What is Blockchain in a Nutshell?

A question that gets asked in most offices today is, what is Blockchain Technology?

I am not a computer science wizz, however, I have a general understanding of Blockchain Technology (denoted Blockchain) which I am happy to share with you. Blockchain is the solution to a long-standing computer science issue known as the Byzantine Generals’ Problem which essentially asks how multiple cooperating parties can reach common knowledge about a factual element. Blockchain provides a solution since any such consensus to be reached without having to place trust in any single entity (e.g. a bank or government).

Blockchain is formed through a series of blocks which comprise of a hash (a string of characters). The series of blocks together form the genesis block which is the only block hard-coded into the Blockchain’s core script, and essentially this forms the Blockchain. The computational difficulty of generating a valid block mostly stems from the randomness of the process of finding a new hash that will correctly connect to the hash of the previous block.

You might be wondering, well that’s great, but what is a block and more importantly who are these so-called miners? A block can store a large amount of information called 'transactions' and anyone who wants to get information stored in the database can do so by querying from any node of the network. A miner is a professional block generator. Most individuals who want to add some transactions into the Blockchain do not have the computing power or the time necessary to find a valid block. In that case, they will add their transaction into a pool of unconfirmed transactions which are essentially mined! When a miner successfully adds a block to the chain, he receives a reward from the system as well a fee perceived from the individuals whose transaction has been completed (i.e. Bitcoin).

So, what are the benefits of Blockchain in a nutshell?

1.      Online privacy: Blockchain will allow everybody to take advantage of new technologies, while maintaining complete control over their data, even from governments, due to cryptographic encryption.

2.      Contracts: Blockchain can digitally facilitate, verify, or enforce the negotiation or performance of a contract. This allows the performance of credible transactions without third parties.

3.      Payment systems: Blockchain removes transaction fees and the distributed digital ledger makes payments easier, faster and cheaper.

4.      Real assets: Blockchain allows for cryptographically activated assets. Those could be either physical or digital and would take the form of a token; whoever possesses the token, which can be easily exchanged and transferred like any other digital currency, owns the asset e.g. property, IP, objects, songs, etc.

Great, so let’s adopt Blockchain! Well, actually it probably won’t be implemented commercially and difficult for societies to extract value from it. Even with the underlying technology being sophisticated, it may not be compatible and practical with most business models. Blockchain itself is of limited value (as is any open-source technology), however, those who can create value on top of Blockchain will benefit most.