Recently (Summer 2017), you may have read about this mysterious ‘blockchain’ stuff that everyone seems to have fallen in love with. If you do some digging you’ll find that it’s absolute genius and consequently understand the hype. Failing to grasp the blockchain concept could cause businesses to fail as they simply won’t contend against organisations who have adopted the technology. In this blog, I hope to explain why.
So What on Earth is Blockchain?
Blockchain originates from the handling of digital currency: Bitcoin and its transactional differential engagement and logging of ledger-style key data points for reference and query.
Google says; “A global network of computers uses blockchain technology to jointly manage the database that records Bitcoin transactions. That is, Bitcoin is managed by its network, and not any one central authority. Decentralization means the network operates on a user-to-user (or peer-to-peer) basis.”
The infographic below illustrates this concept;
Why is Blockchain so Amazing?
To understand why you must look at what. Solutions are established to solve problems, so what is the problem warranting the implementation of Blockchain? Currently all transaction systems are trust-based. Let’s use a real-world example, purchasing a house. You instigate the purchase process of a property with a third party who can consult a ledger of historical information. This data is a dated record of changes such as ownership and modifications to the property over time. However, the records can be modified causing a gap between certainty and absolute guarantee. New records can be added but historic records can be removed or even modified without a record of the change itself.
What if we could ensure that data is 100% valid and tamper-proof? That’s where blockchain comes in. A table of information in a blockchain format is differential, meaning each entry contains the last. Not only are the records linked (hence the ‘chain’ part of the name) they are also encrypted with a key that is produced during the creation of the previous data entry.
Show Me Something Visual
Let’s imagine we enter our first bit of information into a new Blockchain network;
When we add a second record, the information is encrypted using the key from the previous entry and record 2 generates a new key (to be used with the third);
The database would continue to grow in this fashion. Nothing is stopping someone from removing an entry but if they did, the entire Blockchain would display corruption;
Blockchain uses multiple distributed copies of the databases and would auto-magically replace this tampered copy of the data using self-healing algorithm;
You’re in a supermarket buying bread and you must purchase a gluten-free loaf for health reasons. You look for the gluten-free logo and trust that the organisation responsible for producing the bread has done so correctly. This is current data practice.
Now let’s imaging there is a QR code on the bread which you can scan with your mobile phone and it tells you the full manufacturing process, from locations, time and dates to the ingredients added. The information is pulled from an encrypted tamperproof database. The removal of a trust requirement, replaced with water-tight fact.
Which bread is the gluten-free shopper going to buy? More importantly, what’s going to happen to the other companies selling bread on what will be considered old logic (the trust mechanism)? Imagine a scenario where we are dealing with patient medical records instead of bread.
Now, the bread example is a super-simplified description of a complex system. There are other factors that come into play, I simply wanted to provide a platform for you to take the first steps to understanding Blockchain.