Disruptive technology explained – Blockchain

Disruptive technology explained – Blockchain

From the AiM Next Generation Technologies team.

What is Blockchain?

I have a document I want to send to you; a document that has been agreed by both of us.  Simple: I attach it to an email, add your name and press send. Done. But what if you change key parts of it without my knowledge? Well, I can PDF the document. Hang on, what if you need to amend it, and I agree to that, but we want to know what the original looked like? Tricky. I suppose I could send the document to you, and a copy to me. That way we know what was sent, and what changes have been made. But what if I change the original? Umm, let’s also send it to a third party, so we have a neutral observer… Right, but what if one of us crosses their palm with silver. Oh, maybe we’re missing the point that there’s an email trail. Problem solved. Or maybe not! What if I get one of the IT team to hack into the email server and amend the original document…. improbable, but not impossible. Confused yet?

What am I getting at? We live in a world where trust is limited, and sometimes, we need a mechanism that enforces trust. But how? Technology offers some solutions, created and modified dates on files, backups and exchange servers, which make it difficult to change electronic materials, but not impossible. What we need is some way of guaranteeing, as far as possible, that we can trust the authenticity of an item.

Enter blockchain. Essentially, this is a ledger, but a clever one that resists change using cryptography. How does it do this I hear you cry. Well, I create a ledger entry, a “block”, which is timestamped, and sent it to everyone else who’s part of the chain (normally denoted by the term “a node”). If someone amends this block, it is sent to all the other nodes along with a timestamp and an encrypted version of the previous version. This can keep on happening, creating a chain of blocks, or a blockchain…

The benefit of the blockchain, is that changes to individual blocks are possible, but require the consensus view of all the nodes, which in practice, due to there being a large number of nodes, means that it is very unlikely that someone can make alterations. There’s a lot of clever ideas involved, for example the way the previous version is encrypted, the way blocks which aren’t part of the main chain are handled, and visibility of the data. But these are side issues.

Whilst there are already uses for this technology, for example crypto currencies, there are many opportunities for different applications. Watch this space…

 

Interested in reading more on disruptive technology? Click here for our blog on disruptive technology in the Legal industry.