Since Oliva Woolston Morgan and I spoke about the tech trends for 2016 and beyond in our Tech Crammer event last month, blockchain technology has never been far from IT/tech industry headlines. But what is it, and what is all the fuss about?
I will be posting a series of blog posts on the subject of blockchain in the coming weeks, but I will start here by shedding some light on what the technology is itself, and offering a window into its potential to be one of the most significant technological developments in recent years.
Blockchain is the cryptographic technology that underpins the digital peer-to-peer currency Bitcoin. Bitcoin itself has had mixed press, with a volatile value, limited traction with retailers and headlines that include hacks and fraud. Bitcoin is proving resilient, however, and when you look past the currency itself and at the enabling blockchain technology, Bitcoin's success or failure is arguably an irrelevant side story.
Blockchain is increasingly being touted as being as significant a development as that of the internet. A bold claim, but if the internet provides near instant digital communication, blockchain provides near instant digital transfer of assets/ownership, and security of data movement.
It is a challenge to summarise technology that is rather complex, but in a nutshell:
- A blockchain is like a database, but the way it is updated and the way users or applications access the information is fundamentally different;
- A blockchain can store any data (e.g. not just the balance and ownership of bitcoins, but any kind of ledger, register or record);
- A blockchain binds computers together in a distributed network arrangement;
- A distributed network means that the entire record of the blockchain is accessible by every computer in the network, making it easy to verify any existing data, and very difficult to hack or alter data as it is reinforced by the rest of the network;
- Each block of new data is added to the chain of existing blocks, telling the story of every transaction that has gone before it.
This structure gives blockchain dual security traits: (i) the cryptographic storage and transfer of data, and (ii) the evidential layering of successive blocks creating a publicly verifiable, distributed record of events.
Although Bitcoin has suffered a number of security breaches, including one high profile ethical hack about a year ago, these attacks have all been focused at the "wallet" or the user interface area. The blockchain itself remains secure, and very resilient to fraud.
In the hope that you're still reading following the technical section, the take away message is that if data or transactions are being delivered via a blockchain solution, we can, for now, assume that the data itself is secure and trustworthy. The user interface such as the strength of your password remains an issue, but that is no different to the way we currently access data and online services.
I will be expanding on the potential uses for blockchain in blog posts to come, but current projects under use and/or development include an E-Governance system in Ukraine, a land title register in Honduras, and a register of diamonds set to crack down heavily on the blood diamond trade. And ironically, a whole host of private blockchains are being built by the world's largest financial institutions in various collaborative efforts in order to trial the use of the technology to offer faster, cheaper, safer financial transactions.
As well as updates on the blockchain developments as they arise, other topics I will explore in future posts include 'smart contracting' facilitated by the blockchain, and what legal challenges the blockchain will face.
The chances are this is not the first time you have heard of blockchain. You can guarantee it won't be the last.