Along with “artificial intelligence”, “internet of things (IoT)”, and “big data”, “blockchain” is yet another trendy word of the day. Some experts believe blockchain technology, especially in combination with AI, could revolutionize precision medicine, self-driving cars, and international economies. Others believe the technology is overhyped and doomed to fail.
But…what exactly is blockchain? To understand where both perspectives stem from, you need to get a grip on the nature of the beast.
How Does Blockchain Work?
Blockgeeks, an online community for discussing all things blockchain, describes the technology as follows: “Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet.”
Why would such a function be useful? Blockchain is the brainchild of Satoshi Nakamoto, who needed a secure online peer-to-peer transfer method for his now-famous digital currency Bitcoin. He discovered blockchain as the optimal solution: “a ledger of records arranged in data batches, called blocks, that use cryptographic validation to link themselves together.”
With valuations soaring towards $3000 / BTC, Bitcoin has gained fame and fortune in mass media where it is widely regarded as a true investment asset. The hype of Bitcoin has led to a widespread use of blockchain technology beyond financial services, from medicine to e-governance to fraud detection.
Any transaction on the blockchain moves as a batch of data. New batches of data are added to the blockchain upon user confirmation and arranged chronologically. The blockchain stores information about users along the way, who are each represented by a separate node in the blockchain’s network:
Why Is Blockchain Useful?
Many hope that cryptocurrencies like Bitcoin will transform capitalist economies into more open and benevolent economic world orders, by reducing dependence on centralized, third parties in clearing financial transactions. Since an internet connection is all that’s needed to transact on blockchain, impact is highest in developing countries with nascent economies or unstable governments.
In knowledge economies, data is king. Businesses in every industry depend on capturing and deriving insights from reliable data, and blockchain can be used to secure, organize, and give greater transparency and user control over data.
Users are free to store and consume data in a centralized or decentralized, private or public blockchain configuration, and can choose from a multitude of blockchain platforms. These open platforms replace antiquated and inaccessible in-house systems and inspires developers to experiment with creative solutions using the blockchain.
Blockchain technology can also be used in combination with other trendy technologies, such as artificial intelligence and internet of things. Tech companies like IBM and Microsoft offer Blockchain-as-a-Service (BaaS) with different governance structures to enable developers to quickly build decentralized, secure data infrastructures for IoT and AI applications. Smaller technology firms are spearheading specialized use cases, such as using AI to analyze legal documents stored on a blockchain-powered peer-to-peer management hub.
What Will Happen Next With Blockchain?
Emerging technologies move faster in the media’s imagination than they do in reality. Enterprises are still scrambling to adopt technologies that were considered “emerging” ten years ago. How blockchain fares in the Gartner Hype Cycle remains to be seen.
Now that you’ve mastered the basics, learn how blockchain could be combined with AI to revolutionize industries and the challenges facing widespread blockchain adoption.