Most of us have heard of blockchain but, be honest, do you really know what it is, what is does and how it works? In the popular imagination it seems to be the same as bitcoin, which seems to be about making rich people even richer. It is, but it’s actually got far wider implications for us all than some crypto-currency that few actually understand, yet alone profit from.
Unfortunately, when you go to investigate further it becomes confusing, to put it mildly. Even Googling “Idiot’s guide to blockchain” doesn’t help, because you get this sort of thing…
“Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree. Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain. This iterative process confirms the integrity of the previous block, all the way back to the original genesis block.”
All clear now?
No, I didn’t think so. OK, try this? Blockchain is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way." (according to the Harvard Business Review).
Or, in plainer English, Blockchain is a clever way in which any transaction or piece (block) of data can be joined into lots of others along a “chain.” Crucially, all this information is publicly accessible but virtually impossible to hack into or otherwise fraudulently disrupt.
One good way to visualise blockchain is to start by thinking about how you might email a Word Document to another person to ask them to edit it. Clearly, this way it’s not possible for both people to work on the document together. However, Google Docs does allow two or more people to edit one document at the same time. Think of Google Docs as an extended network where people can work simultaneously and accept or reject every change as it’s proposed. Blockchain takes this networking analogy several stages further, so, for example, you could have an entire property chain, with all its communication, checks and final purchase all in one place, accessible publicly across many computers in different locations but, as I said, well-nigh impossible for a criminal to crack.
The reason why it’s so difficult for the cyber-criminals to hack is because all these blocks are cryptographically linked to each other. They all have their own timestamp and unique cryptographic fingerprint (called a hash). To use our property chain example, every time someone adds a new piece of information (block) to the chain, they and everyone else in the chain must verify this change. Blockchain technology makes this easy and once verified this new block of data has its own fingerprint (hash), but also contains the fingerprint of the previous block, to which it then is inextricably linked. If a criminal tries to get into any block in the chain to change it they would quickly find that this is impossible without altering all the other blocks in the chain – something that they can’t do as it requires everyone else in the chain to verify it (and the amount of computing power to override this is so large that it is not realistically feasible to try). Moreover, at this point it becomes clear that something is wrong and the criminal attempt to gain access is rejected. Or, again in plain words, blockchain is exceptionally secure, much more so than conventional internet technology. That’s one of the reasons why it’s been quickly adopted for crypto-currencies like bitcoin.
Blockchain will become central to our future lives in the same way that the internet has become indispensable over the last few decades. And just how that might work in property and construction will be the subject of my next blog.
Chris Peace, MD, Peace Recruitment