Industry News Details

What Is Blockchain and What Does It Do? Posted on : Jun 11 - 2018

Blockchain has earned the dubious honor of being both one of the biggest buzzwords in the tech industry and one of the most widely misunderstood. While it is rightly associated with cryptocurrencies, its application in many other areas of business is growing. For any business looking to jump on the blockchain bandwagon, it is important to first understand its current use.

What Is a Blockchain?

Michael Foster is the co-founder of the decentralized trading platform, a private peer-to-peer platform trading ether for local currencies. Foster said the current use of the term has become largely meaningless in 2018 because of its frequent use. However, the basic concept is straightforward enough: A blockchain, he said, is an immutable public ledger. Blockchains let us agree on the order of a set of records without trusting a central authority.

Blockchain technology has proven to be a tremendous invention, but it was never meant to be the be all and end all to security. The mechanisms that Ethereum and Bitcoin use to verify information (known as EC cryptography) have been widely used for decades. Foster explained: “When there is an advantage to having a public immutable record of something, blockchain is the answer. When there isn't such benefit, it doesn’t make much sense to use a blockchain (stand‐alone cryptography is the solution to your problem). In fact, needlessly adding blockchain to the mix only creates *new* problems, mostly to do with cost, privacy and speed.”

A Simple Database, With So Much More

Behind all this, though is a simple database, according to Marc Baskin, CEO and founder of Morristown, N.J.-based Cryptokist. The blockchain, he said, in its simplest form is a database, like Microsoft Excel, but its attributes make it a superior product that eventually nearly all business models can take advantage of.

It is called blockchain because information is stored in blocks. Once information for a single block is finalized and added to the ledger, the ledger turns a page and starts a new block. You can look back through the connections in a chain of blocks in a way similar to viewing a family tree. The public blockchains (such as Bitcoin and Ethereum), Baskin explained, are:

  1. Distributed (through a Peer-to-Peer network): It’s like an Excel sheet that the whole world can access and add data to, or closer, a Google Sheet that everyone has permission to see and interact with.
  2. Transparent: Since its on tens of thousands of computers, it's completely transparent to everybody. When transactions get recorded on it, they cannot be hidden from the public.
  3. Immutable: Transactions can be added to the blockchain but cannot be removed, edited or deleted. Computers on the blockchain network lock in the transactions on this 'database' through a unique and complex cryptographic process.
  4. Verifiable: These computers also look at the entire database to make sure the transactions haven't been tampered with and to verify balances.
  5. Unhackable: Because of the above reasons, it is virtually unhackable. In cases where bitcoin gets stolen from time to time, it is always a flaw in the applications that are built on top of the blockchain, such as wallets, cryptocurrency exchanges, etc., and not the blockchain itself. View More