Blockchain in simple terms and why it matters
Although Blockchain technology is there since about 10 years, there are still a lot of people who fundamentally don’t understand what it is, and frankly don’t really care. Many associate it to crypto currencies like Bitcoin or Ethereum, and believe it is just another nerds or greedy investors passion.
I am only an advanced blockchain neophyte myself, but every time I happen to talk about it with friends and colleagues or through recent educational work I delivered to clients, I hear the same misconceptions and questions that show a general complex and suspicion from people with regard to this technology. Complex of not being techy enough to get a grasp of it. Suspicion because we are afraid of what we don’t know.
Blockchain is complex
Yes, getting a detailed picture of how blockchain works require some effort, however do people need to know how it works? No. Everybody uses internet but we are not TCP/IP protocol experts as far as I know — and we don’t care. What is important are what internet enables, which is the same for blockchain.
Blockchain is Bitcoin
Yes, I still do hear this… Blockchain is way more than this and brilliants minds of our century call it the “new tech revolution” after the computer and internet. Computer changed the way we processed data, Internet changed the way we share content, the current bet is that blockchain will change the way we do transactions — any kind of transaction, not just financial.
So… what is Blockchain?
I took upon myself to put this piece together with challenging objective to explain it with simple words, here is my go at it:
That’s it, you know the basics. See ? Simple. There are plenty on materials online that explain further the technology components behind it (look for Peer-to-Peer networks, hashing & Merkle trees, PBFT, PoW, PoS, PoET, Asymetric encryption), but is it not the purpose of this article.
Another important element is that ledger do not only record money. They can be used to record transfer of ownership, identity, medical interventions, etc. Once again, it is not just about bitcoin.
Cool but… what does it mean ?
I understand that the benefits of such ledgers might not come up immediately. Here is a brief overview of what it means:
1. The transactions that we do today are full of intermediaries that secure the process of exchanging goods, money, or anything of value with someone, however they also make it slower and charge for their service. In a network where all participants validate transactions, these intermediaries are useless. Imagine a world where you could buy a house without notaries?
2. The distribution of the ledger across a network make it particularly resistant to cyber threats; for example, to alter the ledger content, a hacker would have to simultaneously change the ledger from all participants of the network. Not impossible, however the larger the network, the more difficult it would be.
3. In a public blockchain, the data is available for all network participants (there are private blockchains where not all participants can access the information, or only a small part of it based on their permission).There is a real transparency of the data amongst the network participants. Everyone can trace back in time transactions up till its origin.
In short, the promise of blockchain is to create transaction ecosystems that are faster, cheaper and more secure.
Okay got it, so what are we going to use it for?
That’s where it gets very exciting. There are many projects, B2B and B2C, going on at the moment to build our future based on this technology. Potentially, every single aspect of our life could change: the way we do payments, the way we purchase houses and cars, the way we manage our identity and personal data, the way we do insurance claims, etc.
Here are the three I usually take to explain the potential impacts of blockchain:
- Elections: For many countries, holding public elections is still a challenge due to lack of infrastructure, lack of funding, lack of security, lack of trust in the authorities, etc. Blockchain based election system could provide a solution to organise quickly, on a small or large scale elections that everyone can trust.
- Identity: The identity system hasn’t changed a lot in the past centuries. Our identity is linked to a piece of paper (ID or passport) that we carry around and have to provide to a multitude of public and private organisations on a daily basis. What if citizens identity was managed through a blockchain system, and we give access to our identity for limited period of time to organisations that require it? What if we had seamless travels to foreign countries?
- Healthcare: I like to mention the healthcare system as it is quite fragmented. The ecosystem is wide: doctors and specialists, hospitals, emergency services, drugstores, insurances, … and the patients. Through their journey, patients are required to exchange a lot of informations with a lot of different actors. Here again, a blockchain based patient record could simplify access to information and speed up processes like insurance claims.
Within today’s hype, it is a bit of a challenge to understand the projects that actually answer real problems or the one that look at a problem to solve; however there is no doubt to have, Blockchain is here to stay.