share or sell unused data. Since most enterprise data goes unused, blockchain could act as an intermediary to store and move this data to improve a host of industries.
Copyright and royalty protection – In a world with growing internet access, copyright and ownership laws on music and other content is impossible to control. With blockchain, those copyright laws would be beefed up considerably for digital content downloads, ensuring the artist or creator of the content being purchased gets their fair share. The blockchain would also provide real-time and transparent royalty distribution data to musicians and content creators.
Digital voting – Blockchain also offers the ability to vote digitally, it’s transparent enough that any regulators would be able to see if something were changed on the network. It combines the ease of digital voting with the immutability (i.e., unchanging nature) of blockchain to make your vote truly valuable.
Real estate, land, and auto title transfers – One of the primary goals of blockchain is to take paper out of the equation. If you’re buying or selling land, a house, or a car, you’ll need to transfer or receive a title. Instead of handling this on paper, blockchain can store titles on its network, allowing for a transparent view of this transfer, as well as presenting a crystal-clear picture of legal ownership.
Food safety – Yet another use for blockchain could be in tracing food from its origin to your plate. Since blockchain data is immutable, you’d be able to trace the transport of food products from their origin to the supermarket.
Immutable data backup – Blockchain might also be the perfect way to back up data. Even though cloud storage systems are designed to be a go-to source for data safekeeping, they’re not immune to hackers, or even infrastructure problems. Using blockchain as a backup source for cloud data centres could resolve this concern.
Tax regulation and compliance – Blockchain is beneficial as the trail of data is transparent and unchangeable so could be a great way to make sure industries are compiling with local laws and paying the right tax.
Medical record keeping – The medical sector has already been moving away from paper for record keeping purposes for years. However, blockchain offers even more safety and convenience. In addition to storing patient records, the patient, who possesses the key to access these digital records, would be in control of who gains access to that data.
Wills or inheritances – Blockchain technology may also be used to verify will. Rather than creating a paper will, people may have the option of creating and storing their digital will on a blockchain network. Wills should become crystal clear and legally binding, leaving no questions as to who should receive what assets when you pass away.
Tracking prescription drugs – Blockchain could be a means of transparently tracking prescription medicines. In a world where prescription returns do occur, and counterfeit medications are a very real thing, blockchain offers drugmakers the ability to track their products based on serial and/or batch numbers to ensure that consumers are getting the right doses and information when they pick up medicine from the pharmacy.
We hope we have clarified what blockchain is for you. If you have any questions just let us know!
We hope we have clarified what blockchain is for you. If you have any questions just let us know!