What is Blockchain?
Blockchain is quite simply a suite of distributed ledger technologies that you can use to log and track anything you want to track. This means that you can use blockchain technologies with medical records, financial transactions, and even those records that are traditionally kept as paper records, such as land titles. All these can be recorded and tracked using blockchain.
Blockchain may seem to be redundant for organizations that already have their own record-keeping systems. They already have their ledgers, storage systems, and even some sort of inventory management systems and POS systems; why and what would they need blockchain for?
The thing is that blockchain exists for a variety of reasons. These are:
1. Blockchain tracks and stores data differently.
Blockchain stores your data in blocks. Each block is a batch of information that is then arranged in the order it is received. These blocks are linked together chronologically, forming what would seem like a chain of blocks. If you need to modify the information stored in a particular block, the original block does not get rewritten. A new block with the changed information will be created with the revisions. The change will be logged, including what was changed, what it was changed into, and when it was changed.
So, for instance, you need to update the amount of money that a customer owes you, the new blockchain would reflect the following data: $100 to $150 (new debt) and April 4, 2018, 10:32 GMT. This is similar to what you would do with the traditional handwritten financial ledgers that have been used for centuries, in such a way that no data is cut out, destroyed, or erased even as it changes over time. So you get a complete history for that particular piece of information.
2. Blockchain is a trustworthy way to store data.
Before you can add a block to an existing blockchain, the system must first solve a cryptographic puzzle to create the block. The solution for the puzzle is then shared with other computers living in the same network, in a process called “proof of work”. The entire network will verify if the proof of work is correct before the new block can be added to the blockchain.
Because of these processes, each block in a blockchain is guaranteed to have been verified by several computers, and that it has passed several encryptions. No unauthorized person or computer can add a block to the blockchain. And each block that has been added is verified to be true and has not been subject to tampering.
3. No more middlemen.
The whole process of encryption and verification by the entire network not only builds trustworthiness for the blockchain, but it also allows users to interact directly with the data they want to work with. Compare it to the way we do business now. We often need banks or lawyers to act as a go-between if we have business disputes, such as verifying ownership on a piece of land. That means you spend time and money on what is essentially a middleman. If the information you need is stored in a blockchain, you can easily pull it out for verification so as to settle any dispute.
4. Blockchains can be implemented in different ways.
- It can be public, where everyone can access and view the blockchain at any time.
- It can be private, where only authorized users are able to view and access the blockchain.
- It can be a mix. Hybrid blockchains, where authorized users are able to see all the information in the blockchain, while the rest can see only those that are made public.
Photo courtesy of ladislau.girona (Flickr).