Blockchain may seem like just another buzzword, but this is a technology that has been decades in the making. At its simplest, this is a revolution in the landscape of information collection and management.
Think of it as a database that that exists as multiple nodes — all of which are distributed, transparent, secure and immutable. In other words, they can’t be tampered with. And that has all got to do with the fact that there is no central authority in charge of this network.
But the blockchain technology goes beyond the applications of simple data collection. It has the potential to change the way the world transacts, both in the personal and business spheres. Its promise to bring a completely new level of trust to our world has the capacity to disrupt all businesses and industries from inside out.
Let’s take a look at blockchains, and the technology that powers these remarkable creations.
What is blockchain?
Blockchain can be defined as a shared digital ledger that is constantly updated with appended blocks of transactions from members. All without the need of a central certifying authority to oversee and manage proceedings.
This ledger has all kinds of uses — from transferring funds to settling trades, authentication and authorization to voting and digital rights management. Organizations can also build blockchain powered platforms to gather actionable data from users and devices for use in IoT and artificial intelligence scenarios.
Not many people are aware of this, but blockchain is actually a subcategory of another technology that is known as DLT, or a distributed ledger. Different variations of the concept exist like the Tangle, Hashgraph and Nano, though the plain old blockchain is the most popular by far.
Goes without saying that understanding the full implications of DLT is something far in the future. But its advantages are already evident, in how it streamlines complex market processes. This is what gives blockchain it well justified hype.
The making of a block
Now, you may be wondering blockchains may be complex technologies, but that could not be further from the truth. Their concept couldn’t be simpler. This is a space that revolves around blocks, which are simply sets of transactions that have happened at the same time.
Obviously, there is more to this than this modest definition above, but that is it in a nutshell.
The idea here is to store data and information in a way that can’t be altered or modified. And that happens when blocks are generated, grouped together and linked with each other like a chain. Hence the name blockchain. Only the first block of a blockchain, known as the Genesis block, does not link to any blocks that proceed it.
So, what happens when someone requests a transaction?
It is quickly broadcasted to the nodes, which you can say is a network of computers that validate both the status of the user and the transaction. Once verified, the transaction is then combined with other transactions that are on the network, and they form a block of data to be recorded on the ledger. The block is also broadcasted to everyone in the network, they approve the transaction as valid and then add that new block of data to the existing blockchain, which is now permanent and unalterable.
The data portion of the block contains the information that is to be stored in the ledger, and this can be anything from simple records to contracts, money or any other type of digital asset, information on the customer or their financial or medical records — you name it.
This is how transparent record of transactions on the network is created, which can then be utilized in a variety of unique and innovative ways. And if anyone tries to tamper with the transaction data stored on the blockchain, the entire hash sequence will need to be recomputed.
Which is what makes blockchain immutable and highly secure.
Types of Blockchain
Like any new technology, people started to use blockchain for a number of different purposes. The technology itself is divided into three main categories, each one offering a solution to a unique set of problems, a degree of control and access.
- Public blockchain is the original creation, a platform that everyone can access and transact on. Bitcoin is its most popular implementation. Miners play a big role on public blockchains, they are the ones that verify and add transactions to the blockchain by solving encryption challenges.
- Hybrid blockchain is a distributed ledger where preselected nodes control proceedings. This is also widely known as a consortium blockchain, in how organizations that operate the nodes must sign every block for it to be valid. A hybrid blockchain may grant rights to read the data to the general public, or restrict it to selected participants.
- Private blockchain, as the name implies, is a fully privileged solution. Write permissions are centralized to one entity, but read permissions can be public, if need be.
As you can imagine, cryptocurrencies like Bitcoin and Ethereum are public blockchains, both of them open source, in fact. This means anyone can view the records and transactions conducted on the platform at any given time.
Enterprise use cases normally involve choosing any of these three types of blockchains, whatever that ideally fits their needs and requirements.
The Blockchain Network
Like any network ecosystem, there are various participants in a blockchain network that each play a role in its operation. Participants like nodes and users are the most immediately visible, but you will also find regulators, developers, network operators and certificate authorities in this list.
Let’s take a look at what constitutes a blockchain network, and what the roles of these participants are:
- User: An obvious one. This is a participant that has permission to join the blockchain network and conduct transactions with other participants.
- Regulator: User that has special permissions to oversee network transactions. Regulators are usually prohibited from conducting transactions on the blockchain.
- Developer: Programmers that code up applications and smart contracts for the blockchain.
- Network operator: Entities with the authority to create, manage and monitor the blockchain network.
- Processing platforms: Computer systems that connect with the blockchain and augment processing. They are used to initiate requests.
- Data sources: Traditional data systems that define communication and data transfer on the blockchain. They essentially influence the behavior of smart contracts that are programmed into a blockchain network.
- Certificate authority: An authority that issues and manages different certificates required to run a permissioned blockchain.
That about covers it.
Now, the big question is, who can be a member of the blockchain network? This depends upon the type of network in question, and the rules that are in place for it.
Public blockchains like Bitcoin, Ethereum and may other allow anyone to initiate a transaction with a simple press of a button. On the other hand, a retail company may restrict who gains access to its private blockchain, only allowing trusted suppliers and customers the ability to interact.
Smart contracts are what make blockchains tick! These are automated mechanisms that add to the functionality of blockchains, extending it beyond simple buy and sell transactions. In many ways, these are the application layer of blockchain technology, embedded programs so to say.
They essentially take human judgement out of the equation in these networks, allowing blockchains complete automation. Smart contracts are simply a way of making verifiable decisions after predefined conditions are met — just like a vending machine that behaves algorithmically every time, all the time.
Blockchains can have smart contracts that connect with outside sources of data and information like weather, travel times, currency exchange rates, stocks, match schedules, even user authentication.
Once they gather the required data, smart contracts can execute the agreements that are programmed in, without user intervention and delays. Several noteworthy implementations of smart contracts are now available, the most popular of which is the Ethereum blockchain framework.
Blockchain use cases
With the technological details covered, we now get to the million-dollar question: What are some blockchain uses cases, and what makes this technology so promising for use in enterprise, commercial, government and even personal sectors?
Not only is the blockchain technology widely expected to disrupt existing industries, it is already leading to the creation of new types of companies that are using the power of distributed ledgers to gain an edge over competitors in a number of ways.
One of the biggest benefits blockchain provides is verification. It can be used to verify all kinds of credentials, from university degrees to employment history. A blockchain enabled identity solution can also automatically verify an individual for relevant third-parties.
Additional notable areas of interest are intellectual properties, licensing and establishing history of ownership. Blockchain based solutions offer provenance tracking and authentication for a variety of digital and physical goods, reassuring customers concerned about their source and quality.
Of course, enterprise use cases are wide and far ranging, and scenarios where blockchains are combined with budding new technologies like artificial intelligence, machine learning and Internet of Things continue to excite and entice.
We’ll be taking a look at these in detail in a future article.
But there is no doubting the fact that this revolutionary new development helps solve a range of problems for businesses and users, customers and suppliers, enterprise and organizations.