Blockchain technology is responsible for massive technological advancements in nearly every industry, yet the question on everyone’s mind remains: What is it?
Blockchain is a distributed accounting ledger that transmits information publicly while keeping the identities associated with each account private. It is a highly secure way of storing and quickly transacting data.
With this technology, information can only be added to an existing registry; previous information, grouped into blocks, cannot be changed or deleted. Using cryptography, new blocks must be confirmed by each previous block on the ledger before being added. Unless a new block meets the exact specifications set by the previous blocks, it will be rejected.
Blockchains are driven by the consensus of thousands of computers around the world, called ‘nodes’. Each node contains a complete copy of the blockchain. When a new block attempts to join the chain, it must execute a cryptographic problem. If the rest of the blocks on the ledger confirm the solution, the new block will be added.
This required consensus prevents what is called “double spending” of cryptocurrencies—using one digital coin for multiple transactions before the accounting ledger registers transfer of ownership to another party. If the blockchain recognizes that the coin has already been used, it will reject any other transactions associated with it.
Because the ledger is decentralized and shared across the globe, no single entity can control the data contained on the blockchain. In contrast, traditional databases often retain information at a single location. Breaching a centralized database allows a hacker to access and tamper with all of its stored information. Under the decentralized architecture of blockchain, a hacker would need to breach a majority proportion of computers connected to the network. This democratic mechanism makes the blockchain secure.
Diverse applications of blockchain technology include:
Financial transactions: While you may not be familiar with blockchain, you have probably heard of its most popular application: cryptocurrency. With the rise in value of Bitcoin, investment and interest in cryptocurrencies sky-rocketed in recent years. The anonymous, secure, and fast-processing nature of blockchain made financial transactions the perfect candidate for its use.
Preventing voter fraud: Blockchain has the ability to create a vote-counting system that is immune to outside tampering. Because information previously added to the blockchain cannot be edited, election results cannot be altered by internal or external sources. Also, remember the “double-spending” problem? Before a vote can be added to the chain, it must be verified by the rest of the network. If a voter has already cast a ballot, any additional votes by that person will be rejected.
Healthcare records: Around the globe, people are plagued with scattered and incomplete medical records, especially in areas of political or economic turmoil. By storing medical records with blockchain, this information becomes available anywhere in the world without the risk of being tampered with or lost.
Supply chain management: Today’s supply chains can be incredibly complex. Blockchain creates an accurate, public ledger of the transfer of goods and their related transactions. Even the most difficult supply chains – involving hundreds of workers and multiple countries – can be managed with transparency and efficiency using blockchain.
Blockchain can quickly and securely transfer and store massive amounts of information. It is poised to revolutionize nearly every industry and impact daily life around the globe.
Meet the Author
Nathaniel Thoreson is an intern with the NDSU Center for the Study of Public Choice and Private Enterprise and the director of communications and co-founder of Webblen. He is studying marketing, political science and a certificate in sales at NDSU. The views expressed in this article belong to the author.