Any time a tech innovation reaches the mainstream, it’s accompanied by an intense hope: Could this be the long-awaited answer to all of our problems?
So, naturally, blockchain technology is having something of a moment.
Much of the reason the technology has people so excited is its promise to inject transparency and immutability into any situation, project, or process it’s tracking.
These qualities make it possible for us to imagine a single source of truth: One ultra-secure system that stores every piece of data we will ever need, never forgets it, and makes it available to everyone.
What is blockchain?
Blockchain technology, in its essence, is an unchangeable, shared ledger. Transactions are recorded chronologically and shared publicly.
It’s essentially a mash-up of other technologies, including distributed ledger, cryptography, and proof of work:
• Distributed ledger: A database in which portions are stored on multiple computers within a network. Users have access to only their portion so they do not interfere with the work of others.
Blockchain adjusts this principle so everyone has access to everything, and the entire ledger, from the very beginning to the present, is visible.
• Cryptography: The practice of constructing and analyzing protocols that prevent third parties from reading private messages.
• Proof of work: A system designed to deter denial of service attacks and other service abuses.
Blockchain solutions can have one of two configurations:
Despite its promise and possible opportunities, blockchain still has hurdles developers must overcome if they are to see the technology reach its potential.
• Interoperability. Blockchain technology is likely to come on the scene in multiple formats.
In fact, the technology is still largely conceptual, without defined standards. This leaves the door open for dramatic evolution from its current state.
• Ownership. Even though blockchain is designed to be “open,” someone or something will have to at least develop the platform (in essence acting as the owner).
The technology companies and startups right now racing to be this entity may find themselves coming up against another friction point: eliminating large players from an existing business process value chain.
• A complicated history. Most know blockchain technology because of its relationship with Bitcoin.
Bitcoin operates in an ecosystem that is complex for many reasons: It is permissionless, running on an untrusted and unreliable network, and operating in a highly distributed environment.
To maintain the trust of its users, Bitcoin requires a significant number of people to act as miners. Miners verify and add new blocks of transactions to Bitcoin’s public ledger.
The mining algorithm’s structure creates a lack of confidence and muddies the predictability of how it may evolve over time.
• Integration. How financial institutions, consumers, retailers, agencies, and others will “plug into” a blockchain is a big question mark.
A system is only as secure as the systems connected to it. Before any blockchain technology can achieve wide-scale adoption, it has to present a convincing (and simple) plan for integration that won’t compromise its integrity.
Can blockchain technology really change the world?
Truth is, the world is already changing. While blockchain alone will not tip the planet on its axis, it may very well accelerate change by helping leaders reimagine business models, processes, and solutions.
That said, the latest widgets, gadgets, apps, and platforms, including blockchain technology, must be implemented with purpose.
To learn more, read the full white paper, “Will Blockchain Change the World?”