Blockchain
A blockchain is a revolutionary technology that changes the way people exchange goods and information, especially in a digital manner. Blockchain is a distributed database that maintains a continuously growing list of ordered records, called blocks. These blocks “are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. It is a decentralized, distributed, and public digital ledger that is used to record transactions; those cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.
Blockchain was invented by “Satoshi Nakamoto”—the pseudonym of an unknown person or persons—in 2008. It was created to serve as a public transaction book for the Bitcoin cryptocurrency, which ended up being the first digital currency, solving the problem of double spending without the need for a trusted authority or a central server. While blockchain is still largely confined to use in recording and storing transactions for cryptocurrencies such as Bitcoin, proponents of blockchain technology are developing and testing other uses for blockchain, including these:
Blockchain for digital IDs. Microsoft is experimenting with blockchain technology to help people control their digital identities. Organizations can use the information only with customers’ consent and no central entity would be able to compromise a consumer’s identity.
Blockchain for monitoring of supply chains. Businesses could pinpoint inefficiencies within their supply chains quickly, as well as locate items in real time and see how products perform from a quality-control perspective as they travel from manufacturers to retailers.
Blockchain for data sharing. Blockchain could act as an intermediary to securely store and move enterprise data among industries.
Blockchain for payment processing and money transfers. Transactions processed over a blockchain could be settled within a matter of seconds and reduce (or eliminate) banking transfer fees.
Blockchain for copyright and royalties protection. Blockchain could be used to create a decentralized database that ensures artists maintain their music rights and provides transparent and real-time royalty distributions to musicians.
Blockchain for Internet of things network management. Blockchain could become a regulator of IoT networks to “identify devices connected to a wireless network, monitor the activity of those devices, and determine how trustworthy those devices are” and to “automatically assess the trustworthiness of new devices being added to the network, such as cars and smartphones.”
Blockchain for healthcare. Healthcare payers and providers are using blockchain to manage clinical trials data and electronic medical records while maintaining regulatory compliance.
Blockchain for monitoring of supply chains. Businesses could pinpoint inefficiencies within their supply chains quickly, as well as locate items in real time and see how products perform from a quality-control perspective as they travel from manufacturers to retailers.
What are the business benefits of blockchain?
The blockchain has as its primary benefit a database to record transactions. However, their benefits extend to removing the possibility of tampering by a malicious actor, as well as providing these business benefits:
Cost savings. Transactions need less oversight. Participants can exchange items of value directly. Blockchain eliminates duplication of effort because participants have access to a shared ledger.
Time savings. Blockchain slashes transaction times from days to minutes. Transaction settlement is faster because it doesn’t require verification by a central authority.
Tighter security. Blockchain’s security features protect against tampering, fraud, and cybercrime.
Blockchain explained
Blockchain is a digital ever-growing list of data records. Such a list is comprised of many blocks of data, which are organized in chronological order and are linked and secured by cryptographic proofs. Transactions occur within a peer-to-peer network of globally distributed computers (nodes). Each node maintains a copy of the blockchain and contributes to the functioning and security of the network.
The four key concepts behind blockchain are:
Shared ledger. A shared ledger is an “append-only” distributed system of record shared across a business network.“With a shared ledger, transactions are recorded only once, eliminating the duplication of effort that’s typical of traditional business networks.
Permissions. Permissions ensure that transactions are secure, authenticated, and verifiable. With the ability to constrain network participation, organizations can more easily comply with data protection regulations.
Smart contracts. Is an agreement or set of rules that govern a business transaction; it’s stored on the blockchain and is executed automatically as part of a transaction.
Consensus. Through consensus, all parties agree to the network-verified transaction. Blockchains have various consensus mechanisms, including proof of stake, multisignature, and PBFT (practical Byzantine fault tolerance).
Each blockchain network has various participants who play these roles, among others:
Blockchain users. Participants (typically business users) with permissions to join the blockchain network and conduct transactions with other network participants.
Regulators. Blockchain users with special permissions to oversee the transactions happening within the network.
Blockchain network operators. Individuals who have special permissions and authority to define, create, manage, and monitor the blockchain network.
Certificate authorities. Individuals who issue and manage the different types of certificates required to run a permissioned blockchain.