The use of blockchain technology is still relatively in its infancy but the benefits of, and the potential for, this innovative creation guarantee it is something that we are going to see a lot more of.
The problem is that, without a prior niche knowledge of cryptography and digital technology, it can be quite hard to understand. The concept of what it actually is and how it works can be challenging to comprehend. When coupled with the technical terminology involved it makes it seem even more like an alien concept.
The subject fascinates me, but even with the amount of reading I have done on the topic it can be inaccessible and hard to get my head around. So, I wanted to break down what blockchain technology is and why it has the potential to disrupt the way business is done.
What is blockchain technology?
At the most basic level, blockchain technology is a method of recording data. This can be transactions, contracts, records, or any other digital information.
Each individual piece of data, or block, has its own unique digital identifying code that is attributed to it when the block is created. This is called a “hash”. When the next piece of data in the set is created its hash will contain the information of all of the previous blocks, creating a chain of data.
Instead of the data in a blockchain being stored at a central point, such as within one company’s server, multiple copies of it are stored on computers across the network of that blockchain. These are regularly verified against each other, so if one version of the blockchain is altered it quickly becomes clear.
This is a very high level explanation. If you’d like to learn about how blockchain technology works in more detail, this is a good article.
What makes blockchain technology so ground breaking?
The identifiable code that is attributed to each block and the decentralised storage are what gives blockchain technology the potential to disrupt many sectors.
Because each block is identifiable by its unique hash, blockchains cannot be amended or removed retrospectively. This applies to an individual piece of data, as well as the chain of data blocks that came before it. Any alterations of the data are added as a new block to the existing chain, which are verified by all computers in the network before being linked. This makes the whole data set completely trackable from the initial source and unsusceptible to fraud.
The fact that there is no central authority of the data also adds to the immutable quality of blockchains. Even if one version of a chain gets altered, the algorithms used would recognise that it is a false copy and remove it. To falsify data you would have to amend each individual version of the blockchain – and that could run into the millions of copies.
Having verified data that can be instantly accessed by all parties involved (as well as the public in some cases) and validated easily in this way, means that a new level of trust can be formed between businesses – and between individuals.
The other factor that makes blockchain so ground breaking is that you can use it to conduct transactions without incurring any financial administration costs. Transaction fees could become a thing of the past. There are some great examples of the potential this presents in this article, including how blockchain could negate the need for marketplace websites, such as Amazon and AirBnB.
What could blockchain technology be used for?
Although blockchain technology was originally created for the digital currency, Bitcoin, the potential uses for it are staggering.
It is already being used for confirming digital identities, data management, regulatory compliance and intelligent contracting. But, in reality, any digital process where a trustworthy record is needed could benefit from the use of blockchains.
It’s going to be incredibly interesting to see where this technology takes us. Naturally, I’m particularly interested in the innovation blockchain technology is already bringing to the supply chain area – and what we are yet to see – but I get the feeling that it will immensely affect us on a personal level too.
I’m going to write some more blogs on the implementations of blockchain technology in the areas of procurement and supply chain, as well as for business in general. If you’d like to make sure you don’t miss them, sign up to my newsletter using the form below.
And, if you’d like to ensure you stay ahead of the curve when it comes to your procurement strategy, get in touch to arrange a phone call.
