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How Blockchain Could Improve Business Performance Part 1

How Blockchain Could Improve Business Performance and Create Smart Economy. Part 1. Immutability of Blockchain Records.

 

While most people have heard about blockchain technology in connection with cryptocurrencies, the technology is more about just financial operations. It is about sharing data in a transparent, yet cryptographically secure way. With blockchain, businesses can digitally track ownership of assets around the globe, which open new opportunities for cooperation between all kinds of entities and for new business models.

At the heart, any blockchain network is a ledger, just like a typical ledger you are used to such an Excel. Pages in this digital ledger are called “blocks.” For example, the Bitcoin blockchain creates new blocks of its blockchain on average every 10 minutes, so that the blocks are relatively small. This is similar to a bank of keeping a record of its transactions in a paper ledger and switching to a new page every 10 minutes.

Each block of the Bitcoin blockchain is a ledger that contains information about transactions that have occurred between the time of the creation of the block and the previous block.

The Bitcoin blockchain is fully transparent, which means that you can see all the information about all the transactions that have happened on the Bitcoin network since its inception in 2009 by visiting Bitcoin Blockchain Explorer at https://blockchain.info/

For example, it took the network 8 minutes to create block #520131, which means that the block contains all the transactions that have occurred on the network during those 8 minutes. Block #520131 contains information about 2056 transactions. The total volume of the transactions included in the block was 1,034 bitcoins. You can see all the transactions in the block by scrolling down the page of the block at https://blockchain.info/block/00000000000000000026d5b7932e158414a7592c77bb8b0d84db9dcfac8b32c7. On the very top of the page, you will see a table with the basic information about the block such as the one mentioned above: block time creation, total volume of transactions, and so on. However, if you start scrolling the page down, you will notice that is has full information about all 2056 transactions.

This is how Bitcoin blockchain and many other cryptocurrencies keep a record of transactions that occur on their blockchain networks. This is also the reason why many cryptocurrencies aren’t truly private and anonymous. While the Bitcoin network doesn’t record or store identity information, it does store the information about addresses from which and to which users send funds. This means that if you know someone’s address, you can track all the funds that came to the address and when. This may not seem like a lot of information, but it is. If you know an approximate time when someone is sending the money or is usually receiving the money and the amounts, you could simply track the Bitcoin blockchain to find out when the transaction actually occurs.

While everything described above could be done with virtually any ledger, and definitely with most spreadsheet software applications, blockchain technology has a few major differences from regular spreadsheet applications.

 

Immutability of blockchain records

First, once the information becomes a part of a blockchain, it is impossible to change it. The information becomes cryptographically secure. To protect the information, different blockchains use different cryptography algorithms. For example, Bitcoin uses SHA-256, created by the United States National Security Agency. Litecoin uses Scrypt. NEO uses SHA-256 and RIPEMD160 while the Ethereum Network uses Ethash.

The fact that it is impossible to change the information on a blockchain means that it is only possible to add records to the blockchain. On the financial blockchains such as the Bitcoin these records are debits and credits, but on a different blockchain these records can be about something else, such as manufacturers of products making a record when a product is ready or a cargo company making a record for a container of cargo at certain checkpoints.

Even the property of immutability on its own makes blockchains superior to existing technologies because in the past a company or an individual could simply erase the data and try to alter the information in a system. For example, a shipping company could change the shipping date of a package for it to appear that the company has sent the package on time. With blockchain, such alterations are simply impossible and once data becomes part of a blockchain, nobody can alter it.

Fundamentally, this means that blockchain technology doesn’t just solve the issue of conducting financial transactions in the electronic form or the issue of record keeping.