What’s the Big Deal about Blockchain?
To really get to the bottom of why Blockchain is so revolutionary, it’s important to understand how we got to where we are in the first place.
The Olden Days
When computers were first introduced in the 70s and 80s, we were all preparing for the rise of robots and the end of work as we knew it. We were under the impression that, with the help of computers, in a few short years we would be able to optimize data to its fullest potential, thereby eliminating all waste and generally allowing us to sit back and relax while the computers make all the right decisions. If only it were so easy.
What was quickly realized is that the only way for the computers to be of any use in crunching data, the data would first have to be inputted into the computer. This led us down a long but generally predictable path of memory storage innovation that resulted in hardware that was smaller and smaller and increasingly useful. This allowed most big corporations by the early 2000s to store basically all of their information in digital format. Which is precisely the next problem.
Essentially what happened was that corporations had met the edge of the capabilities of hardware. The computational demands had become too great and too complex to be handled the old way, by managing one’s own servers and data storage on site at every site. The other problem was that each corporation had their own management information system, their own servers, their own database, and their own procedure for inputting data. This creates the need for expensive coordination and dedicated employees every time data needs to be shared. Furthermore, unlike the past, today’s companies are likely to have thousands of partners, suppliers, customers, and subsidiaries, all of which have different informational needs and expectations.
Head in the Clouds
And so, the working solution for the past decade or so has been the enigmatically named Cloud. What cloud technology does is allow remote access to IT Resources, namely all your company’s files and documents. Instead of having to store all of that information in every place that it’s going to be used, the Cloud has servers in just one or a few places that store all that information and enable users to access the data at will. The most notable systems in place today are Oracle, Amazon Web Services, and Microsoft Azure, which do the heavy lifting of building out datacenters and patching software so their customers can focus less on data storage and more on business objectives.
The cloud was an excellent start, but a few of the old issues remain, the primary one being compatibility between companies. Clouds are specific to a company, as they are the ones who pay for its creation and maintenance. Data can obviously still be shared between companies, it just requires the extra step of validating and granting access to the required data as well as the important step of protecting the private and non relevant information about the company and its customers that should not be shared.
Which leads us to the next evolution: Blockchain. The overlying functions of which are not all that different from the Cloud, but there are a few key differences in how Blockchain goes about storing and granting access that make it the definitive next step in Enterprise Resource Management. Instead of being held up by one or a few sets of servers, a Blockchain is held up by every user, every node, in the network. At each node, a completely separate and independent copy of all the data in the network is kept, referred to as the Ledger, which has the effect of decentralizing the information. This may seem like overkill, but what it does is create a decentralized, auditable, and immutable record of every transaction within the network, because the Ledger exists at every node. Tampering with the Blockchain is impossible because every other member of the network is essentially watching you to make sure you follow the rules.
Better yet, when data is entered into the ledger, it is done so in such a way that it is completely transparent, auditable, and essentially tamperproof. Each transaction, each data entry, is thought of as a block. When a new block is entered, some of its components are “pieces” of the previous block, the pieces being sections of code. What that does is create only one correct way for the blocks to fit together. For example, if someone tried to replace or tamper with “Block 16,” they would have a very difficult time because Block 16 has little bits of Block 15 and Block 17 on either end. The net effect is that anyone trying to tamper with the state or order of the Blocks will be found out almost immediately, because every node has its own copy of the Ledger to compare the faulty one to.
The Big Deal
The truly amazing capability that Blockchain makes possible is the ability for two unknown entities to essentially trust each other. When data is entered on the Blockchain, it is encrypted using cryptology. The only way to make sense of any of the data is to have access to a key, of which there are varying levels. Keys can be devised to allow the user to access all, some, and even a very specific sections of the data on the Blockchain. The implication here is that two entities, who don’t necessarily know or trust each other, would be able share data back and forth, but only the data they deem relevant and shareable. This could be a company and a governmental body collaborating to ensure supply meets demand, two companies communicating to compete with competitors, or a supplier and distributor coordinating schedules and inventory to minimize costs and maximize efficiency. The best part is that once the blockchain and sharing mechanisms are integrated, this coordination will happen automatically, transparently, and with the upmost accuracy.
To take it one step further, Blockchain makes possible what are known as Smart Contracts. Essentially what happens is two entities enter in to an agreement, they input the agreement onto a Blockchain, and the terms are fulfilled automatically. The contract lives on and is only terminated when the entire original agreement is met. The smart contract essentially acts as a trusted third party that facilitates the deal. The only, very attractive difference being there is no actual third party. The applications of Smart Contracts are nearly endless, with some of the most notable being Supplier Relationship Management as well as contract bidding.
In short, Blockchain does what we have always wanted from the Internet. It allows us to decentralize our data so that it can be stored securely. It is transparent and auditable which will allow us to put our trust into it, knowing that the Ledger can be audited and bad actors found out with ease. It makes a global economy feasible by allowing companies from around the world to collaborate and compete with each other like never before.
The implications of Blockchain technology are immense, with the potential to completely transform nearly every industry, from healthcare to banking to insurance to agriculture and everything in between. The key moving forward will be seamless implementation and sound application. Each industry has its own set of problems that are well within Blockchain’s capabilities, and so the question becomes: who has the industry knowledge, infrastructure, and technical ability to implement Blockchain in order to fully take advantage of all that it has to offer.