Blockchain technology has come a long way from its origin as the instrument that underpins cryptocurrency. The blockchain revolution of the last two years has shown that this disruptive technology use cases, go far beyond what the original creators initially imagined.
Today the decentralized ledger is transforming critical industries such as finance, healthcare, automotive, retail, energy, and supply chain. Blockchain’s inherent benefits such as immutability, transparency, and provenance offer greater applicability to businesses.
For instance, global supply chains are using blockchain to create and maintain a fully transparent and immutable log of supply chain activities for greater traceability and accountability. The technology has already seen many use cases being explored by companies in various industries, with some implementations already deployed, and a few more in the pipeline.
Blockchain Technology: What is it?
Blockchain is essentially a distributed ledger technology which stores and maintains information across multiple systems spread across thousands of computers around the world. This creates a distributed database that is continually reconciled for recording, maintaining and validating information ensuring that data held on the blockchain is truly transparent and easily verifiable.
Moreover, information recorded in the decentralized ledger is secure and generally, immutable once confirmed. This makes it highly difficult for rogue or a bad actor to alter or delete the information. New entries are added to the blockchain only if the network consensus mechanism can validate it, ensuring that once a transaction has been completed, the blockchain remains an immutable record of it.
As you can see, information held on the blockchain exists as a distributed and continually reconciled database, which means the data is truly transparent and easily verifiable. Because no centralized versions of this data exist, it is nearly impossible to corrupt or hack the information in the blockchain database.
Lastly, blockchain technology is unique because of the cryptography that underlies it, which allows secure peer-to-peer trading of digital assets such as Bitcoin.
Blockchain Explained (ELIF5)
Here’s the ELI5 (“Explain it Like I’m 5”) explanation of blockchain.
You can think of blockchain technology as a spreadsheet that is duplicated multiple times across a network of computers and that this network is designed to regularly update this spreadsheet and you have the most basic understanding of blockchain.
So basically, five things must happen for a ‘blockchain’ to work:
- A transaction must occur – this could also mean an event such as recording bar codes of a food product.
- That transaction must be verified – this is left up to a network of computers spread across the globe.
- That transaction must be stored in a block – this gives the transaction or event the green light so that it can join thousands of others like it.
- That block must be given a hash – the verified transaction is given a unique, identifying code called a hash as well as the hash of the most recent block added to the blockchain.
- That transaction is added on the blockchain – lastly, the blockchain is added to the blockchain for everyone to view — even you.
What are the Features of Blockchain Technology?
In summary, blockchain is seen as an inevitable technology of the future for the following features:
Blockchain allows for time saving
- Recording of transactions is instantaneous
- It is self-auditing which means the network automatically reconciles and validates transactions
- Input of data is done in one place and shared for all parties to view simultaneously, saving time
Blockchain is immutable
- Blockchain is immutable in nature
- When a transaction is sent to the network, it is recorded on the blockchain forever.
- It is managed by a peer-to-peer network free from intermediaries or central authority
- Once the transaction is recorded on the distributed ledger, it can be cryptographically verified and there is no room for debate.
Blockchain allows transparency
- Its decentralized nature allows all parties to see the same information at the same time.
- It provides data integrity by ensuring each copy of the shared ledger will have the exact same data hence easily traceable
- Consensus algorithms provide a trustless environment for recording and validating transactions.
- All participants are identifiable and can be held accountable for the information they record.
Blockchain ensures continuity
- It records copies of information digitally and in a distributed manner, ensuring there’s no point of failure.
- Data stored on the decentralized ledger is immutable hence it cannot be corrupted by a rogue or bad actor.
Blockchain reduces costs
- Self-executing smart contracts automate processes of transactions thus eliminating costly paper-based methods.
- Computing power is used to validate transactions instead of expensive manpower.
- It eliminates the problem of intermediaries
With all this and much more stored in it, blockchain holds promise for disruption in every industry. The technology is being touted to help improve operational processes, enhance transparency and reduce paperwork. And this could translate into improved efficiency and reduced overall costs for both businesses and customers.