Connectivity Question: What is Blockchain and Why Does it Matter?

Connectivity Question: What is Blockchain and Why Does it Matter?

The rapid onset of new technologies moves a little too quickly sometimes and every now and then a revolutionary topic quietly slips by without the recognition it should receive. That’s been the case lately with a particular technology that has the potential to dramatically change the way businesses interact with one another, altering the entire structure of commerce and security.

“Blockchain” is a term you’ve probably come across in the news over the last few years but may not have put much thought toward. Admittedly, we didn’t either until we learned what it meant.

The nation’s leading companies are sure thinking about it though, and many are looking at its possible implementation. Giants like Walmart, Amazon, Facebook, and others seem to share a similar belief that blockchain has the potential to change everything about logistics, banking, contracting, security, and much more. So, what is it, and what does it do?

 

The Elimination of the Middleman

Picture blockchain as if it were a big public checkbook ledger of all transactions.

As transactions are made, they’re bundled together and stored in a register (or block) that gets distributed across thousands of computers. All of these computers work together to verify the transactions and they are permanently recorded. After a register is closed, it’s labeled and essentially attached to the register that came before it, forming a chain of these registers (the blockchain).

With a system like this, one would have a very difficult time committing fraud or altering a transaction because you’d have to make the alteration across every machine containing the register – not to mention working backward through every register that came after it until you got to the one you wanted to alter. Basically, there’s no sneaking around here. There would be no easy way to manipulate these records without being discovered and an improbable amount of computing power would be required to make any type of edits. The transaction information cannot be changed and thus exists as a permanent, redundant, ledger that is copied across onto thousands (if not millions) of computers.

No one computer controls this ledger. It doesn’t “belong” to anyone. This provides a great measure of transparency because anyone can view the blockchain.

What you may notice about this system is that a key middleman is eliminated from the transaction process: financial institutions. No third party is required for these transactions.

 

What About Privacy?

A measure of privacy is preserved in that users can only see an individual’s username or digital signature. In this partial anonymity, integrity is maintained by the way participating computers have to first be vetted before they’re allowed to create registers. Computers are required to perform “proof of work” efforts to validate they’re real and aren’t performing malicious interactions.

 

How Will This Impact Business?

Apart from the financial aspects of blockchain, the processes and methodologies behind it can be expanded to suit other purposes. Blockchain can be used to record basically any information of value. Since it’s an unchangeable, time-stamped record of data, it can be used for anything requiring data integrity to be preserved:

  • Voting
  • Protection of digital assets
  • Tracking ownership
  • Real estate
  • Encrypted communication
  • Document authenticity
  • Stock exchanges
  • Food safety
  • Records of ownership
  • Provenance of generally anything, notably diamonds currently
  • Supply chain quality assurance
  • Medical records and billing
  • Distributed cloud storage

Last year, Forbes authors wrote the current most-practical applications for the software encompasses five key areas:

  • Contract management and smart contracts
  • Payment process and currency
  • Supply chain management
  • Asset protection
  • Personal records and password management

Those five examples in and of themselves touch companies in virtually any industry – particularly those in the health, insurance, and manufacturing sectors. Imagine if real-time status updates could be shared across every point on a supply chain, boosting security and efficiency for the entire system and, in turn, profitability. It should be no surprise that blockchain technology is predicted to have a compounded annual growth rate of 78 percent between now and 2024, according to global data from Research and Markets. North America is projected to have one of the largest shares of that forecasted growth.

 

Folks Are Getting Excited

With so much potential on the immediate horizon, the excitement is palpable among those anticipating all the ways that blockchain may one day change the very structure of business. Major universities and companies are investing in the technology and are investigating new ways to put it to use. This means breakthroughs in blockchain application could very well be just around the corner.

As the impact of blockchain is still emerging, understandably many folks are still unclear about what it means and what it can do. One thing is certain though, developing a better way to store, record, and track data will have major implications for any industry, for better or worse. It could even be a game-changer for many.

Category Features, IT & Tech