Demystifying blockchain

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(Source: 123RF) (Source: 123RF)
Ledgers have been part of how humans trade since nearly the beginning of our species and continue to be how we record transactions. (Source: 123RF) Ledgers have been part of how humans trade since nearly the beginning of our species and continue to be how we record transactions. (Source: 123RF)
The original focus was on our financial systems, leading to the now famous bitcoin, which uses blockchain to track who owns what in the virtual currency. (Source: 3TV/CBS 5) The original focus was on our financial systems, leading to the now famous bitcoin, which uses blockchain to track who owns what in the virtual currency. (Source: 3TV/CBS 5)
(DATA DOCTORS) -

Q: Can you give me a layman’s explanation of what exactly blockchain is?

A: With the hype surrounding cryptocurrencies continuing to grow, more people are hearing about the underlying technology known as blockchain.

At the core of blockchain technology is a publicly shared "immutable distributed ledger." It’s essentially a tamper-proof record-keeping technology.

Ledgers
Ledgers have been part of how humans trade since nearly the beginning of our species and continue to be how we record transactions.

Until blockchain, ledgers were generally controlled by a single entity and could be manipulated without others knowing.

We old-timers also remember the time-consuming, error-ridden manual record-keeping on green ledger paper for sales transactions or inventory tracking, which is why VisiCalc, the first electronic spreadsheet, was such a game changer.

With only one copy of any ledger, it’s easy to manipulate the data when no one is watching.

Today’s private ledgers -- be they in banking, real estate, taxes or health care -- require us to trust the organizations that control them.

This middle-man model is also how so many global organizations have become so powerful. We’re required to use them in order to execute a transaction.

This network of privately controlled ledgers that don’t talk to each other is also why so many transactions take so long to execute.

Immutable distributed ledgers
This stranglehold on so many data sets is what prompted the creator of blockchain to develop this publicly visible, distributed ledger platform.

Imagine a ledger that is shared in real-time with millions of others, showing every transaction in a continuously growing list of transactions.

To further secure this public ledger, encryption keys are created for each entry that tie to the next entry, forming a "chain" of interconnected entries to the ledger.

Any attempt to modify an entry would result in "breaking of the chain," which would clearly be noticed by the millions of other connected ledgers that had the authentic entry and the offending computer gets "kicked" from the ledger.

[RELATED: Arizona edges to front of states eyeing blockchain technology]

This decentralized ledger also eliminates the middleman; transactions become one-to-one, instantaneously. That is why so many large "gatekeeper" companies are downplaying the value of this technology.

[RELATED: Canada wants to help India lead 'blockchain revolution']

Much more than bitcoin
The original focus was on our financial systems, leading to the now famous bitcoin, which uses blockchain to track who owns what in the virtual currency.

[RELATED: Bitcoin: What you need to know before investing]

But there are far more interesting possibilities.

The fashion industry was one of the first to see the value of blockchain as a way to fight counterfeiting:

The healthcare industry is looking to blockchain to help in electronic health record management, data security, interoperability and more. 

There are blockchain initiatives in real estate, government, education and insurance. One of the most compelling uses is in identity management, which could be the gateway to secure the voting system.

There’s a bit of a gold rush mentality for those who truly grasp the revolutionary nature of this technology, so expect to hear lots more about blockchain for many years to come.

[MORE: Data Doctors]


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