The Blockchain Movement is Underway. What Should CEOs Know?
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New technologies that promise to “change the game” seem to come and go daily in the digital era. Blockchains might seem to fit into this category. But its numerous attributes and versatility make it stand out from the pretenders. In fact, blockchain’s security, transparency and ability to dramatically reduce transaction costs may transform entire industries.
According to an article by Forbes, the market for blockchain-related products and services was just $242 million in 2014. By 2022, however, that figure is expected to surge to $7.7 billion. Such remarkable growth raises several intriguing questions about the technology and its potential. Among them: How are companies using blockchain now? Should I consider adopting it? What are its future applications? But foremost, what exactly is blockchain anyway?
Blockchain Basics
First created to support Bitcoin, the unregulated cryptocurrency that requires no central bank, the framework of blockchain has since proven versatile and adaptable to many other uses. Fundamentally, blockchain is a digital ledger system with no central authority. Instead, ledgers are shared among individual computers, or “nodes.” For a new entry to be added to a ledger, the majority of nodes must agree that the entry is correct and that the integrity of the entire chain of interconnected blocks is intact.
Because it’s decentralized, blockchain adds an unprecedented layer of security to the ledger as there is no central computer to attack. In addition, each “block” in a blockchain is made up of ten transaction records. These blocks are linked together by a special key — known as a “hash” — that uses encryption to connect older blocks into a chain with newer ones. The hash is derived from information in the block, so if any data in the block is changed, the hash is invalidated and all subsequent, dependent blocks are also made invalid as well. For a hacker to falsify the ledger, then, he would need to effectively forge every subsequent block from the tampered one while simultaneously convincing the majority of nodes validating the entry that his version of the ledger was the valid one. That’s a daunting task indeed.
Additionally, this engrained security allows for a “trustless” system, meaning parties and computers do not have to know or trust one another to transact. Though much of blockchain’s architecture relies heavily on cryptography, the transaction data in the block itself is not encrypted and therefore public. This fosters transparency, and ultimately trust, in a trustless system.
Technology Evolving Quickly
Blockchain is not without its growing pains, however. Three issues currently hamper the technology:
- Scaling: Blockchains record every single transaction and use the information to validate the authenticity of a ledger through individual…
