Imagine a secure ledger of transactions all stored in a database shared by participating parties in an established, distributed computer network. That is Blockchain. So how does this work and what can it do for my company?
With traditional mechanisms for businesses interacting, where we need to establish trust, there is a central authority. This is either determined by government regulation or through agreement by all the parties that a person or organisation will be the final decision making authority.
Blockchain removes that need. Each transaction in the blockchain is recorded and verified by the distributed network of computers. There is a powerful and sophisticated algorithm that confirms each transaction. These records can be as public or as private as the members of that blockchain want them to be. As the data is moves through the blockchain, it is fully encrypted, so those in the network who are verifying the transactions do not have any access to the raw data or information (unless you choose to let them).
Because of the distributed nature of the system, you are no longer relying on one entity creating trust. Now you can establish it near instantaneously through a network of computers owned and controlled by multiple people, enhancing security.
Not all about money
It is important to remember that the blockchain is recording data. When we refer to transactions, that does not have to be money. It is anything you want it to be. Stock records, orders, property sales — anything that requires the transfer and verification of data can now be automated and processed for a fraction of the cost. Think about crowdsourcing projects, exchanging information to harness the computing power of a distributed network of machines. The possibilities are endless.
The foundation of future transactions
What we are talking about is not an all-encompassing solution. It is a foundation, much as TCP/IP is the basic communication foundation — or protocol — at the heart of the internet, Blockchain is a new foundation.
Like the arrival of so many new innovations, there are those who believe that this will sweep away the old ways of working and replace it with a shiny new future. The reality is, we will go through a long transition as legacy systems are integrated and blockchain technologies adapt to work within existing structures. Businesses do not spend money replacing systems that work. Expect the transition to take some time, but as new data handling applications start solely in the Blockchain world, the speed of transition will only increase.
We do not know where the evolution of blockchain will take us in the end. What we do now, is that we are approaching a new disruption in how we operate in a world where we need to establish trust. We hope you will join us for the ride.
This is part of our introductory guide to Blockchain technologies. See the other posts in this series: