Blockchain: What is it and Why is it important?
25th of February, 2016
What is the Blockchain?
Blockchain is a digital ledger system that has the potential to revolutionize online transactions as they exist today. Before we can look at the potentially incredible applications of Blockchain and the ways it could change your online transactions, we need to first look at exactly how this technology works.
A digital ledger system, just like a normal ledger system, is used to keep track of a business’ transactions. The difference between this ledger and traditional record keeping is that Blockchain exists in a decentralized network instead of being stored in one location, and is completely open to the public. Every single transaction is recorded and stored across all nodes of the network.
This network of ledgers is designed to ensure self-consistency — that is to say that the nodes need to agree with each other about what is recorded. As a result, it would be nearly impossible to tamper with the transaction record. It would not be enough to tamper with one of the nodes, as the tampered records would not match the records in the rest of the nodes in the system.
In addition, because all of the transaction records are kept it can be used to verify authenticity or continuity, adding a layer of security. In other words, because you can see all of the transactions (remember, the ledger is open to the public) and because each transaction is verified across a large network, so you can literally see for yourself that nothing fraudulent is happening.
You can read this article for more information on the specific mechanics of how Blockchain is able to do all of this.
Why is this so important?
The potential uses for this technology are staggering and are poised to shift the way we think about online transactions. Blockchain is most famously used to keep track of digital currency; however, the technology could be applied to the sale or trade of any asset. Blockchain could be used to verify the authenticity of goods; for instance, a purchaser could verify that the diamonds they purchased online are not conflict diamonds. Blockchain can further be used to automate contracts, or so-called smart contracts
Is this really a big deal?
Several industry leaders seem to be interested in developing Blockchain technology, including: Accenture, ANZ Bank, Cisco, CLS, Credits, Deutsche Börse, Digital Asset Holdings, DTCC, Fujitsu Limited, IC3, IBM, Intel, J.P. Morgan, London Stock Exchange Group, Mitsubishi UFJ Financial Group (MUFG), R3, State Street, SWIFT, VMware, and Wells Fargo. You can read more about this collaborative project that is being facilitated by the Linux foundation here.
To recap, Blockchain is a digital system for tracking transactions. These transactions are stored over a network of notes, with each node maintaining a full copy of the registry. This record is accessible by the public, ensuring transparency and allowing for quick and reliable verification. Because of this, Blockchain can potentially change the way we shop online. As we tend towards greater reliance on online transactions, Blockchain offers incredible
utility and security opportunities that are very appealing for all parties involved.
If this has been a little unclear, that’s ok, as this is a new technology that shifts away from how most people think of record keeping and it can be counter-intuitive at times. I’ve included the video above that does an excellent job of helping visualize what is going on with Blockchain and if you still have questions, leave them below!
About Kevin Lee
I’ve always been fascinated by the ever evolving interaction between people and technology, specifically within the developments of online communities.