The Many Faces of Blockchain Technology
Posted on 20 June 2016
“That blockchain, it’s so hot right now!” It seems like everyone is talking blockchain these days, especially due to its incredible potential to revolutionize the world of finance. But what makes this technology so interesting, and is it really useful in other spaces?
What is blockchain technology?
Think of it as ledger storing all sorts of information exchanged and time-stamped on what is called a block. Each new block is attached to every previous block, forming a chain going back to the very first (genesis) block, hence a blockchain (block chain in earlier times) database. Each new block is added to the chain by completing a proof of work (a kind of puzzle), which when completed, timestamps the block. The newly created block is then sent out to the network to be added to all copies of the blockchain.
How secure is it?
The blockchain is a distributed database which is stored over millions of computers over a given network. To create a fraudulent block, would require creating a fraudulent chain that is “longer” (had more proof of work puzzles solved) than the honest chain. This fraudulent blockchain would also need to be updated to all copies of the blockchain in the network, a nearly impossible task. By trusting only the “longest” chain, the self-interest of the users keeps the system secure.
What other applications exist for blockchain?
We’ve seen how blockchain technology creates a trustable, intermediary-free transaction based system, which makes it ideal for the following domains:
- Currency - the most popular example being Bitcoin.
- Payment Infrastructure - as a means of processing Bitcoin payments by merchants.
- Digital Assets - creating assets like stocks, bonds, and land titles and tracking associated transactions
- Identity Management - a digital ID that can be used to log in to sites or digitally sign documents
- Verifiable Data - create a verifiable record of data, file or business process on the blockchain, such as an audit trail for insurance claims or patient health care transactions
- Smart Contracts - blockchain will allow contracts to stay linked with software or digital music such that
- Distributed File Storage - using IPFS (InterPlanetary File System), an innovative protocol for distributed file storage and retrieval, files can be stored, referenced and retrieved using blockchain technology.
This is blockchain in a nutshell and just some of the ways in which this technology can be used. There are a lot of people and companies thinking about novel new uses for it. Blockchain technology seems to finally be hitting its stride and it will be interesting to see what the future holds.
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