If you think Blockchain is a tricky concept, you’re not alone. Maybe that’s because unless you have a cryptocurrency mining operation, Blockchain doesn’t currently intersect with life on a practical level. Or maybe it’s because it’s just hard to wrap your mind around the idea of a technology that can be used to create value out of literally nothing.
There’s a lot of hype about Blockchain, mostly because Bitcoin and other Blockchain-based cryptocurrencies have captivated entire swaths of humanity with its investment potential.
But Blockchain is more than Bitcoin. A lot more.
What’s All the Hype?
Everybody wants to capitalize on the growth potential of Bitcoin. In our hometown of Greenville, S.C., a startup recently announced its plans to build a $10 million cryptocurrency data center with plans to open several more over the next ten years. Why? Because cryptocurrency mining can make you a ton of money.
Some experts predict that the value of the cryptocurrency market will top $1 trillion this year. If the rate of growth remains constant, cryptocurrency could be worth more than the entire U.S. economy in just two years.
But there are others who disagree. Bitcoin’s astronomical growth is a bubble, and like the dot-com bubble of the 90s, some say it’s going to burst.
No matter whether Bitcoin goes boom or bust, Blockchain is far more than a passing trend. The potential applications of the technology extend far beyond Bitcoin and its cryptocurrency compadres. The truth is that we’re only seeing a tiny speck on the tiniest protrusion of the tip of the iceberg in terms of what Blockchain can mean for technology and innovation.
What Exactly Is Blockchain?
Blockchain is essentially a digital ledger that allows information to be recorded and distributed publicly, but not changed. It can’t be corrupted because the information is stored in verified blocks that are distributed among many computers (nodes). Because the information isn’t stored in just one place, it can’t be hacked or altered.
Here’s how it works (the short version):
1. A particular blockchain is distributed across a network. It isn’t stored in any one location. Any computer can become a “node” on this network, accessing the same information as all the other nodes.
2. When a user requests a transaction, the computers in the network validate and record the transaction. (Transactions can be financial, but could also be a new version of a contract, for example.)
3. The network “checks in” and verifies the data every ten minutes. All transactions that take place within that ten-minute timeframe are reconciled and stored as a block. The block is added to the chain of existing blocks, serving as a new entry in the digital ledger.
4. Blocks cannot be changed, because doing so would require someone to override or overwrite information on an entire network of computers.
5. Data stored in a blockchain is encrypted and accessed via public and private keys.
6. Records kept in a blockchain are public and easily verifiable, and they cannot be corrupted.
Blockchain specialist William Mougayar compares Blockchain to Google Docs. Instead of sending documents back and forth between two parties, Google Docs allows two people to view the same document at the same time. This ensures that there aren’t two separate versions of the document floating around, and that both parties see changes in real time.
In the same way, Blockchain’s digital ledger makes data publicly visible to every node in the network. Data can’t be corrupted and transactions can be immediately verified. And because Blockchain stores unalterable blocks of data in ten-minute intervals, transactions can be recorded and stored without the possibility of corruption.
Why Does Blockchain Matter for Your Business?
When most people hear the term Blockchain, they think of Bitcoin. Bitcoin is the earliest and is still the most successful application of Blockchain, and it has become extremely valuable in a short period of time.
But Blockchain isn’t limited to cryptocurrency. Let’s take a look at some other applications that are poised to transform the way we live and work:
Blockchain can enable financial transactions like international payments, insurance claims processing, smart contracts, and smart bonds. These financial transactions don’t require an intermediary or a hold on your financial assets. Smart contracts, for example, can be programed to self-execute when stipulated conditions have been met. Blockchain ensures transparency and creates a risk-free environment for these transactions to take place.
Another equally important ramification of Blockchain for financial transactions is that it reduces the power of oppressive regimes to control access to currency. Blockchain creates an inherently trustworthy record of transactions that does not require an intermediary. It is also a way for people to make themselves more competitive on the open market, no matter where they are in the world.
Imagine you’re using IoT sensors to track shipments in your supply chain. These sensors monitor the location of the goods as they move from one place to another. Blockchain adds a layer of security to that information by storing and managing data so that it can’t be corrupted. It’s also a great way to bring transparency to supply chain ethics for consumer goods or food products.
The same concept can be applied to smart appliances. Smart appliances connect to the Internet so you can set up controls and monitor them from your phone or tablet. Blockchain encrypts and stores this data, and also supports seamless transfer to a new owner without elevated security concerns.
Blockchain also creates an indisputable marketplace of ideas, where information can be published and protected. Threats of legal action can’t touch this information because it is already distributed widely and stored permanently. Blockchain can also protect intellectual property by time-stamping the first appearance of a file and eliminating the risk of it being copied and redistributed.
If your personal data resides in a Blockchain database, it can’t be hacked. It can’t be altered or used fraudulently. Blockchain allows users to own and control their personal information in a way that was previously inconceivable. This is why the United Nations used a blockchain to verify the identity of Syrian refugees who immigrated to Europe. In the same way, Blockchain could be used to verify voter identities in an unassailable way.
File Storage and Data Management
If file storage were distributed across a network rather than dependent on a client-server relationship, documents could be transferred much faster. They could also be protected from hacking or data loss. This would be an important innovation for keeping records like property titles, passports, and legal documents.
Healthcare is flooded with personal, private information and that makes it a prime target for cybercrime. With Blockchain, patient records could be encrypted and verified as reliable, time-sensitive information for insurance claims, research, drug supervision, test results, and supply management.
Blockchain is already gaining traction in many industries, even though it’s not at a customer-facing level. It operates in the background, protecting data and enhancing security while remaining largely invisible. And that’s one reason it holds such potential to create a fair, ethical business environment.
The key to successful Blockchain innovation is having a sufficient number of nodes to sustain the system, while also motivating operators to adhere to a standard code of ethics. That kind of structure takes cooperation, and that can take time.
But once a structure like that in is place, there is no limit to the ways Blockchain can improve business and fair trade.