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Blockchain: the most disruptive tech in decades

What does blockchain do?

As a peer-to-peer network, combined with a distributed time-stamping server, blockchain databases can be managed autonomously to exchange information between disparate parties. There's no need for an administrator. In effect, the blockchain users are the administrator.

Additionally, blockchain networks can be used for "smart contracts," or scripts that automatically execute when certain conditions are met. For example, users of Ethereum's Ether exchange must meet pre-determined conditions that prove someone owns the cryptocurrency and have authority to send the money they claim to own. In addition, multiple blockchain users can create contracts that require more than one set of inputs to trigger a transaction.

One example: real estate transactions require sign offs between buyers, sellers and their financial institutions.

How is blockchain secure?

While no system is "unhackable," blockchain's simple topology is the most secure today, according to Alex Tapscott, the CEO and founder of Northwest Passage Ventures, a venture capital firm that invests in blockchain technology companies.

"In order to move anything of value over any kind of blockchain, the network [of nodes] must first agree that that transaction is valid, which means no single entity can go in and say one way or the other whether or not a transaction happened," Tapscott said. "To hack it, you wouldn't just have to hack one system like in a bank..., you'd have to hack every single computer on that network, which is fighting against you doing that."

The computing resources of most blockchains are tremendous, Tapscott said, because it's not just one computer but many. For example, the Bitcoin blockchain harnesses anywhere between 10 and 100 times as much computing power compared to all of Google's serving farms put together.

"So again, [it's] not un-hackable, but significantly better than anything we've come up with today," Tapscott said.

Public vs. private blockchains

There are a variety of blockchain permutations, and they fall mainly into one of two categories - public or private. Public blockchains allow anyone to see or send transactions as long as they're part of the consensus process. There are also consortium blockchains, where only a pre-selected number of nodes are authorized to use the ledger. For example, a group of banks and their clearinghouse might use blockchain as part of the trade-clearing, where each node is associated with a step in the verification process.

Private blockchains, in contrast, restrict the ability to write to a distributed ledger to one organization, such as a group of employees within a corporation, or between a set number of organizations, such as a number of banks that agree to a network partnership.

Along the way, blockchain - because of its self-policing security - eliminates huge amounts of record keeping, which can get very confusing when multiple parties are involved in a transaction, according to Saurabh Gupta, vice president of strategy at IT services company Genpact.

What industries use blockchain?

Shipping. Fintech. Healthcare. Blockchains are being put to a wide variety of uses in several industries. In shipping, for example, a bill of lading for cargo shipments has traditionally been paper based, which requires multiple sign-offs by inspectors and receivers before goods can be delivered. Even when the system is electronic, it still requires multiple parties to sign off on cargo shipments, creating a lengthy administrative process. To try and streamline that cumbersome process, the world's largest container shipment operator, Maersk, recently announced it is using a blockchain-based ledger to manage and track the paper trail of tens of millions of shipping containers by digitizing the supply chain.



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