“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” (Don & Alex Tapscott, Blockchain Revolution, 2016).
In simple terms, a blockchain is a time-stamped series of records which consist of absolute and unalterable of data that is managed by a cluster of computers not owned by any single entity. Each block of data is secured and connected in a ‘chain’ using cryptographic principles, hence the term ‘blockchain’. The blockchain network has no central authority, and is often defined as a democratised system. It is a shared, transparent and immutable ledger, open for anyone and everyone to see, promoting accountability since all entities involved are held responsible for transactions.
A blockchain has an infrastructure cost, but no transaction cost. Information is conveyed from one individual to another in a fully automated and safe manner. When a block is created, it is verified by thousands, perhaps millions of computers distributed on the Internet and is added to a chain. The chain is stored across various trajectories, creating an inimitable record with a unique history with virtually no possible distortion or fabrication. The three main properties of blockchain technology are decentralisation, transparency and immutability.
The use of blockchain in various sectors
Blockchain development was first tried and tested on Bitcoin and Ethereum developers, but the decentralised data structure used in blockchain technology is useful for other industries and sectors as well. The distribution system of a blockchain does not lie in creating multiple authentication layers, but in the distribution. Blockchain ledgers are distributed, encrypted and shared across network users, and results in a network of validation that can be verified, are traceable, and hard to hack.
Smart contracts blockchain can be used to effect transactions in a number of different fields, from processing insurance premiums, legal processes to crowd-funding agreements. They promote compliance and will simplify and automate routine and recurring processes, which often incur heavy costs to banks and lawyers.
Digital voting will benefit from blockchains because its implementation gives voters their fundamental right to vote without necessarily disclosing whom they voted for in a secure manner. More voting security may also attract more voters since confidence in the blockchain system to vet votes may increase.
Storage of information on the Internet through, for example, Dropbox are not immune to institutions that can compel the disclosure of information. On Blockchain, data is decentralised and stored in multiple high encrypted devices on the network which reduces potential data breaches and costs.
Digital identities and identity management
Verifying your identity is essential in online financial transactions. However, identity management is crucial in protecting individuals from the increase in phishing attempts by cybercriminals. Distributed ledgers offer enhanced methods for evidencing who you are, along with the possibility to digitise personal documents. Having a secure identity will also be important for online interactions in the sharing economy.
Audit trails and chain auditing
Distributed and transparent ledgers enabled by blockchains allow the certification of products and claims by companies regarding the authenticity of their product content. Transparency comes with blockchain-based timestamping of a date and location that corresponds to a product number.