- The emergence of blockchain technology
as an important instrument of change itself,
is somewhat of a surprise, since its primary function,
to enable cryptocurrency,
was supposed to be its defining purpose.
Blockchain, or distributed ledger technology, DLT,
came to life as the technology backend
of the cryptocurrency, Bitcoin, in 2009.
Bitcoin requires a database
of validated and secure transactions.
These transactions must be immutable
and easily associated with owners.
For example, if you currently own five Bitcoins
after series of currency purchases and trades,
each of those transactions must be tied to you
in order to resolve to your account total.
The database stores the transactions in blocks of data
in sequence, a chain, so to speak,
where each new block is dependent on the previous block.
Fundamentally, this is the technology,
A database called blockchain.
In the first few years after the emergence of Bitcoin,
blockchain technology was relatively unknown.
However, there were properties of blockchain technology
that made it appealing outside the domain of cryptocurrency.
Innovators discovered that the very qualities
of distributed ledger technology
that made it perfect for insuring the integrity of Bitcoin
meant it could be used as a way to store all types of data
in a more secure and validated manner.
This would only be the beginning of its rise to prominence
as a new disruptive technology.
While traditional structured and unstructured databases
have served us well for several decades,
they do have some fundamental security weaknesses.
These include issues with account administration
and ensuring only the right people
have access to certain data.
Innovators have worked hard to plug these gaps,
but challenges persist that,
until distributed ledger technology,
have not been elegantly addressed.
Unlike traditional databases that use authentication
to permit specific rights,
distributed ledgers, DLTs,
use a consensus mechanism to enable permissions.
This consensus mechanism ensures
that only transactions allowed
by predetermined rules can take place.
It also provides the assurance
that a transaction is associated with a specific person.
To make this real a DLT can ensure
that a digital-based real estate transaction is authentic,
and as it moves between stakeholders
it retains its integrity.
A DLT can ensure that a vote over the internet
is, in fact, authentic,
and associated with a specific individual.
The inherent design of blockchain technology
makes fraud and transaction manipulation,
something common in traditional databases,
remarkably tough and near impossible.
DLT can be used for a massive variety
of digital transactions and database stores:
from supply chain, to financial services, government,
retail, and the internet of things.
This technology is finding a home
in solving all types of challenges
and creating new opportunities.
DLT becomes even more valuable
when complex rules can be codified
into the blockchain database.
Known as smart contracts,
these block chains not only facilitate data management,
but can trigger events
based on certain conditions being met.
What we're talking about here
is the idea of distributed applications, or DApps,
as they are known,
that can execute all types of actions
independent of checking in on a central server.
The code base is distributed among users and devices.
This creates enormous efficiencies
and also eliminates the bottlenecks and redundancies
of traditional hierarchical systems.
Let's look at medicine
that is required to be kept at a certain temperature
as it's transported.
It can be carried in internet-connected
blockchain-enabled packages.
If conditions change,
a smart contract may be programmed to send a notification,
or perhaps raise or turn down the temperature.
These actions can happen locally and with full integrity.
Blockchain technology eliminates our need
to rely on traditional trust.
We call this a trustless system.
This increases transaction integrity,
and eliminates the need for brokers
and other third party mediators.
If the possibilities of DLT are maximized,
it has remarkable capacity
to disrupt all manner of business models.
It may force us to rethink
the very nature of the centralized organization.
For sure, it will create new ways of conducting business.
If you'd like to learn a lot more
about the enormous potential for blockchain,
feel free to check out my courses
on blockchain technology.