Look at a dollar bill, and you’ll find a serial number. On a check, you’ll find a routing and account number. Your credit card has a credit card number. Those numbers are centrally logged at a location somewhere – either in a government database or a banking system. As you look at a dollar, you have no idea what its history is though. Perhaps it was stolen, or perhaps it’s a counterfeit copy. Worse, central control of the data could be abused by printing more, stealing them, or manipulating the currency – often resulting in devaluation of all the currency.
What if… in every dollar bill, check, or credit card transaction, there existed the encrypted keys that could be used to gain access to records of the transactions? Each piece of currency could be verified independently through a massive network of computers – no one location having all the data. The history could be revealed through mining the data at any time, across a network of servers. Each piece of currency and each transaction with it could be validated to identify who owned it, where it came from, that it’s authentic, and even recording the next transaction if used in a new transaction.
What is Blockchain Technology?
The blockchain is a decentralized ledger of all transactions across a peer-to-peer network. Using this technology, participants can confirm transactions without the need for a central certifying authority. Potential applications include fund transfers, selling trades, voting, and many other uses.
Blockchain is the underlying technology that is enabling cryptocurrency like Bitcoin, Ethereum, Ripple, Litecoin, Dash, NEM, Ethereum, Monero, and Zcash. This infographic from PWC provides a detailed look at blockchain technology, how it works, and what industries may be impacted by it.
While there’s a ton of buzz around Bitcoin right now, I’d encourage you to ignore many of the stories and focus on the underlying technology. Too many uneducated, non-technology professionals liken Bitcoin to a gold rush, or a stock bubble, or even just a fad. All of these explanations and expectations are oversimplified. Bitcoin is like no other currency ever created, thanks to blockchain technology. Blockchain is a complex technology that requires computing power as we’ve never required it before. A basic mining transaction can require tens of thousands of dollars in equipment, cost tens of dollars, use a significant amount of energy, and require minutes or hours of work.
That said, imagine a world where your digital certificate is trusted because it contains the keys to a history of all the classes you took verified through peers… without you calling the certification firm. A world where you don’t need to manually check a business’ history but can, instead, verify the work they accomplished as defined in their blockchain-powered sales contract. An advertisement could maintain a history of its display and the transaction to the person clicking to ensure it’s not a fraudulent click.
Blockchain is a promising technology that can be applied virtually anywhere. I look forward to seeing what’s next!