In recent months there has been a great deal of talk about the underlying technology of Bitcoin, blockchain, and its potential to be a huge disruptor. It’s potential uses are cited to be inumerable, with entrepreneurs and forward-thinkers from any and all sectors finding ways that it could be utilised in their area.
But what even is it?
Well, blockchain is almost like an extended and linked database. Many of us have heard of Bitcoins and cryptocurrency. Blockchain is basically a ledger of records grouped together as batches of data called blocks. These use cryptographic validation to link themselves together. Each of these blocks references and identifies the previous. This forms an unbroken chain. With us so far?
Probably not. To simplify it even more, blockchain is like a database that validates itself. What makes it different to other databases is that it exists in multiple locations at one time – it’s said to be distributed across these locations, in multiple locations, so that anybody can maintain a copy of it. Meaning that nobody can tamper with the records.
Accessed from anywhere within the chain, a blockchain will be able to see any and all previous transactions, and when new transactions are added, they are done so irreversibly, and so become another previous transaction that remains on the chain permanently.
A permanent, transparent database existing in multiple locations
If you are still with us, hopefully you will begin to see that a blockchain is effectively a tamper-proof, permanent, community controlled and shared database. Another term for a blockchain is a multiple distributed ledger, or MDL – something which has been around since 1976. So why the change of term? Well, read on.
That’s where the Bitcoin bit comes in
Bitcoin simplified the traditional MDL into the blockchain that we see today – and that everybody is raving about. Bitcoin’s nature as a currency maintained by a community and owned by nobody made blockchain ideal. Through blockchain, Bitcoin was able to be labelled secure, permanent and always trackable.
Where and why would we use blockchains
Simply put, blockchains can be utilised in any instance and in any sector where trust is hard-founded. As a registry within a sector, a blockchain would provide complete and total clarity looking backward for regulators and auditors, simply because all data within it is immutable and permanent.
And it’s not just for the financial too. Blockchains could be ideal as an audit-trail for pretty much anything.
That’s what blockchain is.