Blockchain, Explained for Product People

Marcos Miranda
Sep 15, 2020 · 10 min read

So, I’ve been interested in Blockchain and its applications for a while. In the beginning, I became fascinated by the concept of decentralized money. I even started trading cryptocurrencies (not in a profitable manner, yet 😉). Soon I realized that there was so much more to it.

This is my attempt to share, as Product Manager/Owner, some of the knowledge I gathered in these past few months.

Let me warn you, I’m not an expert nor a Blockchain developer (although I’m interested in becoming one, someday, maybe). Nevertheless, I’m confident enough that I’ve got a pretty good grasp of the technology.

When it all started?

Blockchain is fairly new, over 12 years old, and it has its origins on a white paper published in 2008 by “Satoshi Nakamoto”. This paper, 8 pages long and freely available on the Web, was the first mention of Bitcoin, a peer-to-peer electronic cash system.

Although it doesn’t explicitly mentions the word “Blockchain”. The paper lays out the mathematical and technical description of the technology that would allow this.

A golden figurine of the Bitcoin logo
A golden figurine of the Bitcoin logo
Photo by André François McKenzie on Unsplash

People started to see its potential beyond just “decentralized money”, and nowadays many of the applications of Blockchain have nothing to do with digital currencies or finances. Yes, it all started with Bitcoin, but like many other technologies in the past, we soon realized that it could be used in other scenarios, for other purposes.

Common Misunderstandings

The fact that Blockchain is sort of a “by-product” of the Bitcoin project might be the reason behind the association between Blockchain and cryptocurrencies.

This is fueled by poor reporting on the matter. You have probably read stories about money laundering, dubious “get-rich-quick” schemes, bankruptcies, thefts, and even disappearances. What about how cryptocurrencies are used in the “dark web” to make untraceable payments for shady purposes? Hell, we don’t even know if Nakamoto is a real person or not.

Despite all that, some people are doing serious work with this technology. And there’s an ever-increasing amount of infrastructure and commercial services starting to appear to support organizations working with different types of blockchains.

For instance, IBM now offers a Blockchain platform, and so do Microsoft and Amazon. These companies aren’t doing this because they want to get rich with quick schemes. They are heavily investing in Blockchain because they see potential and, more important, demand for it.

Your product-spider senses should be tingling right now.

What’s Blockchain exactly?

Before answering that question, let’s pause for a second. You’ve heard of “ledgers”, right?

If you don’t, we have been using ledgers to keep track of accounts and transactions. It’s a pretty common practice actually. You’d start writing down an initial balance and you’d add new entries for each new debit or new credit. This way, you would have the full history of transactions, and we can spot mistakes more easily as they’re more evident.

An antique ledger
An antique ledger
Ledgers, our useful friends — Wikipedia Commons

But physical ledgers aren’t perfect. They could be damaged, lost, be filled out incorrectly, or even tampered with. Perhaps the biggest problem is inconsistency. If my books have a different value than yours, which one is correct?

How can we settle this issue?

Ok, let me put on the Devil’s advocate suit. Do we need to settle this in the first place? I mean, who cares if the books differ? They’re internal documents, for internal purposes, and not something to be shared with other people. If I needed proof of something, I’d use a receipt. Not my books.

As transactions grow in volume and complexity, ledgers usually become the place to go to if you want to know how much you have and how much you owe. Having inconsistencies or errors here could be really problematic.

So, what usually happens is that a trusted and neutral “outsider” is involved to reduce risk. Instead of direct transactions, we’d use this third party as the source of truth and everything (money, documents, etc.) would flow through it. These middlemen will take care of processing transactions and checking that everything is in place. However, they don’t do it out of the goodness of their hearts, they have to be paid (sometimes a lot). This results in more expensive and delayed transactions.

What if we had a better solution?

Imagine a situation in which what I write in my ledger magically appears in the other party’s ledger (and vice versa). Moreover, imagine that we’re talking about a magical ledger made of stone, and whatever is written there can’t be easily changed or deleted. No more middlemen.

