By now you have heard about blockchain. Frankly, it would be hard to miss. After all, it’s practically on every magazine cover, talked about on TV, and has made its way into the workplace. Even with all the exposure, how much do you really know about it? If you have questions and are too afraid to ask, look no further. Join us as we look towards the future with blockchain.
What is Blockchain?
Blockchain is the technology that forms the foundation for all cryptocurrencies (Bitcoin, Litecoin, among the more popular ones).
To fully understand what blockchain is, you’ll need to separate it from Bitcoin.
Blockchain’s foundation is rooted in technologies and concepts that have been around for years, even decades. It’s not uncommon for new technologies to draw inspiration from those that came before it. For blockchain, these technologies and concepts are:
- Private key cryptography
- Distributed network ledger
- The incentivization of that network’s transactions, record keeping, and security
As with many advancements of yesteryear, these technologies were easy to implement in small numbers but challenging to scale larger. For example, you could have a distributed ledger in a single office, but multiple offices in several states become harder to manage. You might say these were concepts were ahead of their time.
Taking these concepts and pair them with modern technology allows the full potential of them to be realized. The best part of each is what gives us blockchain today. So, let’s answer the question: what is blockchain? Blockchain is a decentralized distributed ledger of transactions where a community of users verify and oversee information rather than a single entity, like a corporation or government.
How Blockchain Works
Now that we know what blockchain is let’s talk about how it works.
A lot of the explainers online tend to get bogged down in the details of how blockchain works. For some people, that’s great. We may get a little technical, but we will try to keep it as simple as possible. We want you to leave this article confident in your understanding of blockchain.
The best way to explain how blockchain works is to go through a transaction. A transaction is the fundamental element of blockchain, and it is what starts the process. And since blockchain was built for Bitcoin, we will use the cryptocurrency in our example.
To start, Person A agrees to send Person B a Bitcoin. This transaction creates a block and is distributed across the network. With the transaction available to the network, it is time for verification. Members of the network must come to a consensus to authenticate the transaction.
This is done using complex math equations and algorithms. Once the community agrees, the block is added to the chain and a permanent record of the transaction is created. Person B is now the owner of the Bitcoin. Along with ownership of the block, Person B has a unique key specific to the block.
Potential Uses of Blockchain
With its inception in cryptocurrency, it’s easy to lock blockchain into the banking and financial industries. Blockchain will revolutionize how we deal with money, but its potential extends far beyond that. Take the healthcare industry for example. Due to HIPAA regulations, data and patient information security are critical.
Blockchain pushes recordkeeping into the digital world, as well as adds another layer of protection. For the patient, they possess the key to their records allowing them to control who can access their medical information.
This is just one of the many examples of how blockchain could revolutionize how business is done. Others include:
- Improve equity management and transfer
- Failproof authentication
- Provide smart contracts
- Error-proof recordkeeping
- Improve cybersecurity
- Reduce inefficiencies in any number of industries
- Eliminate election fraud
The applications of blockchain are numerous and could change business network management in innumerable ways.