What is a Blockchain?
Blockchain is a different type of database, one that keeps a record of digital transactions, and all the data on those transactions is decentralised. With a traditional database – one belonging to a bank, for example – the data sits in one location.
A blockchain, meanwhile, is built upon a network of replicated databases that are visible to anyone within the network; in the case of a bank the network could be all of its offices or branches.
How does a blockchain work?
Initiating a transaction
Imagine a simple transaction where money is transferred from one person to another over a network. Once key members of the network (i.e. computers) validate this transfer, defining information about it is cryptographically protected and uploaded to the blockchain as a new block.
The new block is timestamped and references the block that came before it, which allows for verification. Should an attempt ever be made to alter this block, parties on the network would be alerted to the change.
The chain and its security
Ever more blocks are added to the chain as further transactions take place. Every member of the network can see who is entitled to what because information on every single transaction is there for the viewing.
As the entire history (or chain) is visible to everyone, a would-be hacker of our original money transfer cannot simply attack that block. It’s all or nothing: to successfully hack the blockchain, every computer on the network would have to be hacked simultaneously and manipulated in the same way. Delete or alter just one block on one computer and the rest of the network will reject it as corrupted and everything keeps humming along unmolested.
Let’s look at the process rendered graphically:
Image source: WeForum.org
Where will blockchain appear?
Although mainly associated with bitcoin, the potential of the blockchain for the financial world is simply enormous.
When contactless becomes powered by blockchain, billions of transactions can be handled daily with higher security and at lower cost. Expect implementation next year.
Central government spending With the origin and allocation of every pound tracked, foreign aid funds, for example, could be traced to their intended result or beneficiary, ensuring none is wasted or siphoned off along the way.
Already trialled by NASDAQ, blockchain paves the way for more secure, accurate trades that are fully traceable.
Outside of finance, applications include the reliable recording of legal contracts, monitoring the fate of raw materials as they flow through the supply chain, and ensuring the reliability and integrity of online voting, which increases voter turnout.
Wherever data can be more thoroughly tracked, and where it can benefit from ironclad security, underpinning it with blockchain can change the game.
At Menzies we use the latest technology to support our clients, from simple apps that save time managing your employee expenses to collaborative software that gives us a window on the growth of your business. Nevertheless we strongly believe that the personal touch is key to understanding how our clients’ businesses really work.
This combination of technology and relationships can ensure that when there is something we can do to help you or your business, you will hear about it. That is #brighterthinking.