An introduction to the power of blockchain
Mention blockchain and the likelihood is that someone’s first thought would turn to Bitcoin. After all, it was this cryptocurrency that allowed the term to enter the mainstream in the first place. The reality of blockchain is that it appears a little confusing. While people will often refer to its potential, this covers so much ground that it’s not always easy to pick out the bits that matter to you.
In truth, there is much more to blockchain than crypto. More often than not the terms ‘blockchain’ and ‘crypto’ are used interchangeably, but they are not the same thing. Crypto relies on blockchain as the latter is the technology that the former is built on. In this article, we’re going to demystify blockchain technology as well as demonstrate just what it has to offer the modern-day business world.
If you want to understand more about blockchain, and why it’s currently one of the most exciting investment opportunities around, then read on.
Let’s cover blockchain basics first
Blockchain takes its name from the fact that it stores data in blocks of information. When the data contained within the block is verified it is then added to the chain, where it remains permanently. As a decentralised public network, both individuals and businesses are able to securely transfer both information and currency. These transfers take place in an instant.
One of the many appealing features of blockchain is the fact that it grows more and more secure every time it is used. Each time a new block joins the chain, the previous blocks become more difficult to tamper with or alter. As new blocks are being added all of the time, no block is ever left vulnerable or compromised.
Blockchain technology is multifaceted. As such there are numerous features that make it both valuable and unique. Its numerous uses bring equally numerous benefits to different types of business applications.
The accuracy of blockchain
The accuracy offered by blockchain is one of its many benefits and is, quite simply, astounding. Blockchain ensures that every single action is captured and recorded. There is no chance that anything can ever be missed out. Each of these actions is added to an information block before details are verified.
What adds to the level of accuracy is the amount of detail added. Each block is timestamped so there can be no disputes around what happened and when. The record shows a clear trail of everything that has taken place and this information can be accessed by anyone in the decentralised system.
Perhaps one of the most common things that is heard about Bitcoin, and other cryptocurrencies, is the fact that they are decentralised. It is, in reality, the blockchain that is decentralised. What this means is that it is not stored on a single high powered computer somewhere and nor is it controlled by any single bank, company, or institution.
Instead, blockchain is distributed across a whole network of computers. One example given is that blockchain can be viewed in a similar way to the likes of Google Docs. The latter allows the user to share a single document with many other users who are on different devices. As any changes are made to the document, each user can witness this happening before their eyes. This gives a very simple idea as to how blockchain, and its decentralisation, work.
Security and permanence
Each time that a new block is completed, it is added to the other blocks that already form part of the chain. This chain creates a permanent record of every single transaction. Just as with our Google Docs example, every user can see any changes that are made in real-time.
As a block joins the chain, it adds security to the other existing blocks. The features that go into forming the chain mean that the levels of security are unlike anything else that exists. It is extremely difficult to alter the existing records in any way.
The basic components of a blockchain
Every blockchain has some similarities in terms of its basic components. These basic components are:
- A record of literally any kind of information
- A block that is basically a bundle of different records
- The chain that is created by all of the blocks linking together
A brief history of blockchain
As we have said earlier, many people out there use the terms blockchain and cryptocurrency almost interchangeably. The reality is that the foundations of blockchain technology were laid several years before anyone had even heard of Bitcoin, let alone any other cryptocurrency.
It was back in 1991 that research carried out by Stuart Haber and W. Scott Stornetta led to the publishing of a white paper. Entitled “How to Time-Stamp a Digital Document” it set out how a continuous chain could be used to record information securely, whilst also time stamping it. It wouldn’t be until 1998 that this technology became a reality and found a practical purpose.
Created by Satoshi Nakamoto, Bitcoin was the first crypto. Designed to be decentralised, and free from government control. To be decentralised, and to create trust, it needed a secure and transparent system. This is where blockchain came in and it has continued to develop ever since.
What actually happens during a blockchain transaction?
Regardless of the use of blockchain, every single transaction will follow the same basic steps. These consist of:
- The recording of a transaction or a trade – the digital signatures of each party, along with any other relevant information, from part of this record
- The transaction is validated – the network is made up of numerous computers and the set to work to validate the transaction, ensuring that it is genuine
- Added to the block – once it has been accepted that the transaction is real and valid, it gets added to a block. Blocks all contain a piece of code that is known as a hash. Each block will have its own hash but will also carry the hash of the proceeding block. This means that no one can ever dispute where about a block belongs
- The chain – it is possible for a block to contain numerous transactions. When these have all been validated, the block is then added to the chain. Thanks to how the hash code is used it is clear that the blocks appear in chronological order
Where is blockchain being used right now?
While blockchain is strongly linked to crypto, the technology itself has many applications. We are experiencing a time where experiments are taking place to see exactly how this can be used going forward to ensure that all of its benefits are being harvested.
There is no disputing the fact that blockchain is here to stay. The only debate is around exactly how it may evolve. We are already witnessing its use to streamline supply chains and this is impacting on how smaller businesses can interact with larger ones who are looking to utilise this technology.
Just some of the companies that are known to be using blockchain include:
Berkshire Hathaway Inc
With Warren Buffet at the helm, this company is actively exploring how blockchain can be used. In particular, it is looking into how it can assist with supply chains in its jewellery and railroad businesses
Having formed a partnership with IBM, Walmart is already working to move its supply chain to the blockchain. This will help with traceability and enhance food safety measures.
Exploring an entirely different application of blockchain, Toyota is exploring how this technology can be used within its self-drive cars
This tech giant is already using blockchain as a way to securely timestamp valuable data
Will blockchain matter to small businesses?
While there are clear benefits to large corporations, there is also plenty on offer to assist the 31 million or so small businesses in the US. Primarily, smart contracts can be used between users. These allow the creation of contracts that can be verified and enforced. It can also then be used to pay bills, settle invoices with suppliers, and even to pay employees.
Blockchain also has the potential to assist small businesses when it comes to data compliance. There is the built-in ability to verify transactions without the need to obtain personal details from the user. The result is a user experience that is safe, secure, and much less likely to be hacked.
While blockchain technology began life as a platform that allowed Bitcoin to exist, it has so much more to offer. The commercialisation of this tech is still in its early days and the reality is that, as time goes by, we will see more and more practical applications being developed.
We are living through extraordinarily exciting times. There is a rare opportunity to get involved with a technology that is on the cusp of something truly magnificent. Now is the time to get in on all that blockchain technology has to offer.