In 2017, the term blockchain really hit the mainstream. It’s something we’ve heard of, but what does it mean? You may well have heard the history lesson behind it, and know it’s related to – but definitely not the same thing as – bitcoin. That may well be as far as it goes for most of us. So, here’s a basic guide to blockchain.
What is blockchain?
In short, a blockchain is a shared ledger, or series of records (blocks) linked to each other by cryptography. Each block is shared, and is editable by the community of users who can access it. It’s like Wikipedia in that respect.
There is no one owner of the data (like Wikipedia) but when the data is edited, the most popular record becomes the de-facto official record. This stops each participant having their own ledger – and therefore their own version of the truth. Once everyone agrees on a transaction, the record cannot be altered. It’s basically a sort of smart contract or digital agreement.
A blockchain network should reduce overheads in several different ways. Intermediaries are removed so there’s no need to pay a middle man. Instead participants exchange data or goods directly.
There’s one ledger, available to everyone, so there’s no need to keep on sharing the latest version of the records. This also reduces transaction times, because each transfer no longer needs verification. It also completely eliminates the need for paper records.
Less oversight is needed by intermediaries as the network is self-regulated by the participants, which should also lead to better security.
The blockchain way of sharing data, where everyone can read the same record and each record is identical, leads to an increased level of trust. Businesses can be assured that their data is correct and won’t fall into the hands of a third party that they may not have chosen themselves.
Hacking attacks become virtually impossible too, as if someone wanted to hack a particular block in a blockchain, they would have to hack every single preceding block, going back the entire history of that blockchain. And they would need to do it on every ledger in the network, simultaneously.
Blockchain is trying to shift the ownership of data and the control, so passive consumers can become active participants and own the data themselves. Does this mean that cutting out the middle man will create something owned by the people? Or will new suppliers pop up offering support that essentially end up replacing the previous services? Only time will tell. Indeed, removing third parties from the picture won’t necessarily replace the positive things those third parties may have been doing.
The future of blockchain
It’s inevitable that this technology will only grow in the coming years. Blockchain and indeed bitcoin have created something of a stir but only now are we realising the true potential, and importance, of this technology. In an ideal world, blockchain could create seamless data sharing, leading to a more connected and automated world that could be more secure than the internet we use today.