What is Blockchain Technology?

by Sean Boyce

I’m sure by now you’ve heard of the increasingly popular cryptocurrency bitcoin.  Possibly in your travels throughout the internet you’ve also heard the term blockchain.  There is a reason why blockchain and blockchain technology is often mentioned when people are talking about cryptocurrency (such as bitcoin).  Blockchain technology is what has enabled the functionality of cryptocurrencies like bitcoin.  It is the magic behind the scenes that has led to a revolution in the way we interact with tech products.  So before you can truly understand cryptocurrency, you must first understand what blockchain technology means.

Where Does the Term Blockchain Come From?

Blockchain is a reference to how digital information is organized and tracked.  Each digital transaction has the potential to add a new block to the chain.  This is where the term blockchain comes from.

How Does Blockchain Work?

When a digital transaction takes place it is broadcast to a network of computers, referred to as nodes, to validate and keep track of the new transaction.  This new “transaction” can be of anything from a record of something to cryptocurrency.  After the transaction is verified it is added to the end of the current chain of blocks (blockchain) so that all the nodes in the network can keep track of it.  This digital ledger is kept and tracked by all nodes in the network.  When another transaction needs to be verified all nodes in the network have the latest information they need.  This is how the blockchain gets created and updated.  

Power to the Public

One major benefit to blockchain technology is transparency.  The data in a blockchain network is decentralized.  This means the data is not stored in any one particular location.  This was the  old school way of storing data which came with a host of problems like a lack of transparency and single points of failure.  With blockchain those problems are alleviated.  Since the data is distributed across all nodes in the network losing one node does not compromise the whole network.  Also with all nodes having access to the blockchain everyone knows everything so transparency is optimum.

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The Potential: A New Internet

Blockchain technology is so revolutionary it has the potential to inspire a new internet of sorts.  The potential of blockchain technology to disrupt industries and business practices is significant.  Blockchain technology has enabled digital information to be distributed.  There are many benefits to blockchain technology when compared with older versions of keeping track of data.  One of the most easily understood examples is comparing a traditional Microsoft Word document to a Google Doc.  With Word we used to have to create the document and send it to someone to be edited.  Once updated the other person would have to send it back to us so we could see what they changed.  With a Google Doc numerous users can update the document simultaneously.  This give users tremendous freedom and is a much more efficient process.

Blockchain technology has already begun a revolution in finance with the invention of cryptocurrency (think bitcoin), but it hasn’t stopped there.  New products that are utilizing blockchain technology are being developed on a daily basis.  We will continue to see disruption involving blockchain technology.  Right now the industry with the biggest potential for further disruption is FinTech.  More on that to come.

If you’d like to learn more about product management or talk more about the services I offer as a product management consultant please feel free to reach out to me at sean@nxtstep.io.  Keep disrupting.

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