The problem with blockchain is that it has received attention for being a disruptive technology that – in actual fact – isn’t that disruptive in itself.
Like most things in the modern world, the majority of the influence & attention directed at Blockchain has come from Bitcoin. Bitcoin’s price is not predicated on any intrinsic value. As such, if you’re interested in getting involved with the space for primarily financial reasons, you need to appreciate the thing that’s powering Bitcoin, which is blockchain.
Blockchain is a decentralization technology which allows computer systems to store & access data across a network of systems, rather than just a single system. The idea behind blockchain was coined in 2008 by a group of software developers, who released the technology as open source in the same year. Bitcoin was built on top of the technology and released one year later (in 2009).
This article is going to examine 3 signs that blockchain could change the world. Of course, the ebb-and-flow of technology is constant, so we need to state that this is NOT a recommendation for any of the current crypto hype, nor is it a justification of the technology-set. We are simply stating the facts around the product, and where it might lead…
What is Blockchain
Blockchain is a database, more specifically a decentralized database.
The premise of blockchain is to provide access to data in a global, decentralized and completely open way. Rather than having to rely on a central provider (such as a bank or application provider such as Google or Facebook), a blockchain network would grant access to ANY data within it.
The trick with a blockchain network is that all the data is encrypted by default. So whilst the majority of the data is openly accessible (because the encryption is not hashed), there are private blockchain databases which are completely sealed off from others. These private databases work exactly as the open variants except their data has been scrambled so the public cannot read it.
The private blockchain databases we’re seeing today are mostly these crypto (cryptographic) currencies. ALL of these currencies are simply encryption algorithms which basically allow certain people to access private blockchained data. Bitcoin is an algorithm – its coins are simply decryption tokens which can be used to unlock & edit the Bitcoin blockchain database. There is absolutely NO premise for it being a currency at all (more in a second).
Quick Guide: What is Bitcoin and How does it works?
The way blockchain works is to create a series of databases known as chains. These chains allow users to add, edit and read blocks of data. The blocks can contain any number of data elements (so for example, files or actual data-driven transactions in XML or JSON format), and thus each time a block is added to a particular blockchain, the data contained within is updated to reflect the latest version of the data.
A great example of how this works is a telephone directory. Telephone directories represent current files on computer systems today – rigid and static. The files have no version of history, and what you see is what you get.
The idea that blockchain espouses is to bring these files into a dynamic paradigm. Instead of the directory being static, it will be classed as a “chain”. Within the chain, a number of “blocks” will be added to ensure the latest versions of all the numbers are listed appropriately. This means that if anyone updates/adds a block to the directory’s chain, all of the updated numbers on all connected systems will update to reflect the change.
This is the simplest explanation. To gain more insight, you have to consider the application from the perspective of the likes of a restaurant (who may want to have a decentralized way to book their tables) or a hotel (who may want to make their room reservation system tie into a public ledger of available rooms).
The real value of blockchain lies not in the technology but its application.
The idea of decentralized apps – which provide peer-to-peer functionality using GLOBALLY accessible data – is the reason so many people are interested in the technology. The whole idea of Bitcoin/cryptocurrencies is mainly a mirage…
You might also be interested: What are Decentralized Applications? Explained in Simple Terms
The REAL Value of Blockchain for Business…
Rather than it being a disruptive technology, it’s best to see Blockchain as a constructive development… especially in the sense that it will resolve the major problem facing digital infrastructure today – DATA INTEGRITY.
The way systems work today is with a central data provider. Be it on a LAN (Local Area Network) or WAN (Wide Area Network), the way it works right now is for a client to download data from a server. The server is responsible for storing and making that data available to the wider world.
The problem with this strategy is several fold…
Firstly, it means that ALL the data is hosted on a single server. If this server is hacked or compromised on any way (especially with the likes of a ransomware infection that we saw in 2016), the integrity of the entire dataset is at risk. This is why server-side security has been such a delicate topic, especially in medical or governmental facilities – as any damage to the data could lead to MASSIVE public upheaval.
