What Blockchain Means (Hint: Not Just Bitcoin), and Why You Should Care
If you haven't been paying much attention to blockchain — the distributed database technology made famous by Bitcoin — it's time to start.
Here's an overview of what blockchain is and why it matters now.
Introduction to Blockchain
Blockchain is a method of keeping track of transactions through a distributed database (sometimes also called a distributed ledger).
The basic idea is this: Every time a transaction happens or a new piece of information is acquired, it is recorded in a database that a network of people can store and access.
Once data is added to the distributed database, it can't be erased.
The distributed nature of the database is blockchain's killer feature.
Because the database is distributed across a network, it is highly transparent.
No one can modify the database without his change being discovered by everyone else on the network.
This prevents fraudulent activity and mitigates the risk of security attacks.
There is no central database that hackers can exploit, and no centralized authority with unilateral power to decide what information is in the database.
Blockchain became famous with the launch of Bitcoin, an open source online payment system that relies on blockchain to record payment activity.
But Blockchain is about more than just Bitcoin.
Things to Know about Blockchain
On that note, here are the things you should know about blockchain:
- Bitcoin is only one of many examples of blockchain technology.
- Blockchain is a concept, not a specific technology or piece of software. There are many possible ways to implement a blockchain.
- So far, blockchain has been used mostly in relation to payment transactions. But its uses are not strictly limited to payment processing. A blockchain database could also be deployed to record identities, data storage and more. Projects like Onename and Storj are examples of this.
- Blockchain is increasingly popular within mainstream industries like financial services. Banks, like Goldman Sachs and Bank of America, are now investing in blockchain technology. That's a significant change since the days when blockchain revolved mostly around Bitcoin, an alternative, unregulated currency system that established financial companies mostly eschewed.
The Future of Blockchain
To date, Blockchain's large-scale, real-world applications have been limited mostly to Bitcoin.
Other blockchain platforms are small-scale experiments or are still being developed.
Still, it's worth starting to pay closer attention to blockchain now, if you are not already.
The blockchain world has grown rapidly in the past several years.
It has become very diverse and gained the backing of deep-pocketed organizations.
Right now, it remains unclear exactly how we'll be using blockchain in five or ten or twenty years.
But it's a pretty safe bet that we will be using it.