Introduction to: Blockchain
Unless you’re particularly up on the latest technologies, you may never have heard of blockchain. But you may have heard of the digital currency Bitcoin, which has come to prominence over the past few years and is made possible by blockchain. Indeed, according to tech experts, Bitcoin will just be the starting point for this revolutionary technology. But what is blockchain? And what future applications could the technology have?
As described by BlockGeeks, “picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.”
The key takeaway from this is that the information stored in the blockchain is part of a network. This makes the blockchain a decentralized database, an online ledger keeping record of transactions that can’t be modified. This also means a hacker can’t corrupt a single centralised version of the information, because no such centralised version exists.
Google Docs vs Microsoft Word
Perhaps the best analogy when it comes to thinking about how blockchain works comes via William Mougayar, who suggests thinking of the difference between blockchain and traditional databases as Google Docs vs Microsoft Word.
“The traditional way of sharing documents with collaboration is to send a Microsoft Word document to another recipient, and ask them to make revisions to it. The problem with that scenario is that you need to wait until receiving a return copy before you can see or make other changes, because you are locked out of editing it until the other person is done with it. That's how databases work today. Two owners can't update the same record at once. That's how banks maintain money balances and transfers; they briefly lock access (or decrease the balance) while they make a transfer, then update the other side, then re-open access (or update again).
With Google Docs (or Google Sheets), both parties have access to the same document at the same time, and the single version of that document is always visible to both of them. It is like a shared ledger, but it is a shared document. The distributed part comes into play when sharing involves a number of people.”
What the Future Holds
While the technology first hit the news because of Bitcoin, the future uses of blockchain will likely be vast and varied, and will impact people right across the board. One of the likely first steps for blockchain will be the banking/finance industry, which can use the power of blockchain for cheaper, faster and more secure transactions. In Japan, a consortium of banks is planning to use blockchain for domestic and international payments. Where Japan leads, other countries may follow and we may be looking at a future where blockchain becomes the industry standard. Indeed, the Harvard Business Review believes that The Blockchain Will Do to the Financial System What the Internet Did to the Media.
Another future use for blockchain is digital voting. As things stand now in larger countries, online voting isn’t seen as a practical option because of the security issues around it. But with blockchain, that major roadblock can be removed. Due to being a small, tech savvy nation, Estonia introduced e-voting back in 2007 and are the world leaders in digital governance. In the 2015 Estonian parliamentary elections, 30.5% of all participants voted over the Internet. As Anna Piperal, managing director of the e-Estonia Showroom talks about it in Forbes, the security of data is key.
“The basic principle of a digital society system is trust. If the data were to be breached, then the whole concept would collapse,” Piperal said. “We as citizens know what the Estonian government collects about us. Everything is auditable. And institutions and government cannot manipulate the data once it’s in the blockchain.”
While blockchain has been talked about heavily with regard to Bitcoin and financial transactions, what really makes this technology exciting is all the other areas of life that will be affected too. Everything from digital identities to smart contracts, land registries to cloud storage, could be powered by this technology in the future. As we delve ever further into the digital age, blockchain may become the backbone of the world around us.