You may have seen articles that predict that the blockchain will be a major software tool in the very near future. Or you may have seen that blockchains are at the heart today of cryptocurrency like Bitcoins. I’ve been following the development of blockchain technology and I think it’s something that will soon quietly sneak into all of our lives.
So what is a blockchain? It’s essentially a software technique for creating a permanent and unchangeable ledger of events – a record of events that are stored in sequential order and that can never be altered. There are many places in the business world where having a permanent record of events or transactions would be of great value.
Second, a blockchain relies on peer-to-peer verification of entries onto the chain. That means that the identity of the person making any entry into a blockchain is verified by somebody else. This verification process adds validity to the entries on the chain since every entry on the chain has a verified author.
Third, blockchain information can easily be encrypted, making it hard for anybody other than the people involved in the transactions to be able to read the information on the blockchain. This adds an automatic level of security because, unlike a standard data base, each entry can be separately encrypted making the task to decrypt daunting. In a standard database, once a hacker gains access to the database they can see everything. In a blockchain a hacker would have to individually unscramble each entry – something that will deter all except the most determined hacker.
So, what are some of the ways that a blockchain might be used? The short answer is that it will make sense to use the technology anyplace where there is merit in having a detailed record of events that can’t be amended or altered. I can think of hundreds of likely uses, but here are a few:
Accounting. Since a blockchain is basically a ledger it would make sense to use it during the accounting process. In a larger company where multiple people can make accounting entries, a blockchain could be established that would record the events of each entry made – not only the entry itself, but who made it and when they made it. There also could be a pointer to the underlying document that supported the entry. This would be of use to the head accountant in the company because they can now look back with certainty and know everything about any entry into the accounting system. This would give them a tool to pinpoint who made mistakes. But the real benefit would be for external auditors who could quickly understand every entry in detail. Blockchain also would provide the history of each entry and would show if and when an entry was ever changed or amended. A ledger backed up a blockchain creates an audit trail that will make it easier to do things like pass a tax audit years later after everybody in the company forgets the details.
Credit Card Security. I can picture a credit card company establishing a blockchain to record the events of each credit card transaction with the goal of cutting down on credit card fraud. For a credit card used in a store it would establish an exact time stamp of a transaction. But there also might be a picture snapped of the purchaser or some biometric test like taking a thumbprint. Biometric credit transactions are being tested in China, and using a blockchain adds the ability to make a permanent and indelible record of the events involved in each transaction. Something similar could be done with online purchases where a blockchain could be used to record the IP address of the purchaser of other identifying information that might make it easier to track down fraud.
Personal Blockchains. I think people will be interested in keeping track of events in their life. We do a lot of things electronically today and those records are fleeting. You inevitably get a new smartphone or change cellular providers and your personal history is lost. And even if you somehow keep every text you’ve ever made, for example, there is no current easy way to search through them to find a specific text you might have made years ago. A blockchain creates a ledger that can then be searched. For some reason that is beyond my understanding, my wife likes to read things I wrote to her years ago, so she is going to love this! In essence a personal blockchain could create a searchable log of events in your life, large and small.
I can easily think of hundreds of uses for the idea of keeping track of the things we do at work or in our personal lives. The blockchain provides a tool to create a permanent and searchable ledger of past events. For any business that does a lot of transactions of any kind, this gives them a new tool to create a record of their business – something that businesses are largely not very good at today.