You may have heard the term blockchain before, and rightly so you might be confused by it. This explainer will give you a basic introduction to blockchain technology and how it could change the world.
What is a blockchain?
Blockchain is a specific type of database. It differs from a typical database in the way it stores information; blockchains store data in blocks that are then chained together in chronological order, creating, as the name suggests: a blockchain. As new data comes in it is entered into a fresh block. The most common form of this data is what is called a distributed ledger which records every transaction that is made. The distributed nature of the blockchain comes from the fact that every computer which is connected to the network will have a copy of the ledger. This property is a major advantage over traditional technology as it makes it almost impossible to hack, change, or delete transaction details when they are entered. Once a new block is added to the chain, the majority of users of the network would have to agree to change it before a change can be made. On a network with hundreds of thousands of participants, this is nearly impossible. This property also means that there is no central authority or entity which controls the ledger, which again adds to the security of the network. This removes the risk that, for example, you’ll lose your data if a tornado wipes out the data centre your data is in, or if a country suddenly decides to clamp down on internet privileges for its citizens. All these features mean that blockchains have the ability to create secure, trust-less and efficient forms of interactions. The applications of which are rapidly expanding.
Blockchains and cryptocurrency:
You may have also heard the terms ‘cryptocurrency’, ‘Bitcoin’, and ‘Ethereum’ being thrown around in connection with blockchains. This is because the technology which underpins and makes cryptocurrencies (such as Bitcoin and Ethereum) possible is blockchain technology. For Bitcoin, this blockchain is just a specific type of database that stores every Bitcoin transaction ever made in a ledger. In Bitcoin’s case, and unlike most databases, these computers are not all under one roof, and each computer or group of computers is operated by a unique individual or group of individuals. In a blockchain, each node has a full record of the data that has been stored on the blockchain since its inception. For Bitcoin, the data is the entire history of all Bitcoin transactions.
Blockchain is more than just cryptocurrency
Blockchain technology is also exciting because it has many uses beyond cryptocurrency. Blockchains are being used to explore medical research, improve the accuracy of healthcare records, streamline supply chains, and so much more. Currently, there is a vast variety of blockchain-based projects looking to implement blockchain in ways to help society other than just recording transactions. One good example is that of blockchain being used as a way to vote in democratic elections. The nature of blockchain’s immutability means that fraudulent voting would become far more difficult to occur. The financial sector is also ripe for disruption. Banks rely on outdated and legacy IT and settlement systems and blockchains have the ability to make them more efficient or replace them entirely. Applications such as Decentralised Finance (DeFi) and decentralised lending are already proving to be exogenous threats to traditional banking business models.
There are other applications of blockchains going on everywhere. Even in London, you can see firms starting to adopt blockchain into their practices:
British Airway using vChain to streamline security check process
Co-op using blockchain to track food sustainability
RBS and Barclays using blockchain to streamline real estate transactions
What does this mean for you?
Blockchain technology is still in its nascent phase, it hasn’t reached mass adoption yet. However, a wave of adoption is coming. Not only does this have the potential to revolutionise the way we interact with financial systems, conduct elections, store health records, but it also means that for students there will be a new industry which will be looking to attract highly skilled individuals to create applications that could change the world.