If you recognise the word ‘blockchain’ at all it is probably because of Bitcoin. But just as the hype around the crypto-currency is fading away so interest is shifting to the blockchain – the technology which underpins it.
The blockchain is basically a distributed, peer-to-peer database. Rather than one organisation maintaining the database and controlling changes to it there are hundreds or thousands of copies held by different people.
Each copy includes all previous transactions or changes that ever been made. So before a transaction is completed it is checked against the previous block, which in turn has been checked against the preceding block. These changes are then either accepted or rejected by comparison with all the other copies. Because each entry is timestamped and cannot be removed any fraud would need to change the whole chain of transactions.
But it is not just database architects who are interested in blockchain technology.
Several governments are starting to explore the technology as a way to both reduce costs and improve the efficiency of how data is accessed and used.
Imagine a distributed system of land ownership.
Assuming that there is a record that you actually own a property and it is you carrying out the transaction then the record would be updated when you transferred ownership to another person.
Because everything is recorded for all time any fraud or attempted fraud can be found before the transaction is approved. This could radically reduce government costs and free up access to land records.
Blockchain architecture holds out the promise of safe and secure contracts without the need for a third party which means dramatically lower costs for business.
What works for property could work for any other kind of transaction.
This might all sound like a pipe dream but in fact the technology is already in ‘real world’ use – the diamond industry is collecting transactions into a blockchain in order to fight fraud, identifying ‘blood diamonds’ and money laundering.
The big banks are also looking carefully at it for financial transactions.
Accountancy giant PricewaterhouseCoopers recently opened a unit to advise clients on using blockchains to create smart digitally-signed contracts and to improve tracking of digital assets. It is also working with a company called Blockstream to look at ways to get different blockchain systems to communicate with each other. This would allow different businesses inventory systems to carry out seamless transactions at almost zero cost.
Sir Mark Walport, the UK government’s chief scientific adviser has just completed a report on distributed ledgers or blockchain – he sees a real role for the technology in improving government services.
Walport said: “Distributed ledger technology has the potential to transform the delivery of public and private services. It has the potential to redefine the relationship between government and the citizen in terms of data sharing, transparency and trust and make a leading contribution to the government’s digital transformation plan.”
There are still some barriers to widespread use and Walport calls for government leadership to help improve security and scalability.
Of course blockchain isn’t going to solve all the challenges faced by modern business. Like any database or formula the old adage of ‘rubbish in, rubbish out’ remains true. You need to absolutely ensure the accuracy of the initial information for the system to work properly.
There are also issues of scale because any blockchain contains every single change ever made to it. So the job of comparing all the different copies in order to agree changes becomes an ever more complex computing task.
But if these barriers are overcome the basic system promises to bring the advantages of the network infrastructure and internet communication to the real world.
The potential for business is huge.
Blockchain infrastructures could remove almost all the costs associated with any business transaction. Doing deals will be dramatically cheaper, much faster and far more secure.
There is a summary and a video explanation of The UK government report here: