Unblocking the Blockchain: What Is Blockchain?

Updated on October 9, 2018
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Heng Kiong teaches Information Technology, including business analytics and management information systems, at a tertiary institute.

What is this article about?

Get introduced to the fundamentals of blockchain and find out how businesses can leverage this technology to improve efficiency and increase security.

Background

The financial system is going through a major structural change. Recent developments suggest that cryptocurrencies such as Bitcoin will drive the economy. Currently, the “Bitcoin” economy is valued at close to US$70 billion, and growing. Many businesses are “sitting up,” waiting for the next developments. At the same time, they are trying to understand the Bitcoin phenomenon and Blockchain, and what they mean for the future of their businesses.

Since their beginnings in 2009, Bitcoin and Blockchain have changed the way we see and store data forever. Experts believe that the blockchain platform alone represents a robust and truly decentralized medium for recording electronic transactions—something that has become commonplace in all modern businesses. Smart contracts, which are based on Blockchains, provide a way to make and manage business agreement.

Most people often use the terms Bitcoin and Blockchain interchangeably. Are they the same thing? What do they mean for businesses today and into the future?

This article is suitable for senior executives, managers and professionals with a keen interest in Blockchain and how Blockchain will potentially shape and impact businesses.

These topics will be discussed

  • What is Blockchain?
  • Cryptography - Digital Signature and Hashing
  • Applications of Blockchain in Business

What is a Blockchain?

A brainchild of Satoshi Nakamoto, Blockchain is mostly known as the distributed ledger technology underlying bitcoin. Blockchain represents a new paradigm for the way information is share and many even say that it is the most disruptive technology in decades.

This new way of storing data makes Blockchain secure, reliable and efficient. It can be used to record and track values, such as transactions, records, money, etc.

What is Blockchain?
What is Blockchain?

How Were Transactions Done Before Distributed Ledgers Existed?

Currently, due to the lack of trust among companies, business transactions are commonly conducted via an intermediary, for example a bank.

All parties involved in the transactions maintain their own ledgers. The ledgers are not synchronised and hence may result in duplications, discrepancies and disputes.

In addition, this traditional way of transactions is highly dependant on an intermediary.

Traditional Ledgers
Traditional Ledgers

So what makes Blockchain different?

Unlike traditional ledgers where transactions are recorded centrally and stored with an intermediary, Blockchain tracks transactions in a distributed manner and the records are synchronised among all parties in the Blockchain network.

In Blockchain, every new transaction is represented as a new entry in the distributed ledger. Transactions are contained in blocks and chain-ed together. Every block is attached to the previous block. This is how Blockchain got its name.

Transactions in a Blockchain cannot be altered or tampered with, because this would mean the transactions attached to subsequent blocks will also be affected.

Transactions are linked together in a chronological manner to form a continuous chain of blocks which makes the record immutable.

Using Cryptocurrency as an example, the first transaction ever happened is recorded and the entire list of transactions are being downloaded to whoever joins the cryptocurrency network. A cryptocurrency ownership history can be traced all the way back to the first transaction, also known as the genesis block. With a record of all transactions, double-spending can be detected easily.

Distributed Ledgers
Distributed Ledgers

Blockchain is Secure, Reliable and Efficient

Blockchain records are immutable
Blockchain records are immutable

Business Benefits of Blockchain

Because Blockchain reduces risk of data tampering and builds trust in data, intermediaries are no longer required. Businesses can save time and costs while reducing risks as records are immutable. Transactions can now be carried out accurately and in a transparent way.

Distributed Ledger
Distributed Ledger

What's Next?

In subsequent sections of this article, we will discuss in details how Blockchain works.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Questions & Answers

    © 2018 Heng Kiong Yap

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