This is huge. Getting the middlemen out of the picture makes everything cheaper and quicker. What is more, it could be shared by more than 2 people; it could be completely public. Suddenly, “trust” is not an issue anymore since we can rely on this magical ledger as the source of truth.

This is what Blockchain is. A network of information that gets information replicated across many computers (nodes). When someone adds a record to the ledger, it is automatically copied across the entire network.

What is more, nobody actually owns this ledger. Every single member of the network is a “peer” and any transaction added at any point of the network will get replicated across the whole network, peer to peer.

You’re starting to see why this is something with so much potential beyond finances and cryptocurrencies, right?

So, how does one build a Blockchain?

Seven construction workers standing on a construction site
Seven construction workers standing on a construction site
Photo by Scott Blake on Unsplash

Although in the original paper the word “Blockchain” is not mentioned, the word block is. A LOT.

What is a block?

A small piece of data. Yes, I know it’s quite vague. Physical ledgers can only store a limited quantity of information on one page. When that page is filled up, you move to the following one, and so on. Well, if we replaced the paper ledger with a Blockchain, a block would be the equivalent of a page. When information has to be added to the Blockchain, they’re batched together into a block and then added to the end of a chain of blocks (Yeah, they didn’t put a lot of effort into coming up with a cool name for it).

What it’s cool about blocks is that we can store any kind of data in them. Blockchains, unless designed for a specific type of data, don’t limit the data you can introduce to the chain. It grows by having more and more blocks being added in sequence, as they are being completed, verified, and replicated across the network.

Another interesting detail about blocks is that they are secure. Blockchain has built-in security measures, such as “cryptographic hashing”, to prevent people from messing with the stored data.

Oh, and more one thing. There isn’t a single Blockchain. As I told you before, the technology is open source and new blockchain projects appear every day. Anyone can set up their own Blockchain for their own reasons. What’s more, you don’t even have to have the technical knowledge to create one. In recent years a lot of companies, big and small, started offering Blockchain as a Service (BaaS).

Commercial Blockchain Services = You don’t have to build your own network

As more potential applications of Blockchains are identified, the demand for “Blockchain” is in its all-time high. This explains why companies such as IBM, Amazon, and Microsoft started offering commercial Blockchain services, aka Blockchain-as-a-Service or BaaS.

There’s a huge business opportunity in simplifying and making it relatively easy to use Blockchain technology. It’s like them saying: “Let me handle the technically complex backend work for you while you focus on your core business”.

A composite of comercial blockchain services brands
A composite of comercial blockchain services brands
Blockchain-as-a-Service big players.

Does this mean that paying for BaaS services is the only way to go? It depends. BaaSs make Blockchain available to a more broad audience. Most of the uses cases are probably just fine with not having to actually set up their own blockchains. However, in some cases assuming the cost of setting up the network is necessary.

Applications of Blockchain — PMs’ dreamland

So, we’ve talked about the origins of Blockchain, how it works on a high level, and about commercial Blockchain services. But what could be some potential applications for this technology? (This is the part where I feel that the sky is the limit).

Well, let’s list just a few (not finance, that’s the “easy” one).


A blockchain-powered health network could greatly improve the interoperability of the current actors in the healthcare system. We could store, manage, and exchange medical records in a scalable and secure way. No more duplicated or conflicting information. Moreover, these benefits pour towards other areas, like making it extremely difficult to engage in healthcare frauds or other illegal behavior.

The folks at Delloite US wrote a pretty neat report about how blockchain could make healthcare great again. You can download it from here.

Supply chain management & logistics

In most cases, today’s supply chains operate at-scale without blockchain technology. Moreover, many of today’s supply chains have a LOT of quality data, which they can transfer across the whole chain in real-time-like speed. So, Blockchain it’s not going the radically change the way Supply chains are managed.

