Anyone who follows the news around technology has undoubtedly heard terms like blockchain, smart contracts, and cryptocurrency tossed about. But for many, the specifics of these innovations are elusive, or perhaps obscured by technical specifications that can serve to confuse rather than clarify. So what is blockchain, and what does it do? More importantly, what does it mean for the average consumer?
In simplest terms, a blockchain is a record or ledger that is shared amongst numerous devices, free of a centralized hub or control point. As the name suggests, a blockchain begins with a block, which is a set of transactions that have been recorded over a set period of time. As blocks are added, they are linked together with chains. These digital chains that bind one block to another are actually a hash, which is the data from the previous block that has been turned into a bit string by the hashing function. That hash serves to securely lock those blocks into place in the correct sequence and time.
Blockchain storage also provides far more security than you would find otherwise. Unlike a single document or spreadsheet that is shared with co-workers or collaborators, a blockchain isn’t stored centrally. A blockchain network is made up of numerous nodes and devices; the number can depend on the size of the network. Each node in the network has a copy of the blockchain transactions. There are some obvious benefits to this arrangement: decentralized storage means that there’s no single point of failure for hackers to attack, and the blockchain is accessible to anyone with internet access to verify.
The assurance of security and validity of data within the blockchain is what makes it such an exciting development for people and companies in many different areas of tech. The information stored within blockchain is almost impossible to change or delete. Any new transactions to be added to the blockchain ledger have to be validated by the nodes on the network, which requires each network to develop a consensus algorithm. Depending on the size of the network and the familiarity of those within the network, the consensus algorithm can be stronger in some instances.
Blockchain isn’t yet the predominant means of recording data and transactions, but it is quickly gaining momentum. Cryptocurrencies like Bitcoin are most commonly associated with blockchain, but its potential has widespread implications to almost any industry dealing in digital transactions (which is to say almost any industry.) And as data security becomes a greater concern seemingly by the day, the appeal of blockchain’s security will push more and more the development of its potential.