If you read anything about technology and digital transformation, you’ll no doubt have seen a lot of hype around blockchain. Stripping away the hype, and once some teething problems are solved, I believe that blockchain technology is set to revolutionise many industries, in the same way as Big Data and even the internet.
In this article, I look at the very real advantages blockchain technology can bring to businesses, and make a case for why you might, in the future, choose a blockchain over a standard database.
What exactly is blockchain?
But first, back to basics. What is blockchain and how on earth does it work?
A blockchain is a computer file for storing data. Or, to put it in more technical terms, it’s an open, distributed database. The data is distributed (i.e. duplicated) across many computers, and the whole blockchain is entirely decentralised. This means no one person or entity (say, a government or corporation) has control over the blockchain; this is a radical departure from the centralised databases that are controlled and administered by businesses and other entities.
So how does it work? In very simple terms, the file is comprised of blocks of data, with each block being connected to the previous block, forming a chain. Hence the name ‘blockchain’. As well as the data itself, each block also contains a record of when that block was created or edited, which makes it very useful for maintaining a detailed system of record that cannot be corrupted or lost.
Because the whole blockchain is duplicated across many computers, any user can view the entire blockchain. Transactions or records are processed not by one central administrator, but by a network of users who work to verify the data and achieve a consensus. If this sounds familiar, it’s because Bitcoin operates in the same way. In fact, Bitcoin is the first example of blockchain in action.
Looking at the benefits of blockchain
Let’s look at some of the biggest advantages of using blockchain technology:
When might you use blockchain?
Blockchain is certainly exciting and has the potential to transform how many businesses operate, but that doesn’t mean it’s the right solution for every scenario. Here’s why you might choose blockchain over, say, a standard database:
When shouldn’t you use blockchain?
Two examples spring to mind of where blockchain perhaps isn’t the go-to solution.
For one thing, while blockchains make great transaction platforms, they’re not the ideal solution for super-fast digital transactions that take place in milliseconds. Blockchains require huge amounts of computing power, so for super-fast transactions, a centralised database is likely to be a faster, cheaper way of processing and storing the information.
And secondly, blockchains are, by their very nature, open chains of information. So anytime confidentiality is a key consideration, a private database is (at least for now) the better option.
In conclusion, if you’re happy with your current database, then there’s no need to switch to blockchain technology anytime soon. After all, blockchain is still evolving and maturing all the time. But the advantages and uses set out in this article show that blockchain technology is definitely worth considering for the future if a decentralised system of record would suit your business.
Where to go from here
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Bernard Marr is an internationally bestselling author, futurist, keynote speaker, and strategic advisor to companies and governments. He advises and coaches many of the world’s best-known organisations on strategy, digital transformation and business performance. LinkedIn has recently ranked Bernard as one of the top 5 business influencers in the world and the No 1 influencer in the UK. He has authored 16 best-selling books, is a frequent contributor to the World Economic Forum and writes a regular column for Forbes. Every day Bernard actively engages his almost 2 million social media followers and shares content that reaches millions of readers.