This digital world we live in is a wonderful tool for storing data and information on a global scale. Where machines can't access, humans can. Where humans can't access, machines can. But what if we could share data and information not just with machines and other people, but with everything else?
That's the idea behind decentralization--the strategy of distributing large amounts of data across many different nodes so that no one computer or person has complete control over all the pieces of it.
By decentralizing a large chunk of data, the cost to store that data drastically drops because it's not stored on a single server. That means that if any one computer crashes, the information is still available elsewhere. And if a hacker attempts to break into a piece of information stored in a decentralized system, they only have one place to attack it from--the other computers storing the same data.
In terms of business, this strategy has been compared to taking your company's phone book and printing it out on hundreds of identical personal computers so that no one person (or machine) has exclusive access and control over all the names and numbers. Imagine the implications of this for companies involved in data storage, with any kind of files or information.
Crowdsourcing data storage with blockchain
Blockchain is an emerging technology that builds on top of the decentralized concept. The blockchain is essentially a list of information that is stored on many different servers or computers that are connected together with cryptography--a series of encryption codes that secure multi-party communication, but also help to distribute the data across the network. This way, different servers can all access and update the list without storing it on one computer alone (thus decentralizing it). But since each entry in the chain is encrypted, only authorized individuals with special keys can make changes or additions to it.
Blockchain, in short, is a way to store data that's distributed across many servers or machines without having to rely on any one specific location.
Enterprise blockchain is the same idea, but with businesses. Through the use of smart contracts, companies can create agreements and transactions that are encrypted and shared across many machines. Think of it like an email with a built-in "if/then" statement--a conditional relationship that only executes if certain parameters are met. If both parties sign off on the contract or transaction, then it's validated and added to the blockchain instantaneously--and everyone else on the network knows about it too.
Imagine an invoice for services rendered delivered directly to a company's bank account that automatically triggers payment--no additional steps required on either party's part. In this instance, the invoice is stored on a distributed ledger where all of the data is encrypted and stored in a way that it can't be deleted or modified. All of its information is also stored on multiple computers so that if one fails, the others have full access to the ledger's information.
The idea behind blockchain technology was created in 2008 by a developer named Satoshi Nakamoto. He published a white paper entitled "Bitcoin: A Peer-to-Peer Electronic Cash System," which laid out his vision for this new piece of software that could be used to pay for items electronically.
How it is a next big step for companies?
With blockchain technology, businesses can create smart contracts that automatically execute the agreed-upon terms of service--when certain conditions are met. That way, any changes or alterations to the information stored on the distributed ledger won't require human verification, so it's more secure and reliable.
For example, an invoice for services rendered could be automatically sent directly to a company's bank account that triggers payment. Along with tracking every transaction made with smart contracts, companies can also enter into agreements that are more flexible than typical legal contracts. Say you're a manufacturer of medical devices (such as an MRI machine). You may want to make arrangements with various hospitals and clinics regarding how they'll pay for your services (the company can store data on different computers).
That way, if a hospital or clinic doesn't pay on time, the contract executed between you and them is automatically flagged as a missed payment. Likewise, if your MRI machine breaks down and needs to be fixed, the hospital or clinic can make a payment against your invoice before it officially goes through. That way, the company's business isn't affected by the quality of service received from its clients (the smart contract will make sure that both parties fulfill their end of the agreement).
One of the biggest advantages to using blockchain technology for these sorts of agreements is that there's no middleman to slow things down or take a cut--and everything's handled automatically and securely by an encrypted network.
What are the barriers to blockchain adoption?
While blockchain is a promising technology, it's still in its very early stages. The only places you'll find it being used right now are developments related to cryptocurrencies like bitcoin. For businesses, there's a lot of uncertainty about how this new software could impact their operations--and many fear that it's not secure enough for widespread use.
In terms of security, it can be challenging to get all parties on the same distributed ledger to agree on the validity of any transactions made. Right now, companies have dozens of different databases and applications that can be accessed by employees from any location--but these systems aren't always compatible with each other.
