Blockchain - The Next Big Thing?

What the heck is Blockchain anyway?

No doubt we have all heard of Bitcoins. At the moment one Bitcoin is worth circa $40,000 USD. There are reports of a Florida based programmer who in 2010 paid for two pizzas with 10,000 Bitcoins. This draws parallels to the Jack and The Beanstalk fable, imagine being on shift when a delivery person returns with no real money, how would you balance the till?

There is an underlying more intriguing concept that enables Bitcoin, this is the Blockchain. I'll explain the concept in under 500 words without using technical jargon.

Current State

At the moment when you use your debit card, the issuing bank maintains your ledger. When you pay for groceries using the debit card, your transaction is verified by the issuing bank via a number of intermediaries. If you have funds available the transaction is completed. The transaction is protected by your unique details on the card and the pin number only you entered.

The ledger is the single source of the truth. In the current model, the issuing bank maintains the ledger of your accounts, this is a centralised model.

Distributed Ledger

With Blockchain, the ledger is maintained by more than one entity. Now think of your ledger as a small part of a database. The database is distributed, only certain parties can update it, other participants in the community have a read only view.

We will use an abstract example of how Blockchain would work. Note: the technical term Miner has been swapped with Judge. Think of community as Blockchain participants.

1) We enter into an agreement, ie commit to buy something or sign a contract.

2) Details of the agreement are published to the community. Upon completion, both parties announce that the agreement was successful.

3) The announcement is accompanied by a unique Rubicks Cube, each Rubicks Cube is different but the objective remains the same. We may not all be blessed with the cognitive ability to solve a Rubicks Cube, but we know what one looks like when complete. This is how the agreement is verified and accepted by the other judges and the wider community.

4) A group of judges in the community compete to solve the the Rubicks Cube first, why do they compete? Incentive, this could be financial reward or kudos.

5) When the agreement is verified it is sequentially added to the distributed database.

Paradigm Shift

Blockchain no doubt raises questions and concerns. When I was a kid I tricked my parents into thinking that I completed the Rubicks Cube, I just pulled it apart and reassembled it. Security and trust are key hurdles to overcome.

For a moment, consider the various applications of this concept; Retailers - not just transactions but a ubiquitous digital identity. Insurers - an app that enabled temporary heightened level of cover. Global cloud providers - single currency to contend with. Consumers - a single digital wallet for transactions, thumbing through physical wallets for loyalty cards would become a thing of the past.

Do you see Blockchain as a key enabler for digital innovation or a solution trying to find a problem?