There’s a new kid on the block
Over the years I’ve written a number of articles where I do my best to dissect discerningly complicated new technologies from a non-technical perspective. I’ve covered everything from bitcoin to IFTTT, and my next challenge is to try to describe, in layman’s terms, the wonderful world of blockchain. It’s predicted to be huge within every industry in the next 5 years, so read on to stay ahead of the game.
What the hell is it?
Unless you’ve been hiding under a rock, you’ll be aware of bitcoin (a form of digital currency that’s created and held electronically). Bitcoin and blockchain are two separate entities, however it’s difficult to explain what a blockchain is without explaining where it was first born.
Created and realised by the ‘almost mythical’ Satoshi Nakamoto back in 2009, blockchain technology underpinned bitcoin from the very start. Without it, it’d be impossible to transfer and verify bitcoin transactions without compromising on its security and speed, allowing things like double spending to occur.
If you’ve never visited Sideways Dictionary, I’d suggest you check it out for easy-to-understand analogies for pretty much anything in technology. I’m just going to use their description of blockchain as it’s difficult to beat:
“It’s like a public ledger. Every transaction performed through the blockchain is recorded on the public ledger of transactions. And instead of only having one ledger and source of truth, every person has a copy of the ledger and perform checks to insure all transactions are legitimate.”
So, how does it work?
The core requirement for a successful blockchain is having enough people involved that a third party is not needed. This can be done with as little as 3 people, however in reality, cryptocurrency would not have the momentum it does without its hundreds of millions of users trusting it.
Each person that joins the blockchain is given a unique address and a folder for storing data. In bitcoin’s case, this folder stores your bitcoin and is called a wallet.
When individuals on the blockchain decide to transfer something from their unique wallet, everyone in the network is able to see this transfer. It’s firstly verified to make sure it’s possible (i.e. they have enough bitcoin to transfer) and then recorded to the blockchain register.
As this register fills up with more and more records of transactions, it will eventually run out of space and need a new page to record everything. This is called Mining, a process of verifying, securely sealing, and filing away pages of records. Those in the network that help with this service are rewarded for their efforts.
It’s worth noting that the security of a blockchain relies entirely on the honesty of the people using it. Theoretically, if you have more dishonest users than honest, the network will fail. It runs on the assumption that the majority of people are trustworthy.
What problem does it solve?
If you think about the current banking system, in order to transfer money you have to rely on a middle man or third party to firstly check you have the funds, then handle the transaction to the recipient. Physical money isn’t actually transferred, however an entry in a register is updated. In this banking example, a relatively large fee is charged in comparison to a system that is decentralised.
The system does clearly work, however it does have potential drawbacks as it only uses a single person or organisation to handle the transaction. What happens if:
- The register that transaction is recorded on gets compromised, hacked or destroyed
- There are mistakes made when making transactions (£10.00 instead of £1,000)
- That single person/organisation decided to become corrupt and purposely adds incorrect transactions
- An entry is recorded multiple times
Yes, these scenarios are unlikely. However, as times change and fees increase to maintain this centralised approach, the question is now being asked: is maintaining this register ourselves as a blockchain the way to go?
What does the future hold?
Outside of cryptocurrency, there has been a lot written about the potential uses of a blockchain. More traditional institutes, such as the banking sector, have already invested heavily in the technology as they can see the immediate benefits.
“Banks do very similar things to each other, even though they compete.”, says Simon Taylor, vice-president of blockchain research and development at Barclays, when talking to the BBC last year.
“They basically keep our money safe and a big computer keeps track of who has what. But getting these computers to talk to each other is remarkably complex and expensive – the tech is getting a little old.”
Speaking of the benefits, Mr Taylor says, “If banks started sharing data using a tailor-made version of blockchain, it could remove the need for middlemen, a lot of manual processing, and speed up transactions, thereby reducing costs.”
“Having access to an open, transparent ledger of bank transactions would also be useful for regulators,” he adds, “and it could help governments tackle tax fraud.”
Outside of more obvious applications, by removing the need for trusted third parties, a blockchain does have the potential to make transactions within any network infinitely more efficient.
It’s worth reading The Next Web’s thoughts on different industries that are looking to implement this technology, which includes Voting, Real Estate, Shipping and Cybersecurity. As long as there is a need to securely pass data quickly and without restriction, then the possibilities seem to be endless.
When it comes to Home and the wider advertising industry, the most notable possibilities come from the working group iab. They’re reviewing blockchain as a whole and how it can improve the digital advertising landscape. A solid example that they’ve referenced would be AdChain, a blockchain that stores a network of domain names accredited with non-fraudulent activity. Additionally, they’re able to offer advertisers and publishers much more control on the data around campaigns (e.g. participants, media and placements).
In true transparency, I’m not a developer so the intricacies of blockchain are still difficult for me to comprehend. I have however seen enough real-life examples where I can see the benefits of decentralisation. Overall, it’s important that in every industry, including advertising, we keep up to date with new and emerging technologies like these because they open up opportunities for making business more efficient and secure.