Bitcoin? Blockchain? Baffled!
Don’t worry, you’re not alone if you’re feeling a little out of the loop.
With so much jargon being thrown around, it can be difficult to see the wood for the trees, which is why we’re here to hopefully make things a bit clearer.
A simple definition of blockchain
Blockchain is a self-auditing network of information which was initially designed for use with cryptocurrency (although it has seen new uses of late). It is a compilation of records broken down into ‘blocks’.
Bitcoin’s digital ledger was the very first example of blockchain, storing information behind digital coding without the need for a central storage location.
Blockchain information is stored on millions of computers (‘nodes’) around the world but can be seen by anybody with access to the internet.
A Block = digital information about a single transaction (date, time, value, coded username of whoever made the transaction).
Chain = the chronological public database which is created as these blocks join together.
How does blockchain work?
Let’s break it down:
- Somebody completes a transaction
- The transaction is verified through the network of computers
- The transaction is then made into a block and given a unique ‘hash’ code which locks into the hash of the previous block so they are interlinked
- The block is then added to the chain
This process is carried out every 10 minutes so it updates a lot like a live social media feed.
Is blockchain beneficial for my business?
Yes and no… (but mostly yes!)
The potential cons:
- Although blockchain will undoubtedly save small businesses money in the long run, the initial investment is hefty.
The technology which will need to be implemented in order to deploy a blockchain system is extremely expensive and not necessarily something many micro ventures will be able to afford.
- Despite the positive improvements around security of data and digital information, the node network on which it is stored is still susceptible to attack.
As with most things, blockchain cannot promise to be 100% risk-free.
- Significantly safer and more trustworthy storage of transaction information, personal records and business systems by lowering the risk of stolen data.
- As a system which runs 24 hours a day, 365 days a year, blockchain eliminates the need for third party verification of bank transactions. This removes the fees businesses are required to foot when customers pay via credit card.
- Due to its round-the-clock operation, blockchain also makes completing transactions across countries much more efficient as issues around time zones are eliminated.
- A single block has the power to store thousands of unique hashes (transactions) so it is an efficient way to house a large amount of information.
- By nature, blockchain is a shared database of information so there isn’t one central location which can be attacked.
- As an accurate computing system, blockchain reduces the risk of human error.
Of course, there is still a risk of technical glitching but research suggests that you would need at least 51% of the network to go wrong to upset the chain, which is highly unlikely.
Are you interested or hesitant about getting involved with blockchain? Please share your thoughts below.