What is blockchain and how can it help business?
Blockchain sounds like a way to keep boats anchored, which isn’t a bad analogy, considering what the technology purports to do.
While some IT experts herald it as a groundbreaking way of creating a distributed, unchangeable record of transactions, others question the nascent technology’s usefulness in the enterprise, which has traditionally relied on centrally-administered databases to secure digital records.
Even so, companies are moving fast to try and figure out how they can use it to save time and money. And IT vendors are responding to customers calls for info, with some already looking to include it as part of their services.
What is blockchain? First and foremost, Blockchain is a public electronic ledger — similar to a relational database — that can be openly shared among disparate users and that creates an unchangeable record of their transactions, each one time-stamped and linked to the previous one.
Each digital record or transaction in the thread is called a block (hence the name), and it allows either an open or controlled set of users to participate in the electronic ledger. Each block is linked to a specific participant.
Blockchain can only be updated by consensus between participants in the system, and when new data is entered, it can never be erased. The blockchain contains a true and verifiable record of each and every transaction ever made in the system.
Why is blockchain suddenly getting so much buzz? In a word, Bitcoin. Bitcoin is a wildly hyped cryptocurrency, a method of transacting payments over an open network using digital bits and encryption. It was the first ever decentralized one when it was created in 2009.
The term bitcoin was first… well, coined in 2008 when Satoshi Nakamoto wrote a paper about a “peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.”
OK, so what exactly does blockchain do? As a peer-to-peer network, combined with a distributed time-stamping server, blockchain databases can be managed autonomously. There’s no need for an administrator. In effect, the users are the administrator.
What industries are using it? According to Angus Champion de Crespigny, Ersnt & Young’s Blockchain Leader, the technology is seen has being well suited to propagate security policies and identity access management.
The fact that each blockchain record contains a unique cryptographic hash that is used to track that block, as well as others in the associated chain, means the data cannot be modified, making it perfect for record keeping and auditing purposes.
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