What is blockchain technology? You’ve probably heard people (including me!) enthusiastically preaching about its potential, but what exactly is it all about? Let me explain…
The official answer goes something like this: ‘Blockchain technology enables unmediated, trustless transactions between parties.’ That’s not much help, so let me break it down:
When you buy or sell something, you need to be able to trust that the other party will keep up their side of the bargain and transfer the money or the item that is their part of the exchange. When we transact online, with strangers, trust can be a challenge. Luckily, in online transactions, you don’t have to trust a stranger, you just need to trust the payment processor or bank involved. We trust these mediators, because they have a track record of successful transactions.
Blockchain technology does exactly the same thing.
Blockchain technology is essentially just an endless record of transactions. Each ‘block’ in the ‘chain’ records and represents a transaction, all of which can be viewed by anyone in the world. This means that we can trust the blockchain to conduct our transactions in the same way that we do banks, but in this case, the mediator is not an institution, it is technology.
So we can use blockchain technology for financial transactions, but that’s not all. Blockchain technology can be used anywhere where data and trust are essential: from proving you have right of access to certain services to sharing health data with medical institutions.
We’ll see numerous applications of blockchain technology in the years to come.