“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
That is how Don and Alex Tapscott, authors of the 2016 book, Blockchain Revolution, define the technology. Which is fine, but requires some prior knowledge of digital ledgers and of what they are capable.
The truth is, blockchain technology can be difficult for technology-savvy people to understand, let alone professionals outside of IT and in industries such as manufacturing, retail, insurance, hospitality, or healthcare.
To help break through the jargon that surrounds blockchain technology, we compiled common questions about the emerging technology and answered them here.
A blockchain is a continuously growing list of records (or transactions) that take place over a network. These transactions, often between peers, are recorded in a digital ledger. Every so often, all the transactions that took place on the network during that period are placed in a ‘block’ that links sequentially to the previous ‘block’ of transaction data. To guarantee accuracy of the transactions, each block contains a digital fingerprint of the previous block, a timestamp, and transaction data. As each block is created, the transaction data contained within it is validated, creating an irrefutable record of what was exchanged.
Yes. Blockchain data is secured using cryptography, so only parties directly involved in transactions – be they the exchange of digital currency or data – can access the encrypted information.
Blockchain networks are also decentralized, meaning that every node on the network stores the entire chain. This means the data being recorded is transparent to all nodes on the chain (albeit still encrypted so only the persons involved in a given transaction can access their digital assets).
To put this into context, consider that provider Ethereum has 25,000 nodes across the world on its network. In order for a hacker to steal or modify data on the chain, they would need to find a way to do so on every node, at the same time. They would then need to repeat this for every subsequent block in the chain, forever. Therefore, data contained within a blockchain is considered incorruptible.
No. Blockchain is a network framework that enables secure digital transactions between peers while bitcoin is a digital currency. Although bitcoin is transacted through blockchains, blockchains transact more than bitcoins.
An example that most people can relate to is the home buying process. Currently, most home buyers use licensed agents to mediate the purchasing process – paying fees of 2-4% for their expertise and the promise of truthful, accurate information.
With blockchain technology, financial information about a home – ownership, property assessments, mortgage status and so forth – can be held in the chain, accessible only to the buyer and seller. A home inspection can be performed, and that data can also be added to the chain, visible again only to the buyer and seller. With the assurance of accuracy that blockchain technology provides, the buyer can be confident that the home is as promised and transfer digital currency to the seller to confirm the transaction. (After the purchase, the cycle continues, with the new homeowner and purchase price recorded in the blockchain.)
For individuals, blockchain technology presents incredible opportunities for buying goods and services. With the potential to remove mediators such as banks and real estate agents, consumers will have more power and control over how, and what, they purchase.
For companies, blockchain technology can be the key to saving valuable time and money by automating processes. For example, ‘smart contracts’ are possible with blockchain technology which only allow for a transaction to be completed if conditions of the contract are met by all parties. Using the home purchase example, a smart contract could be put in place that only released funds for the purchase if conditions of the home inspection were met.
Blockchain technology is gaining ground in virtually every industry. It will only increase in relevance as time goes on, and more use cases are developed. Here are a few examples:
Healthcare: blockchain technology could mean healthcare providers finally have a way to share data across hospitals, doctors, patients, and other parties without compromising data security or integrity.
Charities: blockchain technology makes it possible to see exactly where your donations go, and how those funds were used.
Retail: blockchain can provide an irrefutable product history that verifies where, when, how, and by whom their products were made.
Like other technologies before, we are still discovering how blockchain will impact organizations. But as use cases of blockchain expand, it will become increasingly difficult for organizations to ignore the possibilities of this new technology.