Although it’s a topic of debate in the business world today, there’s still no clear consensus on whether “Blockchain” is just a buzz word which will soon fizzle away or is it something that has the potential to transform dramatically the way businesses function in the near future.

“Bitcoin”, probably, is the first, and at times, the only dimension that springs out at the mention of the word Blockchain. This article attempts to offer a broader definition of Blockchain that captures its other unique and defining characteristics.

The technology of Blockchain, being in its relatively nascent stage, is still far away from its widespread commercialization. However, in the race to stay ahead of competition and to avoid any missed opportunity in today’s competitive & globalized business world, strategist & planners have started paying heed towards this technology and have begun to investigate into all probable applications of this technology in various aspects of businesses. This has resulted into a rapid evolution and widespread adoption of Blockchain by industries.

Put simply, Block chain is a decentralized database that stores a ledger of transaction across a peer to peer network. When one wants to add a transaction to the chain, all participants in the network validate this transaction and its user’s status by applying an algorithm. This transaction then becomes a verified transaction and gets appended to other verified transactions and create a new block of data for the ledger. This block then gets sent to all the nodes in the network and gets validated and then added to the existing block chain. Each successive block contains a cryptographic hash, which is unique fingerprint of the previous block.

Cryptography secures the data and new transactions are connected to the previous ones, making it near-impossible to make changes in older records without having changes in subsequent ones. And because multiple “nodes” (computers) run the blockchain network, one would need to have control of more than half of them in order to make changes. Overall, block chain technology promises greater security and lower costs than traditional databases.

In simple language – consider of a spread sheet which is duplicated million times across a network of computers and this is designed to update regularly. Or you can say it is similar to Google doc, where all participants within a network see all changes to the ledger and the ledger is constantly updated.

Let’s now check out some facts and fictions about blockchain.

Facts:

1. It cuts out cost and time of intermediaries because it establishes a peer to peer network within one system. As an example, a stock purchase that’s transacted using block chain does not need another entity to process transaction and would be settled automatically in minutes.

2. Only 0.5% of the world’s population is using block chain today but approximately 50% use internet. Penetration of this technology is still low despite significant investment by tech giants such as IBM, Microsoft etc. IBM has invested $200 million and over 1,000 employees work around the year in blockchain-powered projects. The average annual investment in blockchain projects is $1 million. Firms working on blockchain technology projects include IBM, Microsoft, Walmart, JPMorgan Chase, Nasdaq, Foxconn, Visa, and shipping giant Maersk.
   

3. Practically, it is permanent in nature. Once written, not a single entry of a blockchain can be later removed or altered by a handful of users since this would require changing all nodes in the network which is practically impossible. This is why data once written into the blockchain is practically unfalsifiable and irremovable by intention.

4. Block chain are highly transparent because anyone with access to a blockchain can view the entire chain. However, while creating exclusive blockchains, for instance, in banking, developers can limit the information which is freely accessible to all. This can be done based on access rights whereby, only the rightful user is allowed to read and process the entries in blockchain.
   

5. Block chains are of mainly three types: Block chain can be categorized as public, private and federated (consortium).
   Public blockchain gives right to everyone to participate. All that one needs is to download the code and start running a public node on their local device. Participants can validate the transactions and participate in the consensus process on the network. A Public Blockchain is thus “for the people, by the people and of the people”.Private Blockchain, on the other hand, is based on access rights. Here, permissions or access rights are restricted for an organization or for a network of few organizations. Generally, access rights to modify the database is kept centralized or limited to one organization while read permissions may be given to many.Federated block chain is a bit of both, Public and Private Blockchain. Here, there are a group of companies or representative individuals coming together and making decisions for the best benefit of the entire network.

6. Blockchain can work in collaboration with other applications also. One can implement blockchain in more ways than one. Its value increase when it works in conjunction with other applications. It can be collaborated with ERP, IOT, and AI etc. Block chain’s capabilities are continually evolving with new features or add-on applications.

Fictions:

1. Blockchain records can never be hacked or altered: No system or database can ever be completely secure. Theoretically, a block chain can also be hacked or altered. But, owing to its large and widely distributed storage network, it is practically incorruptible and irrevocable as of now. However, as computational resources continually evolve and technological advancements never cease, impact of future technology on the integrity of blockchain remains unclear.

2. Blockchain can be used as a complete database in the cloud: The blockchain is a simple list of transactions and is similar to a flat file. It does not allow you to store any document in physical form like word file or pdf etc. It can only contain data in form of code or fingerprint which certifies the existence of any such kind of document. In such cases, where document in required for any transaction, the user can store this document on cloud or on specialized service provider networks like IPFS and thereafter store a link to this document in the form of a fingerprint or code into a block chain. User can implement his/her own policy on the storage service to allow only select users with the access rights to download this document.

3. Blockchain and bitcoin are same: Because of the sudden wave in cryptocurrency market and popularity of bitcoin, people often get confused between bitcoin and its underlying technology block chain. Blockchain is the underlying technology on which bitcoin runs. Bitcoin is a cryptocurrency or virtual currency which is created and stored in blockchain. It makes electronic payment possible directly between two parties without going through any intermediaries like a bank. Bitcoin is a smart application of blockchain technology.
   

4. Blockchain can only be used in financial sector: Popularity of cryptocurrency have made blockchain synonymous to financial services. Block chain has vast areas of application and finance is one of the areas where it has shown huge potential (international payments, remittances, complex financial products). There are several high profile block chain pilot projects currently under implementation in different fields like supply chain, real estate, healthcare, microfinance and some of them even at personal levels like the ones which create a unique personal digital identity. All-in-all, the applications for blockchain technology, given today’s digital scenario, seem endless.
   

5. Blockchain is not for common people: It is accessible to everyone, everywhere. All one needs is an internet connection in order to start using it. For example, it can be applied to identity application in the following areas: digital identities, passport, e-residency, birth certificate, wedding certificates, Ids etc. It can be scaled to fit the needs of the user and therefore a wide variety of individuals, groups, businesses and non-business users can take advantage of it.

6. Blockchain is cheap: It’s a fact that cost of sending funds using cryptocurrency is comparatively lower than the traditional money transfer methods. This probably has generated a misconception that Block chain is cost effective and cheap. As of now, blockchain remains a costly affair as it involves huge resources spread across multiple computers to run it. Each ‘block’ in the block chain consumes large amount of computing power to solve and this incurs real world costs such as electricity, manpower and infrastructure. Currently, operating a block chain is similar to running a high profile software development project. As technology advances over time, cost of implementing blockchain in future is set to reduce.

Though blockchain holds great promise, today’s blockchain is still in the very nascent stage and we need to first clearly understand what the block chain is and how it can add value to business before mass adoption.