Nevertheless, this doesn’t mean that implementing it wouldn’t add value. There are 3 areas that experts at McKinsey point out as the ones with the biggest added value:

  1. Automation is not widely spread across all the supply chain’s tiers. Especially in the lower ones, manual paper-based processes are common. Managing large amounts of complex data becomes a challenge in these conditions. Replacing and reducing these slow and manual processes would benefit the supply chain as a whole.
  2. Consumers and regulatory authorities have an increased demand for traceability. Improving it would not only satisfy these demands. It would also add value “by mitigating the high costs of quality problems, such as recalls, reputational damage, or the loss of revenue from black- or grey-market products”.
  3. Finally, and perhaps the most interesting benefit of this technology (at least for me) is reducing transaction costs through a digital payment system and smart contracts to handle call-off, payments, and such. Moreover, one could implement automated bidding systems that manage supply requests to reduce costs.

Government elections & democracy

It’s quite common in western democracies to have “trust issues” with our current voting systems. And it makes sense, we have been doing paper-based elections for more than a century and it’s has become pretty clear that the democratic process can be easily manipulated

Hundreds of academics around the world are writing about how Blockchain could disrupt democracy and give us a way to have more secure, transparent, and auditable elections without sacrificing privacy for voters (seriously, there are a lot of people writing about this particular topic, here’s a quick search on Google Scholar and you’ll see what I mean).

What is more, it could substantially reduce the cost of running the currently used ballot systems, like using less paper, less counting effort, and higher voter turnout. Blockchain can solve most of the commonly identified issues with the implementation of digital electoral platforms.

Internet of Things

Blockchain could make “Internet of Things” even more disruptive. How? Well, IoT systems not only need machines “connected” to the internet or other devices. They have to able to securely communicate with each other and be autonomous and smart enough to make decisions based on a set of rules that cannot be tampered with.

Nowadays, IoT systems often suffer from poor “security” across the complete implementation, from the actual sensors to the applications and middleware that handles all of that information. Blockchains built-in security measures can be leveraged to make IoT systems more secure and autonomous.

Chakravarty gives us a great example in an article that he wrote for Hackernoon: “Imagine a vending machine that can monitor and report its own stock, and accept bids from distributors AND make payments automatically via microtransactions for delivery of new items”. Neat, right?

Summing Up: There’re plenty of use cases out there, but in general the benefits are related to dealing with:

  • Inefficient data discrepancies
  • High reconciliation and transaction costs
  • Problems derivated from “lack of trust” between intervening actors.

However, I want to point out that many of the applications mentioned previously do not require a blockchain. Existent technologies can be used to achieve the same purposes. What Blockchain offers us is an efficient way to deal with the many trust issues that might arise in those scenarios.

Isn’t it all hype? Why should I care?

Well, I don’t think it’s “just” hype. Sure, it’ll probably pass but the technology is here to stay.

Blockchain is not magic nor perfect. It has its limitations. As the network grows, it becomes more energy-intensive. Also, the mere fact of building a Blockchain isn’t a guarantee of anything. Think of it as the Internet: we are using it, we don’t think about it, but it is there for us. And, god, how we miss it when it’s gone. Some web pages thrived; others were forgotten into oblivion. But the technology stayed with us.

So, I believe it’s going to be the same with Blockchain. I’m not saying that we’re going to drop our currencies and switch over to cryptocurrencies. Or that everything will be running on blockchain-powered systems. What is likely to happen is that this technology is going to be embedded more and more into the things that we interact within our daily life.

A comic of Dilbert on blockchain
A comic of Dilbert on blockchain
Source: Hackernoon

And this is why you should care about Blockchain if you’re a Product Manager. Our job, as Product people, is to use it where it’s most valuable, and not fall for the hype of the moment.

What are your thoughts on the matter?

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Marcos Miranda

Written by

Provider of good luck, Product Owner, and Blockchain developer. Although I deny it, people tell me I’m a hipster. Also, I’m addicted to coffee.

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +792K followers.

Marcos Miranda

Written by

Provider of good luck, Product Owner, and Blockchain developer. Although I deny it, people tell me I’m a hipster. Also, I’m addicted to coffee.

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +792K followers.

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