In order to remember the benefits offered by Blockchain, remember the following phrases.
- Don’t put all your eggs in one basket
- History cannot be rewritten
- Cut out the middle man
- Strength in numbers
- Trust is the glue of life
1. Don’t put all your eggs in one basket – Decentralized Storage of Information
Traditional Databases – Risk of Centralized Control
In traditional databases, all information is stored in one source. Because it is stored in one location, it is easier for a hacker to alter information. As a result, extra steps have to be taken to reconcile information so that parties can trust that it is correct.
Blockchain – Don’t put all your eggs in one basket
In a blockchain, information is stored, connected and verified across multiple computers thereby making it more secure. No one centralized person has the ability to delete,edit or validate information. Let’s say for example, a hacker wants to hack a Blockchain containing 500 computers. He or she would have to hack all 500 computers simultaneously and it’s secret code (cryptography) which is claimed to be impossible in a well designed blockchain.
This results in better Security.
2. History cannot be rewritten
In a Blockchain system, it is not possible to edit or delete past records of information. Once information is recorded, it is permanently stored and cannot be altered. It is linked to other records in a chain & stored across different computers (nodes).
This makes it difficult to tamper with a single record because a hacker would need to change all other records linked to it as well to avoid detection.It is claimed that a well designed Blockchain is impossible to hack the entire network as it would require significant computer power.
This results in better security and transparency.
3. Cut out the Middle Man
Have you ever tried to send money abroad to a foreign bank account? The transaction takes days and you incur large fees, right? This is because information is stored across two different databases owned by two different institutions. Banks employ a third party intermediary (the middle man) to verify that both parties are correct and the person has sufficient funds to carry out the transaction.
What if we could use technology to cut out this middle man?
If multiple parties are on one decentralized Blockchain, they can instantly carry out transactions directly without the need for a middle man. The computers on the Blockchain use a special code called cryptography to solve very complicated puzzles so as to verify transactions. In our example for foreign transactions, transactions will not need to be verified by a third party. Blockchain technology is able to instantly verify and authorize these transactions by achieving a consensus. I will explain how this process works in more detail in future posts.
This results in improved processing speed.
4. Strength in Numbers
In a traditional centralized system, one party controls and authorizes the entry of data which increases the risk of fraud/error.
In a blockchain, multiple computers on the network use the special code (cryptography) to authorize the transaction. It must be authorized by all computers or else it’s flagged. This provides greater assurance that the record is authorized and correct.
5. Trust is the Glue of Life
Blockchain will provide greater transparency and security between parties who are doing business together. There will no longer be a need for a parties to extra resources to reconcile or check that information is correct. Parties will “trust” the blockchain. This will generate significant efficiencies in doing business.
In my next Blog post, I will cover real life examples. I will also provide a template for business people to use when identifying & articulating the value proposition for a use case. Read how Irish companies are leading the Blockchain revolution.
BLOCKCHAIN FOR BUSINESS PROFESSIONALS SERIES
This blog series is written for business professionals with little technology understanding. My aim is to focus on the use cases & business benefits offered by Blockchain (not the technology) so as professionals can understand and articulate it’s value proposition.