Here is a simple example to understand how blockchains work. Man has been keeping records for over 5,000 years. Writings on clay were used to document important hot historical events, basic bookkeeping amongst other things. We all know that this developed to writing on papyrus 1000 years later and finally paper 2000 years later. It was not until 100 years ago when any necessary documentation was done on paper. This included things like lands documents, bank documents, book keeping records etc.
The invention of computers changed the game. While paper could easily be destroyed, records could now be kept safely for a longer time with duplicates easily made using computers. When paper was being used, if, for example, you are a Scientist and need another Scientist to review a new invention, you would probably need to send them your work, via post mail. Once they got it, a few days or weeks later, they would look at it and if they made any corrections, they would have to send you the new record, again via post mail. The whole process was time-consuming.
Computers and largely the internet made this back and forth easier. Someone can send you a word document that you will get instantly review, correct and send it back in no time. What used to take months can now be done in an hour or two. However, this too has its challenges. For example, a document can only be edited by one person at a time. Also, cybersecurity has become a major nuisance as someone can hack into where the file is saved and modify it or even delete it all together.
Enter blockchain. Imagine the above analogy but now, the same document can be edited by anyone in real time and everyone has a copy of the latest modified document. If it is a bookkeeping document in an organization with many accountants, all of them can work on the document at the same time without having to wait for one accountant to finish their part, then send it to the next accountant and so on and so forth. That is how blockchain works.
A Blockchain is a digitized, decentralized, distributed public ledger. It is a growing list of records stored in ‘blocks’. Each “block” represents a number of transactional records, and the “chain” component links them all together with a hash function. As records are created, they are confirmed by a distributed network of computers and paired up with the previous entry in the chain, thereby creating a chain of blocks, or a blockchain.
One advantage of blockchain is that it is easy to corroborate transactions since everyone using the system has a record of it. The users sort of form witnesses of the transactions. Another advantage is that hacking is almost impossible as a hacker would need to delete the records of everyone as deleting one record would still leave everyone else with that record except for the user you have deleted.
Public blockchains are mainly used in cryptocurrencies such as bitcoin, Etherium, Litecoin, Ripple, Dash just to mention. Blockchain was originally developed as the accounting method for bitcoin. Some private blockchains are now being used for business and commercial use. Blockchains have successfully been used in Crowdfunding, supply chain auditing, protection of intellectual property specifically when it comes to peer to peer music distribution system. Currently, areas that are being explored include smart contract system (an automated system that make a sale or buy when a certain condition is met), Governance (with regards to polls) and identity management on the web.
Blockchain potential is huge, and while not many companies have embraced it in the World, let alone in Kenya, it is something that is about to change.
I am a former investment Analyst who has recently ventured into the business world as a young entrepreneur. In my free time, I use the pen as a sword to shape the world so I can feel how awesome it would have been if I were a writer.