What is Blockchain?
Blockchain is a type of distributed ledger that can be used to create an authoritative record of events, which in turn can be used to provide trust within an untrusted environment.
Blockchain works by creating a digital ledger of transactions. Each transaction, or block, is recorded in the ledger; even the changing of a single character in a much larger digital transaction will result in the creation of a new block. This ledger, or chain of transactions, is then distributed among all participants in the network, and each participant has an exact copy of the entire ledger.
Properly implemented, blockchain is incredibly secure. Once a particular transaction is written to the ledger, it cannot be changed – because any changes would not match any of the other distributed ledgers. Should anyone attempt to access or alter a transaction record, they would have to do the same to every single replicated block and every previous block in the associated chain.
Attention Visual Learners: Click here to SEE how this term relates to Intelligent Information Management (IIM).
While blockchain is most well-known as the technology upon which cryptocurrencies such as Bitcoin are based, it is used for many other types of applications as well, and many of the larger information management vendors have started to implement their own forms of blockchain-type technologies.
Blockchain is still emerging as a technology, and so are the use cases. But the most successful use cases to date have been those that involve distributed business value chains such as global shipping, logistics, and food production and distribution.
Another emerging use case for blockchain involves smart contracts. Traditional contracts define a product or service to be delivered, the obligations that are placed on each party to the contract, and often the price to be paid and under which conditions a payment should be made. A traditional legal contract typically comes in the form of a document that is agreed to and signed by all concerned parties. Or to put it another way, a contract is an agreed list of promises between two or more parties who don’t trust one another.
Smart contracts in a blockchain perform the same function but with an entirely different structure. Smart contracts assume from the get-go that not everyone can be trusted. A smart contract then is a set of computer-driven activities that enforce the performance and process of a contract without question. The actions that define who, how, when, and what happens in the execution of contract clauses are all automated by the blockchain.
Ultimately blockchain is a foundational technology. The entire point of blockchain is to distribute trust. There are significant potentials to reinvent how organizations do business using blockchain, but much work remains to be done in terms of standardization and digitalization before blockchain will make significant inroads into most enterprise processes.