Why are we talking about Blockchain?
Updated: Dec 30, 2018
A solution in the absence of trust to supply chain issues
Let's get this out of the way now: This is not new and this is not a fad.
Ledgers have been used for double-entry book-keeping since the 13th Century, even the use of a shared distributed ledger is relatively dated (ok not centuries, but it is as old as the commercial use of the internet) - The first work on a secure chain of blocks was discussed the Journal of Cryptology in 1991.
Move forward to 2008 when the first distributed Blockchain was proposed by the anonymous Satoshi Nakamoto and implemented the following year as the underlying mechanism for the digital currency Bitcoin, where it serves as the public ledger recording all transactions.
Please do not get Bitcoin confused with Blockchain. Bitcoin is an application built on the principles and foundations supplied by the distributed ledger technology of the blockchain. The Blockchain is quite simply an operating system for development of applications of which Bitcoin is the first, most noted and most controversial. Bitcoin, however, works as a proof case for Blockchain efficiency in that it shows outdated methods of transacting to be expensive, slow, vulnerable to errors (deliberate and accidental) and inefficient in the duplication of efforts to record transactions.
The Blockchain enables software to be written which dramatically increases the speed and simplicity of handling verified transactions at the scale and speed required to support a global payment network. Bitcoin is one example of such an implementation.
Blockchain allows mildly mistrusting parties to collaborate and share a ledger they can both trust.
It is most simply defined as an immutable ledger having the potential to be the technology that refines and redefines many business processes bringing speed, disintermediation and trust to them. It improves trust in a business relationship and reduces the need to trust delivery, as trust is baked into the very fabric of the system
The Blockchain is named thanks to the way that it stores information - in blocks that are linked in order to produce a chain. Voila! Blocks record and confirm the order of transactions at the time they are conducted into the network, governed and verified by rules set by its participants and the design of the software in question. It is essentially a shared database, but with benefits reaching far beyond traditional DB systems
Blockchain evolved out of the need for a cost-effective, efficient, reliable, fast and secure system for recording financial transactions and tracking assets (Assets can be tangible - products, cars, houses and intangible - IP, copyrights, branding, and anything of value)
Blockchain resolves some limitations of existing systems including:
- Cash : Limited usefulness to local transactions
- Error-prone transactions
- Human Error
- Malicious attacks
- Transaction to settlement lag
- Need for 3rd party verifications
- Intermediary layer inefficiencies and cost layering
- Duplication of roles
- Limitations of financial product access*
- Increasing rate of users coming
- Increasing load of transactions needing processing
* (51.7% of the world has access to the internet, and 39% of the world doesn’t have access to a bank account)
The volumes of transactions are growing globally at staggering rates as more people come online - putting increasing pressure on limitations of existing mechanics and growing pains such as this exacerbate existing problems - hence the need for the inefficiencies of the above issues to be addressed.
Further stress (and opportunity) being applied with respect to existing models for transaction, which can indeed be resolved by Blockchain attributes
Blockchain attributes not found in existing ledger transactions
Multiple verifications as to the origin and ownership changes of an asset over time
If Party A transacts with party B, both parties can see the details of the transaction. Party C can see that A and B have transacted but cannot see the details of asset transfer, only that an asset has been transferred
Multiple agreements to the validity of transactions
Permissions can be set for user involvement - driving enhanced privacy, increased operational efficiency and improved audit accuracy
A tamper-proof ledger after recording, all transactions are visible
A single shared ledger allows multiple identical references to completed transactions and asset ownership
For businesses, a Blockchain brings the following benefits
- Time Savings
Transaction times can change from days to minutes without central authority verification
- Cost Savings
Less oversight required on network - it is self-policing
- Improved Efficiency
Reduction of intermediary requirement. Users can exchange assets directly
- Security improvement
The Blockchain offers defence from fraud, tampering and cyberattack. Permissions are set for member access
Business can be set up to operate on the Blockchain with the use of Smart Contracts - agreements of a set of rules to govern transactions.
Contractual clauses can be created that will be partially self-executing and fully self-enforcing to ensure that the intended purpose of the contract is fully met across the intermediaries needed to deliver advertising campaigns.
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Originally written for LinkedIn by Adam Hopkinson November 2017