With all the buzz over Bitcoin millionaires and companies launching their own cryptocurrencies, you may have heard of blockchain technology. But what exactly is blockchain, and what can it do for your industry?
Blockchain is a relatively new technology that facilitates peer-to-peer trades, requiring no centralized authority. Using public databases, this technology stores a chain of 'blocks' containing digital information about transactions, as well as digital signatures that distinguish one block from another.
Blockchain is an append-only data ledger: old blocks are never dropped or deleted, and data is stored chronologically. For a block to be added to the chain, a new transaction must be verified, stored in a new block, and a hash (a unique digital signature) generated for that block. Each block contains its own hash along with the hash of the block before it.
If a hacker attempted to alter your transaction data, as soon as they edited the block referring to your transaction, that block's hash would change. However, the next block in the chain will still contain the old hash and the hacker would need to alter that block as well. But, as soon as they altered that second block, that block's hash would also change and so on. What this means is that it is not worth the effort to falsify a block in the chain because of the enormous amounts of computing power it would take to change all the other blocks.
One far-reaching implication of blockchain is that you don't need to know or trust your trading partner, because you can trust the mechanism of blockchain to verify the seller, the buyer, and the history of the item. This is how blockchain facilitates peer to peer transactions that cut out intermediaries like banks, brokers, companies, and stores.
So who’s exploring blockchain these days?
- The financial industry is interested in using blockchain for cryptocurrencies as well as more traditional goods. Networks like the Ethereum Network use blockchain to support the Ether cryptocurrency, to utilize financial applications that let one borrow, lend, or invest in digital assets, and to decentralize marketplaces. One of the most interesting effects of blockchain is that it allows machines to also be actors in trades. Machines could one day have wallets and place trades based on their own algorithms.
- In energy, people are researching how blockchain could solve problems like allocating power to an electrical network more efficiently. It could also provide consumers with greater control over their energy choices, allowing them to choose sustainable sources.
- For the pharmaceutical industry, blockchain could be used to assure patient confidentiality, thereby making patients more willing to participate in clinical trials. It can also facilitate tracking the movement of drugs from manufacturers to distributors.
- Retailers are looking at using blockchain for payment via cryptocurrency, as well as making their loyalty programs less prone to fraud. Supply chain tracking is another area where blockchain technology can improve efficiency and accountability.
If you're interested in learning about what blockchain could do for your business processes, contact the computer scientists at XorFox for a free consultation.