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FAQ: What is blockchain and how can it help business?

Lucas Mearian | April 26, 2017
The distributed ledger technology has enormous potential for firms that figure out how best to use it.

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

"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. 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 pointed out in an online interview, because it’s not just one computer but many computers. For example, the Bitcoin blockchain harnesses anywhere between 10 and 100 times as much computing power compared with all of Google’s serving farms put together.

"So again, not unhackable, but significantly better than anything we’ve come up with today," Tapscott said.

Are there different blockchain permutations? Yes. There are several general uses for blockchain platforms. There are public blockchains, which allow anyone to see or send transactions as long as they're part of the consensus process There are 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.

And there are private blockchains, where the ability to write to a ledger is restricted to a single organization.

Where does it go from here? Regardless of who developed it, businesses should always take a pragmatic approach when adopting any new technology, according to Gupta.

"You can't ignore it, but you can't just blindly adopt a new technology. The key is to see if it makes sense for your business problem," Gupta said.

Blockchain is emerging from concept to reality as products that use it are just now coming to market.

There are, however, more than 15 blockchain distributed ledger platforms being developed in parallel, with specialist applications on top of them, according to Gupta. The industry will need some standardization to encourage widespread adoption.

"Such challenges are common with new technologies," he said, "and even with this concerns, blockchain is seeing a lot of interest."

 

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