The term Blockchain is derived from a design pattern that describes a chain of data blocks that map to individual transactions. Each transaction that is conducted in the real world (e.g a Bitcoin wire transfer) results in the creation of new blocks in the chain. The new blocks so created are done so by calculating a cryptographic hash function of its previous block thus constructing a chain of blocks – hence the name.
key characteristics of blockchain technology open the door to dis-intermediating third parties from myriad business transactions, lowering transaction costs down to a fraction, – ultimately increasing the potential for innovation in every major industry.
Fundamental characteristic of Blockchain:
The most important characteristics to know about the Blockchain –
- Blockchain is the first truly global platform. Anyone with a simple mobile device or a PC can access it using a simple Wallet application – without the need for a middleman. Based on this type of universal access, the Blockchain as a design pattern and business foundation will enable the creation of a range of business uses. The only limit is the ingenuity of thinking.
- Virtual currencies are but one of the kinds of highly distributed applications that can be built on blockchain. Blockchain will likely eventually become the embedded economic layer of the Internet permitting not just currency or payment related activities but a whole range of others. Bitcoin & online payments are some of the first applications built on Blockchain. However the killer app is years away from being invented.
- Pathbreaking Applications built for Blockchain will upend business models in almost every industry vertical. It will help startups create new business models.
- Blockchain is highly secure & immutable thanks to the ingenuity of the architecture as conceived by Satoshi Nakomoto.
- Blockchain is highly transparent and auditable as transaction blocks are openly available for introspection are published as evidence that demonstrate the integrity of the blocks. This overall paradigm makes it very mathematically intensive and almost computational impossible to create fraudulent new blocks of transactions, as other transactions are continuously being validated.
- Blockchain is also highly reliable in that every node running a full configuration maintains a copy of every transaction executed in the system with only an identifier needed to track ownership – a digital address. Anyone can find out the set of transactions and who owns what using a simple web browser application called an explorer.
- Due to its flat, peer to peer nature – Blockchain conclusively eliminates the need for any middleman – thus disinter-mediating existing structures in many industry verticals. E.g Financial Services, Supply Chain Management, Real Estate, Healthcare etc. Thus next generation applications and platforms built over the next few decades will need to consider the blockchain.
- Blockchain is also digital and introduces the important notion of programmable instruments – be it currency or contracts. An important illustration of the possibilities of blockchain are what are termed – “Smart contracts”. These are rules embedded with a contract that can automatically trigger based on certain conditions being mer. E.g. a credit pre-qualification or a lawyer’s approval etc.
- The other point that is not stressed enough is that in addition to the highest levels of security, the blockchain also enables a high velocity of transactions. Blockchain technology thus has massive potential to be applied in any industry situation where data security & identity theft are major challenges. This includes a plethora of usecases across financial services, retail, IoT, manufacturing, healthcare & real estate.
- A point of confusion for a lot of corporations around this technology is the perceived need or dependence around a publicly accessible database – much like a public cloud. However, the Blockchain is an extensible technology paradigm more than an actual platform. To further illustrate this point, there are potentially three types of blockchain implementations possible – a Public Blockchain, a Vertical Industry specific blockchain and a Private Organization blockchain. These could be run inside private clouds with enhanced & business specific security and authentication procedures as applicable thus serving a community of interest.