The term “blockchain” has been tossed around a lot in recent years and touted as the new up-and-coming technology – but what is it?
Put simply, it’s a way to store data that’s a lot more secure than keeping it on a centralized server. A “block” is a record of a transaction. Once it’s completed, it’s added to the “chain,” creating a blockchain, or a digital ledger. The “blocks” are then sent to each computer on a network. Most famously, it’s been used to log transactions involving the use of the cryptocurrency Bitcoin, which has no physical form and only exists in the blockchain network.
The decentralized way it stores data makes it nearly impossible to alter the data, and additionally, it’s much harder to steal.
Think of Blockchain Like a Google Doc
Think about how document files are currently sent, writes William Mougayar in a post for Startup Management. Revisions must be made by one person, then sent back to the other person before they can access it. But in Google Docs, they can edit the file at the same time. Blockchain allows for multiple people to edit a transaction simultaneously.
“The blockchain as another kind of database is a popular analogy,” Mougayar writes. “In reality the blockchain doesn’t disrupt databases, but it disrupts how databases get synchronized between each other.”
For example, banks could benefit from this strategy. Currently, transferred funds are kept by the first bank until they can confirm the second bank receives it. If they used the blockchain, they can access the transaction at the same time and within the same database, giving them a single set of records to review.
Blockchain Can Protect Intellectual Property and Assist in Manufacturing
Blockchain doesn’t just store financial records. It can store anything of value, according to Harvard Business Review. A two-year research project revealed evidence that the blockchain could influence the business, government and society sectors as well.
Additionally, the blockchain could serve to protect and maintain intellectual property. Through transactions, artists could send digital art to a purchaser and only those two parties would be able to see the transaction and add to it. It could serve to protect the artist’s digital rights, and aid in preventing digital piracy of music, movies and any other media.
Blockchain allows users to store any sort of metadata, which can decrease current limits on manufacturing processes and give buyers and sellers an easier way to build contracts in an open market. The Internet of Things could also benefit from blockchain usage, as the devices will need secure ways to store transactions between companies and users.
How Blockchain Affects Cybersecurity
Since Bitcoin’s inception, the blockchain it uses has withstood any kind of cyber attack. Large corporations like Lockheed Martin have begun using it as a way to bolster their cybersecurity, according to a company press release.
“These new cybersecurity approaches will enhance data integrity, speed problem discovery and mitigation, and reduce the volume of regression testing, which results in reduced schedule risk,” said Lockheed Martin’s vice president of aeronautics’ engineering and technology in the press release.
The company Lockheed Martin chose to work with, Guardtime, is a data security startup. They created a “keyless signature infrastructure” that uses encryption and a cache of public keys. In 2016, the company secured all the health records of Estonia.
So how does it increase security? By eliminating human error, according to Forbes. The digital ledger takes away the risk of one single failure point while providing privacy from beginning to end with a convenient user experience.
Every transaction is also traceable, meaning all computers on the network can see who is doing what and when. Each party on the blockchain can be tracked through their computer’s IP address, giving users transparency and a security level conducive to creating a system of trust.
Does Blockchain Have a Downside?
Like any form of technology, blockchain does bring some cons with it.
The technology may have an impact on the environment. In 2017, it took as more energy to run the Bitcoin network than Ireland and 158 other countries, reported a UK study by PowerCompare. As of November 20, 2017, Bitcoin’s annual energy consumption was 29.05TWh – around 0.13% of the total electricity used around the world. If it were a country, it would be 61st in the world in terms of power usage. In fact, if its usage continues to increase at its current rate it will use all the world’s electricity by February 2020.
Another issue is the lack of regulation. Legislators have yet to create laws about blockchain usage, which has created an environment conducive to those taking advantage of others. An alleged Ponzi scheme called Onecoin recently took millions from investors who thought they were investing in something similar to Bitcoin.
Blockchain transactions can also be very slow compared to traditional transactions. Because they are encrypted, it takes time to process each transaction – in some cases, several hours to complete compared to the instantaneous use of a debit card.
As blockchain continues to grow and evolve, these issues and others are something that organizations will have to consider before implementing this system.