Blockchain. Get used to hearing that word a lot in the coming year. For those of you who don’t know what it is, let us break it down for you – it is basically a whole new way of managing data online. This article explains blockchain technology. (Blockchain explained).
It is not like any tech that we have seen before, and while some compare it to cloud computing, it is really quite different, although that could be one potential application.
Why people get confused is simple. With cloud computing, you upload information, say a spreadsheet, and that document is stored on the service provider’s servers. You and anyone else that you have authorized to do so will be able to access the information from any device.
Blockchain tech is similar to a spreadsheet on Google docs, in that anyone with access can view the document. That is about where the similarities end, though. With blockchain, you don’t have an actual service provider as such.
Instead of relying on a single server or server farm, blockchain tech backs up the information across all the computers within the network. So, the primary difference is that there is no single person or entity in control of the data, and the information can be viewed by all network users.
You would think that this would make the system more open to fraud, but it is this that makes it more secure. To add data, you have to sign it with your personal key. This is part of the process to verify that you are the authorized account holder.
The system then encrypts the data, and the transaction must be verified before it is actually added and visible on the chain. Once it has been, it cannot be changed or deleted, so there is always a permanent record.
INFOGRAPHIC: 16 Blockchain Disruptions
Where Blockchain is useful
We have gone into this in a lot more detail in the infographic (see the above link), but basically, any industry that needs to keep records securely could benefit from this tech. For companies that want to access the benefits and still keep their information private, a private chain is the answer.
This is a closed chain where only those that have been given access are allowed to view data or add new entries.
It could also be extremely useful where transparency is important. According to sites like Bitfortune, this could help to transform the online gambling industry entirely.
People would be able to access all records of bets won, payouts, etc., so they would quickly see whether or not an online casino was legit.
It is also useful in the food services industry, to prove to clients that the goods were sourced as and when they claimed, and to identify possible weak points in the chain.
It can also help to lower barriers to entry for new businesses in terms of infrastructure. New businesses could take advantage of the network and thus gain access to larger markets without having to be concerned by the high costs of setting up a network.
What Developers need to work on
The system is not perfect. For a start, most applications are running on a proof of work model to verify transactions. What this essentially means is that computers within the network must solve a really complex math problem and then present their answer to the network to be checked.
The issue here is that it takes a good deal of electricity and processing power to do this. So, it is not an ideal solution. You also have a lot of redundant checking. Members of the network who get the right answer and present it first, earn coins for doing so.
This can be quite lucrative, and so there are a lot of miners working on any one problem at any time. This means a lot of wasted effort.
There are applications that are moving over to a more efficient way of doing things – i.e., a proof of stake model, but that model also has a lot of issues.
The fact that you cannot delete or change data is both a good thing and a bad thing. It is a bad thing when it means that you cannot reverse a transaction that has been made in error, and it can also be a negative if you have a “bad” record somewhere.
If the police, for example, were to start using this system, and you had a record, it would still be easy to pick up even twenty or thirty years down the track.
And, while credit reports today only show the more recent payment histories, and adverse listings that have not yet expired, a blockchain based system would have your complete credit history.
So, clearly, while there are substantial benefits to adopting this tech, there are also some potentially serious downsides as well. Overall, though, the tech looks set to stay.
You might also want to read:
IBM Study: Blockchain to Recast the Future of Business
INTERVIEW: ‘We offer immutability through Blockchain-based ledger’
CONTRIBUTED ARTICLE
This article was written by the Bitfortune.net editorial team.
DISCLAIMER: All comments in this article are attributed to Bitfortune.net. Digital Creed has not verified any of the facts stated here, not takes responsiblilty for comments made by the authors.
