Blockchain For Dummies

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Blockchain for Dummies

There has been quite a lot of chatter on the net in the last 12 to 18 months about blockchain. I’ll attempt to demystify some of the concepts in this blog as well as outline some potential applications. Blockchain for dummies does what it says on the tin and presents an introductory, lightweight guide, hopefully whetting your appetite of an often misunderstood technology.

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What is Blockchain?
Wikipedia’s definition of a blockchain is given as… “A blockchain, originally, block chain is a distributed database that maintains a continuously-growing list of data records secured from tampering and revision. It consists of data structure blocks—which hold exclusively data in initial blockchain implementations and both data and programs in some more recent implementations—with each block holding batches of individual transactions and the results of any blockchain executables. Each block contains a timestamp and a link to a previous block.” [1]

So, what does this mean in ‘dummies’ terms? Basically, (and this is my definition in as much of a nutshell as I can make it); a blockchain is a mechanism that allows businesses that are separated across a network, to instantaneously complete and verify transactions without having to refer to a central overseeing authority. It really doesn’t sound like a big deal, but as more and more applications built on blockchain technology emerge, it appears to be set to revolutionise the internet (again).

Delving into the weeds a little more, so that we can get a grasp of the underlying technology,  we can say that; blockchain is a data structure which enables a digital record of commercial accounts (ledger), to be created and shared across a number of computers (usually located some distance apart), and connected via a network. In semi-tech parlance this is known as distributed computing. So, basically, we are saying that a ledger is created and shared across a network simultaneously to a number of partners. This is more or less the basic concept. Remember this is a ‘Blockchain for Dummies’ guide, and whilst there are various flavours of blockchain implementations, they won’t be covered here. One question remains then, in this brief introduction. If it is such a simple concept, and clearly devoid of rocket science, what exactly is all the noise about?

The key word of course is ‘distributed’, or to put it another way, decentralised. Looking at the vast majority of technology-enabled businesses these days, the status quo suggests that many platforms rely on databases that are centralised with a single point of failure. Yes, of course we have many measures in place to prevent the loss or theft of data, but each database regardless of whether it is an original, a copy or backup or a cloud-based replica is in itself a centralised container which is potentially vulnerable to failure, tampering, theft etc.

The big advantage that blockchain technology brings to the table is a means to ensure that we have freedom from 3rd parties and complete control over who has access to our data. We see that the effect of decentralisation is a powerful one in that, the reduction in the use of intermediaries in record keeping has increased security and control. In order to continue the blockchain each block must be signed and verified by multiple verification agents who must also then agree upon the transaction time stamp, which is indelible. The possibility of forgery has gargantuan odds stacked against it since the sheer amount of data being processed simultaneously creates an obstacle that is nigh on impossible to overcome.

Who Invented it?
From what I can tell, the true identity of the inventor(s) of blockchain has not been credited with the idea and its most famous (to date) product, the bitcoin. Some say this is because of the far reaching consequences that blockchain could deliver and hence endanger the life of the inventor(s). It is generally recognised that a person or group of people known as Satoshi Nakamoto were the fist to publish a paper describing bitcoin. [2] Whatever the case, most media articles seem to agree that it is a substantial opportunity to change the way we do business across the internet.

How is it used Today?
Almost everyday now, we see newly emerging ideas and applications of the blockchain model. At the time of writing a very recent article in the media from a government source states – “blockchain technology is going to become more important if the UK is to be fully automated in the future, including delivery fulfillment and increased proliferation of the internet of things”. [3]

It’s difficult to see just how far reaching blockchain will be, but for sure, it will at least initially be inextricably tied-up with a number of financial, contractual and payments related sectors, including the obvious one, currency (bitcoin and others). Blockchain can be used to ensure that data is verifiable. Take a look at ‘Proof of Existence‘ to see how this simple application works for example.

Onename is a web app built on blockchain that allows a unique and verifiable identity to be registered for purposes such as digitally signing documents, safely and securely signing into websites and apps etc. Here is mine. Others such as real estate are relatively new to blockchain, but will soon leverage some of its unique application selling points such as smart contracts.

The financial sector is the one making the most noise since it may be set to reap the initial rewards. The Financial Times recently reported – “A group of seven banks including Santander, CIBC and UniCredit is claiming a breakthrough, ranking among the first financial institutions in the world to move real money across borders using blockchain-based technology.” [4] Forbes are posing the question “Will Blockchain Become The Internet Of Finance?” [5]  and have suggested that as much as $1 billion has already been invested in the technology since its inception.

How will it be used Tomorrow?
Looking to the future, a number of other areas have been identified as possible applications. Indeed startups have already begun to exploit opportunities in car rental, home internet ready appliances, reduction in cyber risk, social welfare, stock market prediction, salary administration,  and others. The CEO and founder of Everledger, was quoted in ‘Wired’ as saying “We can apply this technology to solve very big problems: ivory poaching, blood diamonds, all these big ’blood problems’ that are helping cartels, terrorists and criminals”. [6] This is amazing if there really are real-world applications that not just disrupt industries, but change lives at the granular level.

What’s clear is that many of the applications are under-developed. Some are just ideas, others have attracted millions in start-up funding. The next few years will really see the technology develop and experiment. Blockchain is a game changer and it’s here to stay. Because of its very nature, ‘certainty-as-a-service’, then it has to be a power for the good. How it will affect me personally? I am not yet sure, but if it provides guarantees, increases transparency and evolves security along the way, it’s definitely worth investigating further.