Blockchain is best known as the technology behind the cryptocurrency bitcoin -- a digital currency whose value soared above $19,000 in December 2017 before slumping to half that less than two months later. But there’s more to blockchain than fueling an investment bubble. The technology has the potential to disrupt more facets of our lives than perhaps any other technology.
Here’s what you need to know about what makes the technology so revolutionary and how enterprises will use blockchain to make data more secure.
Blockchain Fundamentals - Four things you need to know
At its’ most simplified, a blockchain is a continuously updated list of all transactions. Each transaction is called a block. Put multiple blocks together you get a chain. Blockchain. Simple right? Now it gets fun.
The first key to blockchain technology is that is it decentralized. This means that instead of being stored in one centralized server, that list of transactions is distributed across multiple computers. Each computer has its’ own copy of the list. When another transaction is added to the list (or when another block is added to the chain) all the computers in the network must accept that transaction and synchronize their version of the list so that it is the same as all the others on the network. That decentralization and synchronization means no single party controls the data.
Cryptography also plays an important part to the technology. Each party that wants to add a transaction to the blockchain has a digital cryptographic key, a secret value used by a computer to encrypt and decrypt messages. One digital key ensures that only the owner of that key can add a transaction to the blockchain involving their own assets, and another digital key lets others confirm that it was really the owner who added the transaction. In this way, the blockchain can help parties in a network who do not know each other to transact together.
Another fundamental part of the blockchain relates its resistance to tampering or other changes, otherwise known as immutability. Blockchain uses a cryptographic concept called hashing, which reduces data to a bunch of seemingly random characters. Change one small piece of the data and the resulting hash is completely different than the original, making it very easy to identify red flags in the data. Blockchain links hashes together when new blocks are added to the chain. This makes it impossible for a hacker to alter an old transaction because the resulting hash would “break” the chain in a very obvious way.
Mining is the final piece to the blockchain puzzle. It is the process by which new blocks are added to the chain, and by which transactions are confirmed to be real or fake. When multiple parties announce transactions on a blockchain network, computers on that network will “race” to solve a complicated mathematical puzzle based on those transactions. The first computer to solve the puzzle will announce to the network, and the other computers on the network will then verify that none of the assets in the transaction were already used. If the transaction passes this test, then it is made a permanent part of the chain.
Blockchain for the Enterprise
The distributed and secure nature of the blockchain will disrupt many industries from healthcare, to banking, to supply chain management. The technology could be applied to almost any form of record-keeping, agreement, contract, or register, especially where security and auditability of transactions are important.
Banks were some of the first to embrace blockchain. Accenture has estimated that the biggest investment banks could save $10bn by using blockchain technology to improve the efficiency of clearing and settlement. One of the best-known examples of this restructuring is the Australian Securities Exchange, who has shifted much of its post-trade clearing and settlement on to a blockchain system after years of extensive testing.
Verification of identity is vital for many industries and governments. Banks have been trying for years to set up a shared digital utility to record customers' identities and keep them updated. Verifying customer identity is also vital for airlines, call centers, and ecommerce. The UN and Microsoft teamed up to develop a blockchain identity system for people with no identity papers. While companies like ShoCard have developed identity platforms on the blockchain for travel, call center verification, and age verification.
The Farm-to-fork movement has been an unexpected success story for blockchain. Many big food retailers, like Wal-mart, are exploring ways to apply blockchain to bring verifiability and greater safety to their food supply chains. Food supply chains are a complex network that spans farmers, brokers, distributors, processors, retailers, regulators, and consumers. With all participants on the same blockchain the food giants could simplify their supply chains with automatic tracking of important information, such as temperature and quality of goods, shipment and delivery dates, and safety certifications of facilities. They could also more easily find the origin of contaminated food products and eliminate them. End consumers would then be able to verify that the goods they purchased were handled safely throughout the transport process.
Blockchain technology will not solve all the security and authentication issues surrounding digital data and transactions, but with players like Microsoft, IBM, and Samsung dedicating serious resources to the blockchain our data will be much safer going forward.
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Mandie Holmes is part of the Open Innovation Team at Samsung SDS Research in America(SDSRA). Mandie drives strategy projects to foster innovation and to identify the “next big thing” for Samsung SDS. Based in Silicon Valley, she focuses on AI, blockchain, cybersecurity, data analytics and fintech. Prior to joining Samsung, Mandie was an early stage tech investor in Boston. She holds a B.S. from the Massachusetts Institute of Technology and a M.B.A. from Simmons College.