How a distributed database that maintains a continuously growing list of ordered records.
Blockchain has the potential to be a solution for a set of use cases but there are a number of governance, management, political, regulatory, risk, and technical hurdles that must be overcome first.
While there are a myriad of proofs of concept being conducted currently, most will not end up in production until the multi-party hurdles can be resolved. This could take years for most industry segments.
Before IT executives become enamored with the new technology, they should collaborate with the audit, corporate, legal, line of business, and risk management groups to gain buy-in that monies allocated to be spent to validate the chosen use case(s) are worth spending.
Blockchain, a distributed ledger technology
Blockchain, a distributed ledger technology, was popularized by Bitcoin in 2008.
The hype in blockchain picked up in 2016 when it was touted as “the answer” for all sorts of use cases because the shared ledger is encrypted but transparent to multiple organizations and the data cannot be erased.
The ability to share a ledger amongst organizations should reduce overall costs and could potentially eliminate reconciliation issues. Thus, while there is value to the distributed ledger technology, many of the expected use cases will fall by the wayside.
2016 saw the bifurcation of the tamper-proof database technology into multiple disparate offerings with different characteristics and the implementation of a myriad of pilots against each forked solution.
Variety of Choices and Differences
The bitcoin approach uses a peer-to-peer method where multiple individuals, called miners, offer their computing power to verify and record the cybercurrency transactions into the blockchain.
The distributed ledger database is public and open to all participants, and each network node stores its own copy of the blockchain. This process is slow and cumbersome but the transactions are transparent (even though the parties are not explicitly identified).
The anonymity makes the use of bitcoins desirous in certain black market circles and in 2016 one of the bitcoin exchanges was hacked with approximately $60 million stolen – so the technology by itself does not prevent fraud or theft.
Next- A number of projects