Wouldn’t it be great if you could be well-informed on every cutting edge technology topic? Well…it’s not going to happen. There are too many trends, hot topics, and buzzwords flying around. Technological progress is made continuously, which in part, is why I find technology so exciting, but it’s ultimately the reason why we have no hope of keeping up.
That said, there are emerging technology trends that are particularly compelling that haven’t yet reached the ubiquity of “Big Data” and “Internet of Things.” You may have heard some of them mentioned or read about them on a tech blog, but you may not be familiar enough to have a conversation about them.
That’s where I want to help. My aim is to write an occasional series of blogs dedicated to technology topics that are on the cusp of trendiness. Today’s topic is “blockchain.”
Where have I heard that before?
The most common place you’ve likely heard about blockchain is in relation to BitCoin, a virtual currency that emerged under mysterious circumstances back in 2009. BitCoin is referred to as the first “cryptocurrency” and it relies on blockchain technology to act as a secure, decentralized ledger that keeps track of who owns what. This ledger makes sure that only one person owns each BitCoin at a given moment, and that you can’t send the BitCoin to multiple parties at the same time, thereby creating unauthorized copies.
So what is it?
The name “blockchain” is named for the way the data is structured. Not surprisingly, it is a chain of data blocks. These blocks contain batches of some kind of valuable data, like a financial transaction, and additional data that is used to verify the contents of the block and connect it to the previous block in the chain.
A key feature of the blockchain is that it is decentralized, in other words many computers in a large network all have copies. This is important because it means there is no centralized, master version to hack or bring down like you’d see in more traditional systems that are centered around a database. Each computer in the network can also independently verify the blockchain and add new data.
To illustrate the concept, let’s think about BitCoin. Imagine you have a BitCoin and you want to send it to someone else. The person receiving it wants to make sure they own it, and that you aren’t going to try to also give it to someone else. To accomplish this, BitCoin uses a blockchain as a ledger to track ownership of each BitCoin.
Here’s how it works:
- The original BitCoin owner decides to send it to a recipient; a transaction is created that is batched with a number of other recent transactions into what’s called a “block”
- That block is sent to all of the other computers in the blockchain’s network
- Each of those computers use some fancy cryptographic algorithms to verify all of the transactions in the block
- Once the block is verified, it is added to the blockchain and is then given a timestamp and has a “hash” calculated for it that acts as a digital fingerprint for both the contents of the block and a reference to the block before it; this connection to each previous block is important because it means you’d have to simultaneously hack the entire chain in such a way that no computer on the network catches you (nigh impossible)
- The transaction is forever part of the blockchain and the recipient owns the BitCoin
What are the drawbacks?
Although blockchains are inherently very secure, there are still vulnerabilities that must be considered. The most well-known attacks have been related to BitCoin theft. The Tokyo based Mt. Gox was attacked in 2014 and $460 million in BitCoin was stolen. Another exchange called Bitfinex was robbed of $72 million in BitCoin in 2016. In the Bitfinex case it wasn’t the blockchain itself that was compromised, but the digital wallets that are used to secure the transactions.
Blockchains also require large amounts of computing power to verify the transactions. Each computer on the network isn’t participating out of the goodness of their hearts, instead they get some type of small payment for their service, which makes the operation of the public blockchain possible. The more computers you have verifying transactions, the more secure the blockchain is. There have been questions raised about the security of private blockchains used by some financial institutions since, by design, there are fewer participants in their network, meaning that there are fewer “eyes” keeping tabs on the blockchain.
Why should I care?
Blockchain has been around for several years so it’s not exactly new. You should care about blockchain because it is a hot area of research in academia and corporations alike, and you’ll likely see it even more in the future. The use cases for blockchain are expansive and exciting:
Considering its roots in BitCoin, the use of blockchain in other types of financial transactions seems like a no brainer. We rely on financial institutions to secure and verify our transactions today, so the thought of replacing them with a decentralized blockchain would be highly disruptive to existing players. As a result, financial institutions are trying to get ahead of that by figuring out how to incorporate blockchain into their businesses. Visa, MasterCard, Goldman Sachs, and many others are all working on their strategies.
Grammy Award winning musician, tech maven, and one of my favorite artists, Imogen Heap, is leading the way in the use of blockchain in distributing digital music. Her project, Mycelia, is working towards “fair trade” distribution of music. Blockchain allows for a comprehensive record of music ownership, which is simply not available today. It also allows you to pay for what you want to do with the music. For example, it may cost one amount to own a song for personal use, but another price to sample it for your own song. It also allows for royalty payments to go directly to the artist, writers, engineers, etc. that worked on the song or album. This use of blockchain has the potential to add transparency to purchasing and disrupt the relationship between music labels and artists.
Paper ballots have long been seen as the gold standard for recording and tabulating votes being that paper is essentially immune to hacking. A startup called Follow My Vote is looking at blockchain as a viable, higher-tech alternative. Unlike paper ballots that can be lost or destroyed, votes stored in a blockchain are effectively immutable and can be validated in a very transparent way. This kind of technology could make voting less expensive and easier for voters by enabling you to vote at home or on a mobile device.
Where can I learn more?
The Impact of the Blockchain Goes Beyond Financial Services – HBR
How Blockchain Is Changing Money and Business – TED Talks
Are you ready to dazzle your friends with your knowledge of blockchain? What technology topic would you like to know more about next? Let me know in the comments below.