A lot of people think blockchain technology and cryptocurrency are one in the same, but that isn’t true. Cryptocurrencies are in the headlines, but the transformative power of the underlying blockchain technology is the pot of gold at the end of the rainbow.
One simple analogy is that the blockchain is to money as the internet is to information. It removes the friction and costs of access to the masses. But don’t confuse blockchain technology with the bitcoin-ethereum-blockchain crytocurrency. It is quite easy to be distracted by the media onslaught of coverage around virtual currencies, and more recently, Initial Coin Offerings (ICO), however, this is mostly smoke and mirrors when compared to the potential held within blockchain itself. Token technology may anchor the next web revolution, spawning crowdfunding behemoths that expedite the value delivery path to their users while cutting out the advertisers and fee-based middlemen.
The current thought model posits the question, “What can’t be tokenized?” Future research notes will explore and detail the many use cases of blockchain and how they are being put to the test with early adopters in this bleeding edge space. Big banks are embarking on programs to provide syndicated loans and the grocery supply chain has signed up with IBM to launch a blockchain-based solution to track food shipments and monitor food safety.
It all sounds mysterious, intriguing and, to be frank, easy to dismiss as so few of us really understand what blockchain technology really is and how it works. Let’s take the first steps towards closing this knowledge gap.
There are five foundational principles that underlie blockchain technologies:
- Distributed Database: All access all the time! Everyone partaking in the database can see everything in the database. This architecture provides true decentralization where there is no single point of control or failure. This transparency allows independent verification of transactions to occur without a middleman verification step.
- Peer-to-Peer Transaction: Blockchain takes the idea of “serverless computing” to a whole new level as there is no central hub for processing transaction data. All transactions are processed and stored in the nodes plugged into the network and those nodes share that data with all of the other nodes.
- Transparency with Pseudonymity: Blockchain users have the choice to remain anonymous or share their identities. However, the record itself is present and visible to all. Transactions are encrypted and assigned a unique address as the means of identification.
- Irreversibility of Records: Once a record has been transacted in the distributed ledger, it cannot be modified due to the linkage between all records (blocks) that comprise the blockchain. These records are encrypted, ordered chronologically, and visible to all.
- Computational Logic: Due to the programmatic nature of the blockchain, logic and algorithms can be applied to automate transactions between nodes upon pre-defined conditions
For the rest of the piece, download the Basics_of_Blockchain (PDF).
Note: This is used with permission from Info-Tech Research Group .