The blockchain is unquestionably an ingenious invention – the brainchild of a person (or group of people) known as Satoshi Nakamoto. But what has been a way of facilitating transactions within a dark world of illicit activities, is now being looked at by conventional businesses. Companies like Toyota, UnitedHealth Group and Fidelity are exploring blockchain technologies as a way of streamlining operations and cutting costs. By doing so they are giving legitimacy to the space, and motivation for other companies to investigate blockchain options as well.
What is Blockchain?
Very simply put, a blockchain is a database that maintains a continuously growing set of data records. It is distributed in nature, meaning that there is no master computer holding the entire chain. Instead, the participating nodes have a copy of the chain. It is also ever-growing — data records are only added to the chain.
A blockchain consists of two types of elements:
- Transactions are the actions created by the participants in the system.
- Blocks record these transactions and make sure they are in the correct sequence and have not been tampered with. Blocks also record a time stamp when the transactions were added.
Advantages to Blockchain
The big advantage of blockchain is that it is public. Everyone participating can see the blocks and the transactions stored in them. This doesn’t mean everyone can see the actual content of your transaction however because that is protected by your ‘private key’.
How Does It Work?
When someone wants to add a transaction to the chain, all the participants in the network will validate it. They do this by applying an algorithm to the transaction to verify its validity. What exactly is understood by ‘valid’ is defined by the blockchain system and can differ between systems.
A set of approved transactions are then bundled in a block, which gets sent to all the nodes in the network. They in turn validate the new block. Each successive block contains a hash, which is a unique fingerprint, of the previous block.
Different Types of Blockchains
There are two main types of blockchains:
- In a public blockchain, everyone can read or write data. Some public blockchains limit the access to just reading or writing. Bitcoin, for example, uses an approach where anyone can write.
- In a private blockchain, all the participants are known and trusted. This is useful when the blockchain is used between companies that belong to the same legal mother entity.
Toyota, UnitedHealth & Fidelity
What are forward-thinking companies doing on the blockchain front?
Toyota has enlisted a series of partners that specialise in different aspects of blockchain technology to explore how the technology may be applied to their business. Their current thinking is that it could be used to gain enough driving data to create truly autonomous vehicles. In order to make autonomous vehicles safe, monitoring and distributing information about the safety of individual vehicles is paramount, as is gathering information about the way owners use their cars. Blockchain technology would provide a secure way of doing this.
In the banking sector, Fidelity Investments recently became the first financial institution to join the Initiative for CryptoCurrencies & Contracts, a group of academic institutions and technology companies looking to develop their own blockchain-based technology. Fidelity would like to develop blockchain programmes that help make financial systems more efficient and secure, and make some of its processes simpler and cheaper. Potential use cases range from systems to manage international payments, to programmes to settle securities trades.
And in healthcare, UnitedHealth Group is going to hire a full-time director of blockchain platform and applications development!
Our IT Experts’ Thoughts
Blockchain technology has a lot to offer, and the use cases will only expand as businesses begin to think creatively about integrating it into their own processes. We won’t be sending out invoices with any cryptocurrency options anytime soon, but we do think we may in our lifetimes. But for now, we will watch this space.
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