It’s got stiff competition, but ‘blockchain’ might just be the tech buzzword de jour. Want to make your startup sound like it’s much more sophisticated than it really is? Just sprinkle a couple of mentions of AI in your funding powerpoint then stick the whole thing on the blockchain. Those sweet venture capital dollars will be flying into your bank account before you can even say the words ‘distributed ledger technology’. But what actually is the blockchain, and why is everyone going on about it?
Give it to me in one sentence
Blockchain is all about storing and processing sensitive information – like financial transactions or voting records – on lots of different computers, rather than sticking it in all in one place.
Sounds simple enough. But why bother?
It all comes down to trust, really. Take voting in elections as an example. The process of running an election, then receiving and counting all of those votes is usually overseen by a single organisation. But there are problems with this approach. Some people have good reasons not to trust those central organisations, and data is potentially more vulnerable to hacks if it’s all kept in one place. In theory, blockchain technology allows everyone to keep an eye on what’s going on within a system, but doesn’t give any one person control over that information.
You haven’t mentioned bitcoin yet
Okay, fine. Bitcoin is the most obvious example of the blockchain being put into action. Using bitcoin, people can make financial transactions directly with each other without having to get any third party, in this case a bank, involved. Anyone interested can view a public record of every transaction (without any identifying information attached), but because the data is processed across lots of computers, no one can mess with that data.
What’s really going on with this network of computers?
That’s where the blockchain gets kinda tricky. A blockchain is really a kind of database that’s shared across loads of different computers that are each running the same software. Each bit of data is secured using some complicated bits of cryptography that means that only people that are meant to be adding to or editing the data can do that job. Crucially the job of adding or editing this data is shared between lots of computers, so that no one individual (or even a group of individuals) can mess up the data by themselves.
So what is it useful for?
It’s really early days for blockchain technology, but there already a few areas where it’s being experimented with seriously. Bitcoin is the obvious one, but lots of similar cryptocurrencies are also based on the blockchain. Democracy Earth, a non-profit based in California is using the technology to make it easier for people to vote on issues they care about. The diamond industry is particularly keen on the blockchain as it allows them to digitally track the ownership of a diamond without the need for paper certificates. This could help cut down the market for blood diamonds.
Got it. So can I go launch that blockchain startup now?
No. Please God no.
Credits to: Wired UK