Secondly, it means that if you’re a client trying to either access or change this data, there is no public forum which can be used to validate or alter the dataset. Instead, you have to rely on the central provider to either change, or make available the provision to change, the stored data within their system. This is not only cumbersome but can lead to problems.
Thirdly, there’s no way to access the data outside of the realm that the provider determines. For example, a LAN based business network will not any any API’s or web services which would allow users to create applications to access the data stored within. In other words, if members of the business wanted to manage it at home, they would not be able to.
The promise of ‘blockchain’ is to resolve all of these problems.
Blockchain’s open and decentralized nature basically makes data available to ANYBODY who has appropriate access (this is where the cryptocurrencies derive their true value).
However, irrespective of how effective the technology is, the most important thing is understanding its implications in the real world. This is where many investors are now looking, in order to ascertain the monetary value for business use…
Signs Blockchain Will ‘Change The World’
Before proceeding, we need to state that NO technology “changes the world” (well perhaps apart from revolutionary medical drugs or something). The real secret lies in HOW that technology is used.
With the likes of blockchain, the value will come from applications built on top of it. Like how Amazon, Facebook & Google brought people to the Internet, there will be a killer app which brings businesses onto Blockchain.
To determine this, we can use the following indicators:
1. Blockchain is an open source Infrastructure Layer (Very Similar to a Protocol)
The web is a protocol (HTTP – Hyper Text Transfer Protocol) designed on top of TCP/IP (the core protocol which connects computer systems together).
Whilst this doesn’t really matter, what’s important is that the adoption of the protocol was what drove demand for online content, thus ushering in the new Information age.
In other words, it wasn’t the underlying technology which changed the game… it was the way in which it was used. The web simply gave CONTEXT to the explosion in personal computing adoption, allowing everybody to access content they either wanted or needed.
This was important because Blockchain is very similar. The blockchain database network is very similar to the early Internet, in that millions of free data nodes are accessible to millions of computer systems… the big difference – however – lies in how these nodes will be used and accessed.
Much likes the myriad of websites in the dot com boom that never made any money, the rise in crypto coins seems to be built on the anticipation of adoption. Just like the dot com era, we’re seeing rampant speculation with very little by way of RESULTS to back it up.
What this ultimately means is that if there is a company (or killer app) which comes to the fore to power the blockchain idea for businesses, this will be the key to its adoption.
And if it becomes a standardized method of transferring & sharing data, it should change the computing landscape for good (especially in the context of how business networks operate).
2. It’s a Completely DIFFERENT Way To Look At Things
One of the BIG things that changes industries is when a solution comes along that’s COMPLETELY different to anything that’s gone before.
Personal computers were not just technologically revolutionary, but actually did things entirely differently to normal (mainframe) setups. This contrarianism actually drove demand due to the way in which it was obviously different to what had existed previously.
The same can be said about blockchain.
Despite the technology set being entirely free and open source (meaning anyone can change/edit the source code), it’s the way it’s able to do things DIFFERENTLY that counts above all.
3. It Solves A MASSIVE Problem
Crypto mania aside, the main reason why blockchain technology is important is due to the way in which solves the data integrity problem.
As was evidenced over a year ago, the ability to keep data not just secure but accurate is extremely important, and indeed one of the biggest threats to companies today is the loss of data either through hacking or compromise (Wannacry).
The idea of blockchain – if secure – would remove the need for a business to store its data in a central server, or datacenter. This would not only remove their requirement to continually maintain the server-side infrastructure, but also ensure that their staff (of varying degrees of authority) would be able to manage and change the data as required.
When a problem is solved in this way, the moment an economic incentive is provided for a company, they’ll typically find it gets adopted. This may end up happening for the idea of blockchain – the ability to store data in a much more secure, accessible and cheaper way.
This is pretty much what the majority of institutional investors are looking for in the new technology right now.