Blockchain simplified

In this article, I will attempt to give a high-level overview of Blockchain, some current and potential use-cases, and challenges with Blockchain in simple words.

What is Blockchain?

A blockchain is simply a ledger (one which records transactions), which is decentralized (that is, instead of one centralized server, exact copy stored on multiple nodes) and immutable (that is, one which cannot be altered). Blockchain makes this possible by using strong cryptographic encryption, linking/chaining of blocks, consensus protocol, and others. (In the interest of keeping this simple and high level, will skip details of all those things for now). The ledger itself can also be programmed to trigger transactions automatically.

So, what makes Blockchain useful?

Decentralization and immutability are the biggest technical benefits which translate into two big benefits from a business perspective -

• Trust with no dependence on a central authority
• Transparency with publicly verified transactions

Trust allows individuals, organizations, machines, and algorithms to freely transact and interact with one another with little friction. Transparency allows us to avoid intermediaries like lawyers, brokers, and bankers.

In the next section, we will look at some of the use cases to understand these benefits in more detail.

Blockchain use cases

• Financial currency - Bitcoin is probably the most known use case of Blockchain, one that makes people believe that Bitcoin and Blockchain are interchangeable terms. Bitcoin is a digital currency that people can use to buy and pay others in the network without the need for intermediaries and central authority (like the central bank of each country). The Bitcoin transactions are stored in blocks and publicly verifiable (the entity sending/receiving coins is anonymous). Anyone can create a block (the technical term is 'mining' a block) and earns by keeping a part of Bitcoin with itself for putting the transactions on the block.
• Social Media- Steem is a blockchain-powered social media platform (think of something like Facebook) where users are rewarded (in Steem currency) for writing content and/or liking/commenting. It promises control of your own content, no sale of user data, and free speech. The content (posts, comments, likes) is stored on the blocks and the company earns from people/companies wanting to share promoted content on the platform.
• Cloud storage- Sia is the decentralized cloud storage platform that leverages blockchain technology to create a data storage marketplace where people can buy and pay rent for available spare hard disks on networked machines. The blocks here store transactions between the host and the renter and the company earns a small commission on every rent amount. The rented disk space offered by the platform claims to be cheaper than public cloud storage companies and lower risk because of decentralization.
• Supply Chain- Provenance offers a platform to combat counterfeiting by providing stakeholders with a transparent, secure, and highly accurate audit trail of any item in the entire supply chain. Here, physical goods are fitted with tamper-proof RFID tags, holograms, and QR codes that get scanned through each stage of the supply chain, all of the information is recorded on a blockchain. The company charges a fixed monthly fee for on-boarding and maintaining the blockchain infrastructure.
• Academic research - A blockchain-based system for research data could prevent data manipulation by providing a complete, transparent audit trail of all data that is collected, processed, and accessed by researchers. Any modifications made to research data would require at least 51% consensus from stakeholders and would be visible to everyone- ensuring high data quality and preventing individuals from acting dishonestly.
• Internet of Things (IoT)- Blockchain can be used to record the sensor data information shared by various IoT devices which power smart-homes, autonomous vehicles, supply chain, automotive industry, etc. Blockchain solves the need around interoperability amongst devices of various organizations, provides a scalable solution against a centralized database, and provides additional security and audit of the data exchange between multiple devices.

As can be seen, Blockchain solves a wide variety of use cases. However, Blockchain is not for all. Next section, we briefly explore when Blockchain is not for you.

When would Blockchain not be for your use case? 

• If your system doesn't need transparency 
• It needs to be pretty fast
• It's not a transaction-based system

Finally, we look at what the future holds for Blockchain.

Future of Blockchain

I found this inference from HBR on Blockchain pretty apt and therefore copying it as it is - "True blockchain-led transformation of business and government, we believe, is still many years away. That’s because blockchain is not a disruptive technology, which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly. Blockchain is a foundational technology: It has the potential to create new foundations for our economic and social systems. But while the impact will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure."