Magazine article Information Today

Blockchain Comes of Age

Magazine article Information Today

Blockchain Comes of Age

Article excerpt

One of the more interesting parts of writing this column is learning about things that I really didn't know too much about beforehand. Yes, I know my way around intellectual property and privacy issues, and as a lawyer and a librarian, I know about our legal systems and structures, how they work, and how to find and work with the law. Tech areas are a bit hit and miss; I'm a pretty decent end user, but do not claim any particular advanced skill. Business tends to baffle me, but as a librarian, I can usually find enough information to clarify and explain what I need to know.

So this column is about business technology and the 600-year history of blockchain. Blockchain is the technology underlying the bitcoin cryptocurrency, a completely electronic currency that was developed after the 2008 economic crash. It has also been identified as a potential platform for a wide range of industry transactions, including for finance, insurance, real estate, and even music.

Systematic, Secure, and Long-Term

While blockchain itself is obviously not 600 years old, it is at its foundation a ledger system for recording and managing transactions. The ledger system was developed in 15th-century Italian city-states. Businesspeople and traders of all kinds used books to record the activities of their businesses, such as expenses of capital or inventory, payments to employees or contractors, income from sales or services, or even the barter or trade of one good for another. This systematic, secure, and long-term structure was needed so that the businesspeople or traders could tell not only the current state of their enterprises, but also the historical record that led to that current state. For most of the last 600 years, the entries were in books--initially handwritten, later printed or typed. During the last 50 years or so, computers have replaced physical books, but the basic principle has remained largely the same.

Blockchain maintains those core structures, but it is seen as having the potential to transform the basic transactional ledger into a disruptive (in the positive sense) cross-industry tool that, similar to the internet itself, may create entirely new methods for reaching customers and making money.

'Hashed'

Blockchain refers to both a specific digital transactional ledger and the software, network, and protocols that provide the technological infrastructure. The blockchain infrastructure uses largely open source software to create a database of data entries that represent transactions and are distributed across hundreds or thousands of computer nodes. The software forms a message or messages related to a transaction into a "block," assigns it a header and time stamp, and then "hashes" it. The "hash" is an encrypted reference to the underlying data message, which remains part of the block, while the data itself is moved outside of the block. This provides a high level of security, as any hack of the hash within the block will not reveal the underlying data.

Blocks of transactions are then chained together, with each block referencing the previous block. The chain is both permanent and distributed. As a result, any attempt to alter data within a specific block is obvious to the blockchain's users because it would no longer correspond to the information in the subsequent blocks in the chain. All of the participants in the blockchain would be aware of the attempted change, and it would be rejected. Encryption, distribution, and the hash structure that keeps the core data outside of the block are all factors in blockchain technology's reputation for being highly secure. …

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