One of the latest technologies that has been disrupting almost every industry over the past few years is blockchain. Millions of dollars-worth of research has gone into exploring the potentially endless possibilities of blockchain technology, including numerous tests to establish which areas blockchain is the most appropriate solutions and which areas are better off maintaining a traditional system.
Razi Salih has worked extensively in the financial sector over the past ten years, with some of his projects involving blockchain technology. There have been many tools designed to help individuals and businesses work out if blockchain is the right system for their purposes, or if they would be better retaining a client-server database.
Blockchain removes the requirement for transactions to be authorised by a central authority. This can be an advantage in many cases, but there remain scenarios where it still makes sense for a human third party to verify and authorise transactions. If data privacy is of the highest priority, it may be that storing that data needs to be done in a way that is not connected to any network, for example.
However, blockchain creates a system where each individual user has a unique digital identity and enables push transactions using secure private key cryptography. By removing the requirement for elaborate and costly accounts to establish secure digital relationships, blockchain can ensure data privacy and security at a lower cost than a traditional master copy system.
More information about how a distributed ledger system works can be viewed in the embedded PDF.
Blockchain in its current format is not as fast – in terms of the speed in which each transaction is processed – as a traditional data entry system. Businesses that require transactions to be processed in milliseconds may therefore be better off sticking to the old centralised systems for the time being, although blockchain may well get faster as the technology advances. The mining or processing of each block in the blockchain can be costly and time-consuming.
A definition of mining for blockchain can be seen in the short video attachment to this post.
Establishing Digital Identity
Blockchain establishes a unique digital identity for each user of the chain, which is identified through a private encrypted key and a public key. The private cryptographic key is used for expressing consent to any interactions that take place digitally within the chain. The public key is used in a similar way to an email address, to identify each user in the crowd.
Data Record Keeping
Blockchain has revolutionised the way we store data, providing a system where information can be stored both statically, such as in a registry, or dynamically as each transaction takes place. There are three ways in which registry data can be stored in a blockchain. The infographic attachment looks at these three different types of data entry, which can be used in any combination.
This shared yet secure system of record keeping has the potential to dramatically reduce the cost of sharing information among companies that require procedures such as cross-checking records or sharing processes.
Systems that require the processing of a lot of data that is highly dynamic, such as where there are frequent, regular transactions being made, may find that blockchain provides the ideal solution. Keeping records up to date using a traditional paper system when information is in constant flux can consume a lot of financial and human resources. There are also certain limitations and risks when it comes to manual data entry systems. In these cases, a system underpinned by blockchain could save time and prove more cost-effective.