Blockchain: What Is It And Why Is It An Important Technology To Watch?
Blockchain is one of the lesser understood technologies that have burst onto the scene in recent years. Because of its versatility and the inherent security features that blockchain demonstrates, many businesses are seeing a use for it. Despite this, few business people understand what blockchain is or how it can affect their company’s bottom line. The understated importance of blockchain makes it a shadowy competitor to better-known technologies like artificial intelligence and Big Data. Let’s explore what blockchain technology is and how it can affect businesses moving into the future.
Defining Blockchain Technology
Investopedia’s concise definition of blockchain technology is that the technology is a decentralized, distributed public ledger. What this means is that blockchain technology is a method of recording data that is saved on multiple locations (termed ‘nodes’) that all members of the connected node network can access for verification.
Each time a record is changed on one system, it is broadcast across the network, and each other copy of the chain is updated. The power of the system comes from the use of consensus – the record is only taken as accurate if at least 51% of the copies of that record on the network agree with each other. The need for consensus gives it an inherently high level of security that scales with the size of the node network.
Applications of Blockchain
Initially, as Forbes mentions, blockchain was a technology that was designed for creating cryptocurrency such as Bitcoin. While this remains its most common use, the blockchain has found popularity in industrial applications as well. Due states that aside from Bitcoin, blockchain technology can be used in the banking sector for things like cross-border goods tracking, background checks for clients, or payroll services. Computer World goes on to show that the blockchain can be applied to other aspects of everyday life, including protection of copyright data, or in distinctly different industries like oil and gas or real estate.
From a business perspective, blockchain offers a lot of benefits to existing businesses. Because of how a blockchain is constructed, there is no way to hide or edit previous parts of the chain. The result is that all information about any transaction on the blockchain is available and traceable. The consensus factor makes it nearly impossible to hack since an attacker would need to impact more than half the available nodes instantaneously to ensure that a false record can be implanted.
These factors make a strong case for the inclusion of blockchain in business, allowing for more reliable record-keeping and easy access to transaction history across the entire length of the chain. Additionally, blockchain allows for the creation of so-called “smart contracts” that enable the system to check that specific criteria are met and then respond appropriately, depending on if outcomes are achieved.
From a consumer’s perspective, blockchain offers valuable ways to interact with businesses and verify the things they are being told is true. Marketing can sometimes lead to people having false impressions of a product, but blockchain promotes visibility and transparency. Business 2 Community reports that 54% of consumers prefer to know more about a product before purchasing it. The blockchain also offers consumers peace of mind by preventing cybersecurity breaches of data or even prevent voter fraud in elections. The applications of blockchain are widespread, and it has the potential to impact many different aspects of life.
The Inherent Benefits Blockchain Offers
As we’ve already seen, blockchain technology gives enhanced security through its consensus system. The improved security translates into a system that promotes transparency, accountability, and traceability. Current iterations of blockchain technology offer a fast and inexpensive way for businesses to implement security that could potentially protect the business’ data.
The most significant improvement that blockchain provides to both commercial customers and consumers is an increase in trust. Because records cannot be falsified, both consumers and producers have to abide by the data on the blockchain. It makes for easier administration of agreements and contracts and even helps to automate contracts to ensure things are done on time.
What are the Drawbacks of the Blockchain?
Most blockchain explanations leave out the fact that the technology still has some flaws. Among the more glaring issues that blockchain displays include:
Complexity: Blockchain is by no means a simple system to navigate. Because of its complexity, it has spawned its own dictionary of jargon, and the average user probably would be lost trying to follow a technical discussion of the technology.
Network Size: As mentioned before, having an extensive network of nodes is key to the security of a blockchain. While the system scales up very well, it does poorly in small scale implementations.
Network Verification Speed: The amount of time needed for the network to verify a transaction on the chain varies depending on the complexity of the blockchain and the number of nodes it contains.
Inherent Flaws: One of the blockchain’s most significant assets could be its most massive flaw. If 51% of nodes on a network agree to a lie, then that lie becomes truth. In smaller networks, this can be an easy feat to achieve, making those systems even more vulnerable to corruption.
The Future of Blockchain
Blockchain technology has advanced significantly from its earliest days. New implementations of the blockchain are already addressing the flaws that the system has and coming up with ways to remedy those issues. While the technology still forms the core of many cryptocurrencies, it has also found itself legitimate application in the same financial sector is was initially designed to disrupt. Entrepreneur mentions that European banks are pushing for the adoption of blockchain far quicker than expected.
Finding a Place in Business
Blockchain’s application isn’t limited in scope. Businesses can implement it in departments such as marketing, data collection and analytics, and even customer service. Combined with other merging technology like AI and IIoT, it could be a formidable tool in a company’ arsenal for securing its data assets and ensuring that all information that passes through the company is appropriately recorded. It may even impact how companies view cloud computing and processing. Blockchain’s problem won’t be finding where it fits in business. Its issue will be trying to inform those in industry why it’s such an essential technology for the company’s future development.