Everyone's heard of blockchain by now. Whether you've been tentatively watching the value of Bitcoin soar, reading up on the boom of digital currencies, or taking notes at conferences, these have become words in our vocabulary. But, what actually is the blockchain and, beyond investing a few thousand in digital currency, how else will it impact your life?
Described by many as "the new internet," blockchain is a digital technology that is becoming essential to both business and politics and will soon disrupt every industry imaginable, according to Kai Chen, CEO of Olympus Labs.
The word "blockchain" sounds really cool, but like any other popular innovation, its quickly becoming jargon; many don't truly understand what it is or how it impacts them. So I thought I'd tap the experts and get the skinny.
First of all:
What Exactly is Blockchain?
Co-Author of the Blockchain Revolution, Don Tapscott, describes blockchain in simple terms. "The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions, but virtually everything of value." Let's break that down further.
While blockchain has been responsible for Bitcoin and other famous digital currencies, its real power lies in its technology. Chen explains, "Blockchain is secure, trustless, and decentralized. All records on the blockchain are immutable because they are shared by all the participating parties on their own computers."
Jon Gillham, CEO and Co-Founder of Adbank, an online ad platform built on the blockchain, says, "Blockchain is distributed among many people and records transactions that everyone can see and verify. It is essentially a chain of computers (known as "nodes") that all must agree on a transaction."
Just like any technology--your car, the internet, a microwave--you don't need to understand how blockchain works to use it, but the perhaps the simplest way to think about it is by using a spreadsheet example.
The Spreadsheet Example
Remember the days when Microsoft Excel dominated the office scene? You would prepare a spreadsheet, email it to the next person to check and edit, wait for it to come back and update. While you could have potentially thousands of the same document available, you could not have thousands of people editing it at once. That lead to documents being duplicated, several versions being created, email threads and confusion.
Google Docs removed that problem by allowing several people to work on the same document at once, like a shared ledger visible to two or more parties in different locations. But where Google Docs' limitation lies in the distribution of the document. Blockchain steps up by allowing everyone to access the same information simultaneously.
Instead of passing documents back and forth, losing versions and causing mayhem, blockchain is updated and available at all times.
How is Blockchain Innovating Businesses?
If the ramifications of such technology haven't become clear yet, just imagine the amount of legal documents that could be managed with blockchain. We would no longer need passports, birth certificates, or any traditional hard copies. As Chen points out, "We can soon have digital passports that relate to a unique private key, so the inefficient way of carrying and risking losing passports during international travel is a thing of the past."
And consider the banking industry. If you had all your money in one bank account and that bank shut down one day, all your funds would be lost because they were centralized. Now imagine using blockchain technology. "If your records were distributed across several accounts, your account would be safe because all of the participating parties have the same information."
Decentralization is a major part of blockchain technology. No transactions can be lost or manipulated and no data can be located in a single location. Gillham points out, "Anytime trust is centrally located it has a single point of failure, the blockchain allows that same critical information to be stored on many computers ensuring it is a tamper-proof database."
With blockchain, any changes that happen anywhere happen on the entire network. This means that, as far as Bitcoin and other digital currencies are concerned, transactions are almost simultaneous and happen in real time. Now transfer this to all types of record keeping, from land registry to immigration.
According to Block Geeks, "Decentralization means the network operates on a user-to-user (or peer-to-peer) basis. The forms of mass collaboration this makes possible are just beginning to be investigated." But, it's thought that blockchain could be used by the sharing economy, crowd funding, data and identity management, stock trading, crowdfunding and many other areas.
Blockchain is also essential to politics because it can provide a way to increase voter participation and reduce voter fraud. Every voter would have a unique private key that they could use to vote in elections. This way, voters couldn't vote twice, and the inefficient way of hand counting ballots would be eliminated.
Why Businesses Will Eventually Need Blockchain
Businesses will need blockchain for more efficient transactions, transparency and security. They'll no longer need to worry about data getting lost. Because the blockchain self-audits every 10 minutes (a period of time known as a block) it can never be corrupted or altered and every record is public.
"Blockchain technology will disrupt many businesses similar to how the internet has disrupted entire industries," Says Gillham. Chen backs this up by saying, "The technology is transparent, efficient and incentivizes the users. It will disrupt every industry."
He adds, "Blockchain is essential to business because it is a much more efficient way of keeping records. It significantly reduces the risk of fraud because one party in a transaction can't change their own records without confirming the change with every other participating party."
Over the next few years, we'll begin to see blockchain stamp its footprint across all areas of our lives, allowing us to do things faster, cheaper and more securely. Forget about focusing on digital coins--blockchain is going to revitalize your whole company.