It’s reported that over the course of a one year period, Google searches for “blockchain” increased by 250%. It’s no surprise – blockchain is best known for its application in cryptocurrency, such as bitcoin.
But what is it?
A blockchain has a fairly self-explanatory name, in its most simplistic terms. It is a chain of blocks containing data. This data acts as a ledger – information that can be stored but cannot be altered, adjusted or in any way changed. New blocks can be added to the chain with new information, but past information is “locked” and unable to be edited. Each block is linked to the blocks before it so that a change to the contents of any of the previous blocks would invalidate all blocks following it.
Blockchains are described often as “consensus-driven”. Many computers are connected to the network. If something attempts to add a block to the chain, all computers must compete to solve a mathematical proof, the results of which are shared across the computers on the network. These computers (or nodes) much all agree on the solution – or come to a consensus. This helps to prevent an attacker adding transactions to a block maliciously.
The consensus-driven nature means that there is no one centralised entity approving new blocks (or transactions), as we rely on the agreement of multiple entities instead. This results in far more transparency of the transactions occurring – anyone can view the contents of the blockchain in order to verify that what it says has occurred has actually occurred. This ‘decentralised’ nature allows for far quicker and more reliable transactions to take place than ever before – we don’t have to trust that a single entity is working to validate transactions, we are instead relying on multiple entities all coming to the same conclusion.
All of this is secured by cryptography, ensuring that data is safe.
Real Life Applications
Blockchain can most obviously be applied in banking – transaction ledgers can be maintained with little worry of an attacker altering them, whilst removing the need for the middle man, such as a bank. A consumer can make a purchase and blockchain can confirm the purchase and update the consumer’s bank balance to reflect it near-instantly. New types of banking start ups such as Monzo have used this to allow consumers an essentially real-time look at their accounts at all time, with complete transparency and security.
However, blockchain can also be applied throughout businesses. Gartner have in fact advised businesses to start evaluating business uses for pure blockchain, given the power of the tool.
For instance, blockchain can now validate ownership of a digital asset, such as a paid-for piece of software – something that wasn’t reliably able to be done previously. Ownership of digital assets can be transferred from person to person with ease and complete security. In this we see how cryptocurrency is able to benefit from blockchain technology.
Businesses which have transaction-based activity and would benefit from complete transparency with the public could benefit hugely from implementing blockchain.
It’s seen as one of the fastest growing technologies today and will likely only develop further. The benefits it can add to consumers could invite a new and exciting layer of competitiveness amongst businesses in particular.