Wikipedia defines Blockchain as "a continuously growing list of records, called blocks, which are linked and secured using cryptography", but what does this really mean to you and me? Several friends have asked me over and over about blockchain and what it does and how it is related to Bitcoin. So what is blockchain? In its simplest form, blockchain is a type of security verification used to validate a transaction. The transaction is not limited to just monetary transactions, it can be used to record medical changes, personal wallet (identity), credit inquiries, IoT communication, Supply chain auditing or even login attempts into a computer system. What makes blockchain so unique and secure compared to other systems is how it verifies and validates transactions.
It does this by utilizing a distributed network of computers to verify each transaction. This is in stark contrast to traditional transactions which require an single source to verify any given transaction. The technology of how this group of computers performs that verification can be very complex. But simply, imagine that a "block" is a list of transactions and the "chain" is the set of all blocks.
For this to work, a majority of the computers on the network must agree on a transaction before the it can be accepted. Each block has a unique cryptographic method that verifies that each transaction is legitimate. The type of cryptographic method used is called "consensus algorithms" which leverage digital certificates and unique hashes to secure the the transactions. Each transaction contains a validation hash (unique encryption method) a pointer that links a previous block to an originating block ensuring consistency between the transaction.
HOW SECURE IS BLOCKCHAIN
Now that we have a better understanding on what blockchain is we need to understand the security behind it. It is important to understand the security behind this technology since it may have a significant impact to our everyday lives in the near future.
Blockchain's greatest strength can also be its weakness. It utilizes a distributed network of computers to provide transaction verification. Whomever owns 51% or the majority of the servers on the network, completely controls transaction verification.
Blockchain is not limited to only one type of system. Anyone can build their own blockchain ecosystem. You must be selective when a company claims they utilize blockchain.
Size of the blockchain ecosystem matters. How many blocks (nodes, servers) are there? The larger the number of servers the more secure a blockchain system is. The smaller the size each block the more susceptible the blockchain is to being overwhelmed.
Who runs the server is important, remember anyone can participate, if its an open community like bitcoin anyone with the proper configuration can run their own server. This also means they can also turn it off whenever they want. Make sure your choice is backed with a strong company with a 24 x 7 presence.
Geographic distribution matters, you want a company or organization that can ensure your information will survive disasters.
Suspicious activity within the blockchain can be tracked and addressed before they spread. The larger the blockchain ecosystem the more likely transaction manipulation can be stop due to any suspicious activity.
Ensure company has strong infrastructure presence. The problem with bitcoin is that it leverages close to 12,000 servers around the world, the majority which live in China. Since timezones are so different in the West, many bitcoin servers are taken down when Chinese sleep at night causing delay times in transaction validation. Its actually a bit more complex than that but it helps you understand the general problem.
WHO IS USING BLOCKCHAIN TODAY
There are several industries using blockchain today and the applications of blockchain seem to be endless.
Amongst the most recognized is Bitcoin, which has single handedly given blockchain the popularity that it is now receiving.
Others include the banking sector where many banks are pursuing blockchain to create their own crypto currency.
The medical industry has been working to leverage blockchain as a way to track permissions and who can view medical history and records.
Based on recent events with Equifax blockchain is being considered for credit reporting.
Smart Contracts are an emerging with the use of blockchain as the core element to verify contracts for fraud, monetary exchange, shares, property and many others.
Blockchain is one the newest emerging technologies. It is important to keep reading about it and where it is headed. Ensure that you look at a companies with scalability and proper security when looking at blockchain options in any field.