We are hearing more about blockchain technology as time goes on. If you aren’t sure what it’s all about then you wouldn’t be the only one, as many people are confused by this technology. Here we will look at what blockchain is and attempt to demystify it once and for all.
You will find many definitions of what blockchain technology is – this is because there are different types and applications. However, there are some simple commonalities that define it in more general terms.
Many people, who do not yet understand the blockchain, incorrectly assume that it is the same thing as Bitcoin. On the contrary, blockchain technology is the enabler of Bitcoin (which itself is a cryptocurrency whose transactions are recorded on blockchains). As a broad definition, we might say that blockchains are a way of storing and sharing important information in a way that cannot be tampered with. The data stored in blockchains boasts trustworthiness through the ability to verify authenticity at each point in its journey. So, it’s rather like a digital ledger in which the data and its history is recorded. It is these characteristics that make blockchains perfect for securely storing any type of important information.
As its name implies, data is stored in blocks. A block of data is simply a representation of a stage in the data’s journey, the recording of some action or change. This could be any action, such as the signing of an official document, along with information such as the date, time and details of the signee. Each time there is any addition or edit to the data a new block is created and recorded on the blockchain.
Not only does the content of data blocks remain secure, their sequence is immutable too. Blocks are timestamped, effectively chaining them together so that their order cannot be altered or new blocks inserted out of sequence at some later time. Consequently, the blockchain promotes trust through verification – everything is recorded and cannot be removed or altered secretly.
Any network or organisation with a need to securely share and trace data, about anything important, can use blockchain technology. It is becoming more common for organisations to subscribe to an existing ‘blockchain-as-a-service’ offering, which is a cloud-based service pre-configured with much of what is needed. Once set up for the organisation’s requirements, it offers a network to which all involved parties belong so they may share access to their blockchain’s data.
The applications of blockchain technology are expanding rapidly, taking the world by storm. You are probably most familiar with the idea of cryptocurrencies, such as Bitcoin. Using blockchains to record any type of financial transactions is the perfect use case – making the most of the efficiency and security it offers. However, blockchains are used for more than just cryptocurrencies.
Growth in the use of blockchains in supply chain management is just one area where benefits are beginning to be seen. For these often complex and large scale environments, the benefits include cost-efficiency, traceability of goods and a better overall experience for the consumer.
Another example of an area where blockchain has gained traction is in the up and coming area of digital identity verification. This is something required across many areas of industry and governments around the world and blockchain can offer a secure and cohesive way of tackling the problem. Blockpass is one example of a service that is using blockchain technology to offer identity verification services to companies and individuals.