If you haven’t heard the term “blockchain,” you will. It’s gaining such momentum that we want to make sure we keep everyone in the loop on what it is, how it works and why it’s important. This will be the first blog in a series to explain the concept itself.
Essentially, a blockchain is a shared database that is duplicated across your computer network. Each individual record is called a block and the blocks are connected to each other through cryptography. Every block is identifiable through its unique “hash,” and these hashes serve as a connection tool to link the blocks together. Anytime a change is made to a block, content is automatically reconciled across the chain and a new block is generated to leave a clear trail of edits.
Okay, so how is that different than a standard spreadsheet? Well, because each block contains a hash that points to a previous block, along with a timestamp and transaction data, there is complete transparency. You cannot simply overwrite a point of data. Also, because the entire network is connected, an individual cannot make a change to their own personal file without others being able to see what was changed and when. As a result, the possibilities for theft or fraud plummet. Of added benefit, a blockchain provides an automatic, accurate paper trail, which is an incredibly helpful reality should a legal or financial situation require a clear account of adjustments.
And how is a blockchain different from shared cloud files, such as Google Sheets? While functionality is similar with changes shown in real time on everyone’s copy, cloud storage is centralized with a single provider that you must trust to protect your data. If you’re not entirely comfortable handing your data over to another company, blockchain solves this. You store your own data online with direct control over its security and management of online identities. If an intruder tries to tamper with a block, subsequent blocks become invalid because the hashes no longer match.
So that’s the basics of blockchain. Next blog we’ll share how blockchain is predicted to transform industry – be sure to check back for that. And in the meantime, if you want to learn more about this technology, check out this article on potential blockchain applications.