Over the last 12 or so months, the cryptocurrency Bitcoin has been causing a massive stir. With values going through the roof (and back down), people have been making fortunes as the banking world is turned on its head. But perhaps the real story behind Bitcoin is the technology that underpins it: Blockchain.
At first glance, Blockchain might not look too different to other things on the internet that you are familiar with – Wikipedia or Google docs, for example. Many people write entries of information and a community of users control how this information is recorded, used and updated. No one single user controls the information and it is not the product of a single publisher.
However, looking closer, there are several key differences that make Blockchain stand out. While both run on distributed networks, Wikipedia is built into the World Wide Web using a client-server network. A user with the right permissions is able to edit entries on a centralised server. This centralised server is controlled by the owners who manage the database and protect against cyber threats.
The digital backbone that underpins Blockchain is fundamentally different. Information held on Blockchain exists as a shared system that is continually updated across all nodes. That means that rather than being a centralised database stored in one place that allows access to users, Blockchain is not stored in a single location. Records are therefore kept truly public and easily verifiable. And there is no centralised version to corrupt through hacking, but information stored simultaneously on millions of computers.
In this sense, it is a public ledger. Just as the internet made it possible to freely distribute data online, Blockchain does the same thing for money. The system makes it possible to transfer money across the world by bypassing middlemen such as banks and governments.
By storing information that is not controlled by any single entity and has no single point of failure, Blockchain is transparent and incorruptible.
Attracted by these qualities and the idea of removing the middleman, tech companies are starting to adopt the technology for various other uses than transferring money. Businesses can streamline internal operations, reduce expenses and cut out mistakes. Electronic ledgers are much cheaper to maintain than traditional accounts and they also reduce processing delays.
These opportunities for decentralising and providing flexible and secure operations could be the future of the way companies create products for consumers. As trust in the system grows, more and more of us will be using Blockchain technology. As cybersecurity risks grow and become more serious, the idea of an online ledger system that cannot be corrupted is one that is really gaining traction.
While all the big news at the moment is about Bitcoin, which may or may not be a financial bubble ready to burst, the technology that has grown up to support it could be around for many more years to come.
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