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You’ve probably heard the word “blockchain” before. Maybe it’s been mentioned in relation to things like cryptocurrencies, NFTs and the metaverse… It’s actually been around for a while, but it’s one of the most exciting technologies to watch for the years ahead.
So, what exactly is blockchain technology?
In this brief introduction, we explain the basics of blockchain technology and how it can help businesses of all sizes, all over the world. Let’s take a look.
In this article:
- What is blockchain?
- When did blockchain technology start?
- How does blockchain work?
- What are the benefits of blockchain?
- How is blockchain being used?
1. What is blockchain?
Blockchain is simply a shared, unalterable method of recording transactions and keeping track of assets. It’s a system of recording information that’s extremely difficult (and near impossible) to cheat or hack.
These assets could be something physical, for instance a house, land or cash. They could also be intangible assets, things like intellectual property and branding. Essentially, anything of value can be traded and tracked on a blockchain network.
It’s called blockchain because each “block” in the “chain” contains a number of transactions. These permanent and tamperproof blocks are added in a sequential order (what’s called the “hash”).
Each time a new transaction happens on the blockchain, a record is added to every participant’s ledger. Each computer in the network keeps a copy of the ledger, so there’s no single point that can be changed or removed.
These decentralised records (managed by multiple individuals) are what’s known as “Distributed Ledger Technology” (DLT) or a “peer-to-peer” (P2P) network.
2. When did blockchain technology start?
The roots of blockchain go all the way back to 1991, when Stuart Haber and W Scott Stornetta published an article describing a secure chain of blocks. The idea stuck around, with several computer scientists working on ideas for cryptographic secured chains and ideas on how to implement them.
Blockchain was born in 2008, instigated by the anonymous person (or group) behind the cryptocurrency bitcoin. Operating under the pseudonym of Satoshi Nakamoto, they released a white paper in 2008 describing the blockchain model.
The initial code launched in 2009, when Nakamoto used the first blockchain as a record for bitcoin transactions. By 2014, blockchain technology was separated from bitcoin – enabling its use across other industries and applications.
Today, governments, charities and businesses of all sizes use blockchain for a whole host of things. This includes (but isn’t limited to!) property, voting, fitness trackers and even vaccine distribution.
So, how exactly does all this work?
3. How does blockchain work?
There are three major elements to blockchain technology:
As each transaction happens, it’s recorded as a block of data. This means there’s a permanent record of any asset that’s been moved – whether tangible (i.e. products) or intangible (i.e. intellectual property).
The data block records whatever information you choose. This could be who, what, where and when – as well as monetary value and even the condition of goods (for instance, the temperature of a food consignment).
Connecting the blocks
It’s really important for blockchain technology that each “block” forms a “chain” of data – connected to the ones before and after.
This means the blocks record the exact sequence and time of transactions. Because they link securely together, this prevents any blocks being altered, removed or inserted between two pre-existing blocks.
An unalterable chain
With each block that’s added, this strengthens the verification of the previous block. As a result, this increases confidence and security of the blockchain as a whole and ensures its key strength – permanence.
As transactions are blocked together, this removes opportunities for tampering and creates a record that all network members trust.
4. What are the benefits of blockchain?
So, why is blockchain technology important?
Well, the key word is trust. Because blockchain operates with decentralised technology, it’s run by the people actually using it. Users are assured they’re receiving accurate and timely data.
These records are extremely difficult to fake, hack or alter, which means people trust in the value of their assets. What’s more, you can be confident that any confidential blockchain records are shared only with other network members you’ve specifically granted access.
Here are just a few other benefits:
Enhanced information sharing: businesses, no matter how large or small, rely on information. The faster information can be shared, and the more accurate it is – the better. Blockchain is ideal for information sharing because it provides shared, immediate and transparent data. This means it can be used for things like tracking orders, customer payments, warehouse stock and production levels…
Increased security: blockchain technology provides consensus on data accuracy. Every validated transaction is immutable because they’re recorded permanently. This means that even system administrators can’t delete records. Unlike traditional record-keeping, which is vulnerable to cyberattacks and frauds, blockchain allows for trusted data verification.
Improved efficiency: businesses often waste time and money on things like duplicate record keeping and third-party validations. Blockchain technology can improve a company’s bottom line, with opportunities for new efficiencies. To help speed transactions a “smart contract” (essentially a set of rules governing transactions – for instance, terms for when travel insurance is paid) can also be stored on the blockchain.
5. How is blockchain being used?
Today, in addition to bitcoin, there are more than 10,000 cryptocurrencies running on blockchain technology. And while blockchain began life as a way of recording cryptocurrency transactions, there are so many other potential uses.
Companies such as Walmart, Pfizer, Siemens and IBM have all incorporated blockchain into their business practices. For instance, IBM created a “Food Trust blockchain” to trace food products journeys. This means, if contamination issues (for instance, E. Coli) are found, it’s easy to track food products all the way from origin to delivery. It’s already used by companies such as Golden State Foods to trace goods and quality throughout their supply chain.
Healthcare providers are also using blockchain technology to securely store medical records. When a patient’s medical record is created, it can be written straight into the blockchain – which gives patients confidence their records can’t be changed or tampered.
The property market is another massive growth area for blockchain. Property purchases are some of the largest and most important transactions we ever make. Anyone who’s gone through the process will know how time-consuming and cumbersome the process can be. Instead of physical deeds and local recording offices (prone to human error), blockchain eliminates the needs for physical files and scanned documents. It also generates trust that ownership and deeds are stored, verified and permanently recorded on the blockchain.
West Virginia even tested blockchain technology in the 2018 US midterm elections, using it to eliminate potential for election fraud. This also reduced the number of staff needed for counts – providing almost instant results. Various other countries performed similar experiments, with e-voting technology rapidly developing around the world.