Blockchain — It’s Not Bitcoin?
TL;DR — Blockchain is one of the biggest buzzwords out there, yet it is deeper than a new currency or hyped up “app” that everyone will use for a few weeks and forget about. Instead, it is a new technology platform that could radically change how we use the internet, or just make things a little better, who’s to say?
Why are we talking about this?
Part cool story, part new (-ish) technology that is worth knowing about, part de-mythification. We want to understand what blockchain is at this moment so we can start to better understand where it will take us in the future.
What is Blockchain technology?
Simply put, blockchain is a decentralized, distributed, and constantly-updated digital ledger that tracks all transactions across a peer-to-peer network. Makes total sense, right? Let’s try breaking that statement down term-by-term to better understand:
- Decentralized: Instead of making all our programs rely on a central server, blockchain technology allows a network to be supported by each individual’s computer. Each computer operates as a node, or a touchpoint of the network.
- Distributed: Similar to decentralized, distributed means the network relies on not having a central point for records. However, distributed refers to the fact that each node keeps a copy of all the transactions that take place on the network.
- Constantly-updated ledger: The ability for a blockchain network to be decentralized and distributed means that if one node goes down, the network keeps going. Each time a transaction or a record is needed it is recorded on the digital and public ledger, which is shared across the entire network.
- Peer-to-peer: This is one of the major points of blockchain that may be the hardest to wrap our minds around. Because of the decentralized and distributed nature of the technology, there is no need for a middle-man. Since all transactions are recorded with a unique time and signature, and every person has a secure and unique identity, all transactions can be made securely without having to go through a bank or third-party who would want to take a percentage.
In even simpler terms, blockchain technology acts like a universal shared Excel spreadsheet that everyone is constantly updating with every transaction made. So why is it called blockchain? This is because over varying increments of time, all transactions are stored in a “block” of data. Each block is verified by the users on the network, then added to the chain of blocks that make up all transactions recorded. Thus, we have a blockchain.
So, Why Do I Keep Hearing About Bitcoin?
This is because the history of blockchain and Bitcoin are tied to each other, even if the technologies are different. In 2008, a person or group of people known as Satoshi Nakamoto (not their real name) wrote a white paper on the Bitcoin concept that could be built on a blockchain. Bitcoin is a digital currency built on a blockchain, where a bitcoin (currency) is given to a “miner” whenever they secure a new block on the blockchain. A “miner”, as the name implies, is either a programmer or person with the proper programming software who goes through the transactions that will be lumped in a block to make sure the transactions are valid and recorded. This block becomes a miner’s “Proof-of-Work”. Because of this self-auditing nature, the blockchain stays secure and transparent.
All of this means that Bitcoin is a secure form of digital currency, known as cryptocurrency. Since each transaction made or coin spent is unique, each transaction is verified before it’s made and coins cannot be spent twice. This is also why Bitcoin is being compared to digital gold. There is a limited amount on the market and it literally has to be mined for there to be more, but there is a finite amount. Bitcoin as a protocol and as a currency are only the first iterations of what has created over 700 cryptocurrencies and started even more potential apps and businesses. However, Bitcoin is limited in its ability, and is only used as a currency, whereas blockchain as a technology has an almost unlimited potential for various applications.
What Does This Mean for Marketers?
Well, in reality it does not mean much yet. We are only at the beginning of our understanding of blockchain and what it can do. We are even further behind on regulation, laws, and understanding the potential effects of this technology. However, even with our limited knowledge there are some really exciting opportunities that blockchain can open up. From better digital advertising and data tracking to making our customers a larger part of the conversation by passing the middlemen of ad space regulators, decentralized applications (or dApps) offer immense potential for marketers to be in a better relationship with both the companies they work with and the consumers they are trying to reach. The transparency and intrinsic trust built into the philosophy and structure of blockchain can have a very positive effect.
Now that we have a base understanding of what blockchain technology is, we can start diving into what these potential possibilities are. We will be publishing a series of posts on what is currently on the market and what researchers are working on. But for our next article, we will dive into our understanding of the platform a lot of these dApps are built on — The Ethereum Project.
