“The human result of blockchain technology is that it heightens the level of trust we put in sensitive, high-value transactions.” — Kim St Martin, Chief Operating Officer, Blocksource Capital.
You’re likely familiar with blockchain as being the technology that drives the digital currency Bitcoin, and that institutions worldwide and luminaries including Bill Gates and Sir Richard Branson are falling over one another in a race to harness its full potential. But what exactly is blockchain technology, and why is it poised to revolutionise the way we do business?
The straightforward and simplified response is that blockchain is a tamperproof and trustworthy system of recording information.
All respectable banks, credit report agencies, hospitals, and more, keep a ledger or database of accounts, transactions, services rendered, and such. Traditionally, such ledgers can be modified with information added or removed for any number of reasons — some of which may be nefarious. Hence, regardless of the type of transaction you’re dealing with, there is always a level of trust required, with information needing verification through various means. So, when purchasing a house for instance, in a traditional ledger system, it can be very easy for the real-estate or insurance company to alter certain info so that the offer is more attractive.
This need for trust, and consequently, the need for authentication and authorisation, is the reason why we resort to a readily trusted middleman or third party to complete most high-value transactions. We want to know that we are dealing with people who are who they say they are, and we want to be reassured that they can do what they say they can do. We also want to be certain that they have the money claimed, guarantees, etc., all of which, when attributed to a peer-to-peer distributed network, reduces the risk of centralized corruption or failure. This is where blockchain technology comes in, and why it’s so exciting.
Central to a blockchain ledger is a unique and unhackable cryptographic key. The key is provided when a record is written and stamped. When a new record is written, the previous one is added to it and a new key produced, thereby creating a chain of dependency which ensures that everyone can see who wrote a record, and when. If someone in the chain tempers with the records, it is easy to spot who and when immediately in real-time.
In other words, blockchain solidifies the credibility of all the information required to complete a successful transaction. This can be anything from purchasing a home or other high-value item, to trading stocks.
In the increasingly digital world in which we operate, this a huge advancement.
Using cryptography to keep exchanges secure, blockchain provides a decentralized database, or digital ledger, of transactions that everyone on the network can see. This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded.
Trust, authentication, and authorization, vital to digital transactions, are established as a result of the configuration of the cryptographic and transparent blockchain technology.