As Bitcoin careered towards its $19,000 high in December, another term simultaneously bulldozed its way into the public consciousness — blockchain.
Sure, Bitcoin grabbed all the headlines, but the underlying message suggested that blockchain was the real star of the show, with potential applications that extend far beyond the cryptocurrency craze.
Yet despite the almost incessant buzz, confusion continues to abound when it comes to understanding exactly what blockchain is and precisely what it does. Indeed, many businesses know they should be paying attention to blockchain, but they’re still not really sure why.
So how can they begin to understand whether blockchain holds any value for their business?
The first port of call is to understand the fundamentals that have underpinned its meteoric rise.
Blockchain is a consensus algorithm and a type of distributed ledger that contains unchangeable digital data.
In the most commonly known use case of cryptocurrencies, blockchain typically confirms and stores financial transactions, while making the history transparent for the users.
It is designed to be practically impossible to change the transaction history, thanks to the cryptographic techniques in place.
This means that stored and confirmed information cannot be changed. And due to the high levels of trust, no bank is needed to store or transfer the digital money.
While it’s understandable that some people conflate blockchain with the cryptocurrency movement, completely non-monetary information can also be stored in the closed network.
Shippings, epidemics, elections
That’s because the heightened levels of trust inherent in blockchain mean it is particularly suitable for information about shipments of goods, occurrences of epidemics, or votes during an election, for example.
Other non-monetary examples include any situation where having a shared history of events is desired, such as patent registrations, establishment of digital identities, or a patient’s medical record.
So how does it differ from storing the transactions in a normal database?
A traditional database is owned and maintained by a single organisation.
Data sharing vs data ownership
The blockchain solution is based on sharing the data with other parties.
There is no dominant owner; the blockchain technology itself establishes the digital platform for trust and can act as an independent authority.
A typical question at this point might be: What can blockchain offer my business?
Fast, efficient transactions
The short answer is that blockchain typically leads to faster and less expensive problem resolution, particularly when dealing with multiple players or partners.
It does this by enabling greater transparency and faster access to information.
Without blockchain, probably the strongest member or an independent third-party committee would run a database for all the other members.
But could the other members trust the strongest one?
Wouldn’t that case enable the strongest player to enforce and regulate conditions for all the others?
'No external authority'
So if you’re engaged in a scenario where there is no external authority or it would not be feasible or economical to establish one, blockchain may just be what you’ve been looking for all this time.
Simply put, in such a situation, blockchain itself would become the authority.
The first known use cases have already demonstrated the potential to speed up some particularly complex processes, save costs related to difficult problem resolution, and provide transparency for competing parties that need to cooperate, whereby they can use blockchain as a third-party authority.
Network of computers
However, it’s important to realise that blockchain can’t do all the work on its own; you also need a few other tools — specifically, a network of computers with sufficient storage and power.
But exactly what it’s possible to do with these tools is still not very clear.
Indeed, there are some very new and unintuitive concepts in the realm of blockchain, even if they are built on basic, easy-to-grasp parts that already have some history on the market.
The technology is always evolving and learning “on the go” is very much the norm with blockchain.
What you build with it depends on you and your needs.
While we already know it can act as a substitute for existing or missing authorities, we can also look forward to use cases that would never have even existed without this disruptive technology.
The continuous innovation around blockchain-based solutions will no doubt surprise us every day.
And given their tremendous disruptive potential, those that overlook blockchain technologies today may well find themselves being overtaken by those who didn’t tomorrow.
The columnist is group vice-president and regional managing director for the Middle East, Africa and Turkey at global ICT market intelligence and advisory firm International Data Corporation (IDC). He can be contacted via Twitter @JyotiIDC. Content for this week’s feature leverages global, regional, and local research studies undertaken by IDC.