It’s a word that keeps cropping up, and it’s supposedly set to transform a number of different industries in the very near future - so why can so few people seem to explain what blockchain is?
Just the name of the technology and the way the word is used generate confusion. Some argue that the word ‘blockchain' is not a noun, others that it is a noun, but a concrete one and not an abstract one.
And when it comes to the actual tech itself, we have a whole new problem. According to one TechCrunch writer, understanding the technology is “level 10,000 on the nerd scale”. So to help clear up the confusion, here’s Clarity’s guide to blockchain.
What is blockchain?
A blockchain is a digital ledger capable of recording transactions in a permanent and transparent way, secured by cryptography. In other words, it’s a way of recording data so its accuracy cannot be disputed and its security cannot be compromised.
Another key feature of a blockchain is that it is distributed - by this, we mean that it doesn’t exist in a single location, but spread over a peer-to-peer network. There needs to be a consensus over the entire network in order for new ‘blocks’, or records, to be added to the ledger.
And to go back to the debate over whether it’s a concrete noun or an abstract one, then the answer is both. You can have a blockchain - the distributed digital ledger - and blockchain technology, describing the concept as a whole.
How does it relate to bitcoin?
Without delving too deep into the story of the mysterious Satoshi Nakamoto, the person or persons behind the digital currency bitcoin, blockchain is an integral part of the cryptocurrency. It’s used as a ledger that records all bitcoin transactions, meaning that it is very hard - if not impossible - to defraud the system.
One example of a blockchain already being used for this purpose is a UK-based startup called - you’re never going to believe this - Blockchain, which reckons it is currently recording and validating $2.5bn worth of digital currency transactions every month.
What can it be used for?
As well as a ledger for digital currencies, there are a number of areas where blockchain technology can be used. For example, import and export businesses could use it to verify the contents and quantity of shipments, allowing for payments to be made more quickly. Indeed, many potential applications revolve around the financial service industry, improving the speed and trust of many types of settlement.
Digital voting is also a possibility. But if you’re asking for examples of where blockchain technology is actually being used right now, then we can whittle down the list somewhat. In many cases, blockchains are being used only on a trial basis, such as by the Swedish Land Registry to prove how it can potentially speed up real estate sales.
Anything else it is being used for at the moment?
There are a number of startups bringing blockchain technology to market for a number of different purposes - anti-counterfeiting, identity verification, and to support peer-to-peer marketplaces, for example. However, much of it is very early stage still.
So what’s the weak link?
In theory there isn’t a weak link when it comes to data security. By design, blocks cannot be retrospectively modified. Blockchain is also highly fault tolerant, as they are distributed over a peer-to-peer network which can still function effectively if individual nodes are taken out of the network.
But don’t be fooled into thinking that blockchain is the answer to everything. There are a number of situations where it isn’t going to be much help, as IBM’s John Palfreyman points out, such as for high-volume, low-value transactions, replacing distributed databases, or in secure messaging.
Anything else I should know?
Well, while there is a lot of interest in the concept of blockchain in the media right now, this will soon subside if more interesting, real-life applications don’t come to light soon. But for startups in this area, there is a real opportunity to grab some attention.
If you’re a blockchain startup wondering how PR services can help you, get in touch.
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