Before we get started on what Blockchain is we just need to separate out Bitcoins from Blockchain – they are two different things as we shall quickly explain.
The relationship between the Bitcoins and Blockchain is similar to that of the World Wide Web and the Internet. The Internet is a globally interconnected network of computers whilst the World Wide Web (Web) is a service which sits on top of and relies on the capabilities of the Internet. The terms "Internet" and "Web" are often used to mean the same thing but they are very different and so it is the same with Bitcoins and Blockchain.
Bitcoins are a service which runs on top of and relies on something called Blockchain. Bitcoins are a digital currency and as it is a digital currency you don’t want people just randomly creating their own fake Bitcoins. To stop this from happening Blockchain was developed as a technology to provide an unchangeable digital record of Bitcoins right back to when they were first generated (an act of "mining" which has to be confirmed by lots of other "miners" to prevent fakes).
A Blockchain is therefore a digital record of transactions of a "something" in which each transaction can be followed back to the previous one and so the start to confirm its authenticity. That something could be a Bitcoin, a patient record, a mortgage application, an aircraft part - anything. This record of transactions (a ledger) is also widely distributed with multiple copies across the Internet (making it easily available and almost impossible to attack).
It is important to note that only the record of the transaction is available not what was actually transacted. Also each new transaction involving our "something" is created in such a way that it can only relate to the previous transaction and it cannot be tampered with. So from this you end up with a series of blocks (transactions) in a chain - hence the term Blockchain.
There was a lot of excitement about Bitcoins but the real interest is in the technology and concepts used for Blockchain. Like Web (and Email) as services on top of the Internet, other kinds of services can be put on top of or make use of Blockchain technology. In a world where increasingly things are geographically distributed and we want things now, a Blockchain can be used to record transactions, be sure they are genuine and share the records to prevent hacking.
An example of where this might be used is in Banking. At present each bank keeps a record (ledger) of all the transactions it undertakes which is fine but if you are looking to move things around quickly between different banks interacting with all these ledgers slows things down. However, if all the banks adopted Blockchain technology then they could contribute to a single shared ledger allowing transactions to be verified and validated and performed without the current hindrances.
Blockchains can be used for any kind of transaction records but are particularly suited to those where lots of people need to be able to check and share the records of transactions. Governments are very interested in it, Estonia being an early adopter for the services they provide their citizens.
Although the principles behind Blockchain are well established, its use beyond Bitcoins is still very much in its infancy. Start-ups, business and governments alike are all actively exploring its possibilities and once the concept is understood, opportunities where it can be used begin to appear all over the place and this is what makes it an exciting and interesting area of technology.
We hope you found this short article useful and bear in mind we have only provided a very general explaination of Blockchain. For more information, try the following:
And perhaps to provide a reality check...
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