Blockchain technology is relatively new, and fascinating. And a complete mystery to most people.
There are some excellent primers on blockchain technology, but it’s worth covering the basics in a short blog.
What is blockchain, exactly? It is a shared, distributed ledger – a way to keep track of something that can be traded. Sounds simple, right? But there are some key advantages to blockchain technology:
- Trust in the technology (and not in the individual).
- Transparency in the transaction
- Verification at each point
Whenever something happens, blockchain creates a record of it – and it is added to the chain of prior events. Every point in the network that looks at that record sees the history, without needing a third-party (such as a bank) to verify that it happened. Blockchain is a peer-to-peer verified network of transactions.
Why is it useful? Because blockchain is a general purpose technology. It can be used to track anything from cryptocurrency (Bitcoin and others) to food safety to data storage. And at each stage, because it continues to be verified, all parties involved agree on how the transaction is taking place.
How is it different from current transactions? Most contracts or transactions rely on an independent party to make sure that the terms of the transaction are fair. For financial transactions, this may be a bank or a lender. For contracts, it may be a legal firm. Because blockchain is a peer-to-peer technology, a third party is not needed – the events taking place are checked and recorded at every stage of the process, and the history is embedded in the chain of events.
Who can use blockchain technology? Frankly, almost anyone. There are low barriers to entry in using blockchain technology. But blockchain works best when you need an ongoing history of a transaction. In my next blog, I’ll cover some of the interesting uses for blockchain technology – and why these matter.