Blockchain’s ground-breaking applications

Blockchain Technology—The basics

Blockchain Technology defined

What is blockchain technology? Most people associate the term blockchain with Bitcoin (the Internet-based currency). However, Bitcoin is now only one of many public blockchain platforms using blockchain technology in banking—all of which keep permanent time-stamped records of various transactions for the public to see and verify. For example, people now use blockchain to timestamp digital documents and images. This provides confirmation that a person had a file at a specific date and time.

Public blockchains are useful for things like patent and copyright visibility. Governments that opt for data transparency can publish information on blockchain platforms to provide the public access to files with time-stamp and originator information.

A private blockchain is different in that it gives their contributors control over who can read transaction ledgers, including who can submit and verify them. This is often a necessity for financial transactions that need to be kept private among validated users. By comparison, a public blockchain platforms allow anyone from any region of the world to read and write transactions. In some cases, this has resulted in collusion to ‘fix’ certain transactions. More concerning–some participants operate on the dark net to exchange illicit goods for Bitcoin or other digital currencies, like Monero.

Defining characteristics of blockchain platforms

  • Distributed access to transaction information
    A complete history of blockchain transaction information is available to all network users. There is no central control node. Records are verified without the use of any intermediary. Each ‘node’ stores information that is made accessible to other nodes.
  • Transparency with the option of anonymity
    Every user on a blockchain has a unique, identifying address (a 30 + alphanumeric code) to validate identity. Transactions occur between addresses. Users can either choose to remain anonymous or provide information about their identity to others.
  • Records of transactions are permanent
    Transaction information, which is linked to every previous and subsequent transaction, cannot be changed. This is because algorithms and other digital techniques ensure that all records are permanent, time-stamped, and available to others on the network.
  • Computational Logic
    Because ledgers are digitally based, they are programmed/programmable. They are therefore open to users who want to create algorithms that establish new rules for transactions with other nodes.

Bottom line – blockchain technology is more valuable than bitcoin or any other digital currency it may use. Though blockchain platforms are for the most part secure, they nonetheless have distinctive security vulnerabilities which require proactive measures before the launch of any new ledger.

Accuracy of data is not guaranteed by blockchain networks

The accuracy of blockchain information isn’t guaranteed unless cross-referenced against other sources. It’s hoped that in the future, participants will have more ways to determine the validity of data. For example, federal government employment data could be checked against state, local, or academically researched information that has been time-stamped and signed by the most credible participants.

This opens the door to an exciting possibility for government oversight that better serves the interests of companies and citizens: for example, both governments and technology companies could update information to a blockchain. In turn, regulators could use this data, in real time, to apply rapidly changing algorithm-based regulations. Such a regulatory environment would allow companies to move faster while at the same time more efficiently protect ever-evolving consumer safety and rights. This could go a long way in resolving the corrosive distrust and frustration that now exists between government, business, and citizens.

Blockchain’s biggest security challenge

No system is secure without sophisticated, high-quality architecture that is bug-free. The main challenge with financial transactions like those on blockchain is that the private key (the long alphanumeric code designed for each input) can be stolen or lost, just like cash, if not stored securely. The issue for blockchain technology applications according to one estimate, this problem has resulted in bitcoin users losing $950 million.  Bitcoin still lacks a way to protect those who have lost their private keys—and so, they’re impossible to recover if lost or stolen. So blockchain technology companies still have this hurdle to face.

Some private blockchain owners are considering ways to reverse transactions, especially those that are shown to be theft. The potential downside of frequent transaction reversal is that it would undermine the confidence or participants in the system’s fairness and impartiality. That said, no system with inherent security flaws will be tolerated by users.

Other key points:

  • While there is no central organizing authority in a blockchain system, private blockchains may give more control to their more important contributors, including, in some cases, even latitude for transaction reversal.
  • The accuracy of data is not guaranteed by blockchain networks, though some private blockchains are moving in that direction. Some public blockchains are likely to follow, especially health-care networks and those that are government-based, all of which require validated information to earn member trust.
  • Blockchain’s biggest security challenge is securing private keys (the long alphanumeric code designed for each input). If not stored securely, they can be stolen or lost just like cash.

Blockchain key theft is largely preventable

If you currently participate in a blockchain network or are considering doing so, implement the following to protect your private key information—

  • Discourage users from sharing private keys. –Unfortunately, for the sake of convenience, some networks allow members to share alphanumeric keys using a common password.
  • Minimize external connections for any computer with private key information. Avoid a stolen bitcoin wallet and be sure to be aware of the rising trend of bitcoin theft for 2017.
  • If interested in the most secure level of protection, consider using cryptographic hardware that meets the minimum of FIPS 140-2 Level 2 certification.

New, exciting blockchain applications

The 2016 election results underscored the unreliability of pundits and pollsters in predicting outcomes. Blockchain-basedswarm intelligence,” has already achieved surprising reliability in predicting everything from Academy Awards winners to Kentucky Derby champions.

Still in beta test, blockchain tools from Augur and similar tech organizations will in the future have a revolutionary effect on investments, commodities trading, derivatives, credit default swaps, and private equity distribution. Such predictions would be open to large numbers of people who would be outside the reach of financial regulators. In far future, this could presage the elimination of intermediaries in stocks and bonds trading.

Finally, blockchain technology may also eventually give us control over their own medical records, which would be stored at a person’s private, secure online address. Sharing of that information could then be limited to trusted recipients.