There’s been an increasing amount of buzz around blockchain technology lately, and people are more interested than ever before. “A new technology that functions as a distributed ledger within a decentralized network and promises greater security, lower transaction costs, etc.” is usually how it’s described. But what does all of this really mean?
What is Blockchain? In its simplest form, Blockchain is a digital ledger (consider the general ledger your organization’s finance/accounting teams use) that stores information across a network of computers. It stores information in batches called “blocks,” that are linked together in a chronological fashion, similar to a chain of blocks. This information can be virtually anything, but try imagining it in terms of a financial transaction, since that’s probably the easiest to visualize.
To illustrate, here’s what happens when you make a purchase: Imagine purchasing new software online from Microsoft (for illustrative purposes only). The block would store the date, time, and dollar amount of your purchase. It would also log information about who is making the transaction. For security purposes, your name would be recorded as a unique “digital signature,” more like a username instead of your actual name. Once your block has been verified and added to the blockchain, it’s assigned a “hash,” a unique code that allows it to be identified among any other block.
What makes Blockchain so different than the other technology we have available?
How are transactions on blockchain verified? Blockchain networks use “consensus models,” tests that require users to validate/prove themselves before joining the network. A popular cryptocurrency you’ve probably heard of, Bitcoin, uses a model called “Proof of Work.” In this system, when new transactions occur in the network, complex computational math problems are assigned. At this point, all computers in the blockchain network rush to solve the problem; once a user’s computer solves a problem, he/she becomes eligible to add a block to the blockchain. They also receive a reward, a number of Bitcoins (newly created and added to the network for growth purposes) to compensate for the significant amount of power and energy it requires. As blockchain is adopted for more purposes, more consensus models will arise.
How can blockchain be applied in real-world scenarios?
We are still in the beginning stages of blockchain, but it has incredible potential to disrupt our industries, creating opportunities to innovate and grow. To learn more about blockchain and how to it can revolutionize your organization, visit www.doblerconsulting.com or call us at +1 (813) 322-3240 (US) /+1 (416) 646-0651 (Canada).