Blockchain Technology: What Is It and Why Is It Important

Blockchain technology.

Blockchain has been a potential game-changer in the tech world. (Image: Mikkolem via Dreamstime)

Blockchain has been a potential game-changer in the tech world. Although complicated, it can provide very simplistic and practical use cases. The biggest problem with adapting to new technology is adapting too late.

What is a blockchain?

Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. For example, an investment can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). As a result, virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.

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How a blockchain works

As each transaction occurs, it is recorded as a ‘block’ of data

Those transactions show the movement of an asset that can be tangible (a product) or intangible (intellectual). In addition, the data block can record the information of your choice: who, what, when, where, how much, and even the condition — such as the temperature of a food shipment.

Each block is connected to the ones before and after it

These blocks form a data chain as an asset moves from place to place or ownership changes hands. The blocks confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered or a block from being inserted between two existing blocks.

Transactions are blocked together in an irreversible blockchain

Each additional block strengthens the verification of the previous block and the entire blockchain. This renders it tamper-evident, delivering the critical strength of immutability. This removes the possibility of tampering by a malicious actor — and builds a ledger of transactions you and other network members can trust.

factory-automation
Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. (Image: BiancoBlue via Dreamstime)

Why blockchain is important

Business runs on information. The faster it’s received and the more accurate, the better. Blockchain is ideal for delivering that information because it provides immediate, shared, and utterly transparent information stored on an immutable ledger that can be accessed only by the permission of network members.

A blockchain network can track orders, payments, accounts, production, and more. And because members share a single view of the truth, you can see all details of a transaction end to end, giving you greater confidence and new efficiencies and opportunities.

Critical elements of a blockchain

Distributed ledger technology

All network participants have access to the distributed ledger and its immutable record of transactions. In addition, this shared ledger records transactions only once, eliminating the duplication of effort typical of traditional business networks.

Immutable records

No participant can change or tamper with a transaction after it’s been recorded in the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the mistake, and both transactions are then visible.

Smart contracts

A set of rules — called a smart contract — is stored on the blockchain and executed automatically to speed transactions. For example, a smart contract can define conditions for corporate bond transfers, including terms for paying travel insurance and much more.

Blockchain is ideal for delivering that information because it provides immediate, shared, and utterly transparent information stored on an immutable ledger that can be accessed only by the permission of network members. (Image: Daniil Peshkov via Dreamstime

How is it going to change the world?

Blockchain technology isn’t some sci-fi, unpractical tech years from being functional. On the contrary, it has exceptionally productive use cases for today.

Greater trust

With blockchain, as a member of a members-only network, you can rest assured that you are receiving accurate and timely data and that your confidential records will be shared only with network members to whom you have expressly granted access.

Greater security

Consensus on data accuracy is required from all network members, and all validated transactions are immutable because they are recorded permanently. No one, not even a system administrator, can delete a transaction.

More efficiencies

A distributed ledger shared among network members eliminates time-wasting record reconciliations. And to speed transactions, a set of rules — called a smart contract — can be stored on the blockchain and executed automatically.

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