Ever heard of blockchain? Best known as the technology that enables controversial cryptocurrency Bitcoin, blockchain could be one of the most significant IT developments of our time.
You don’t need to be a cryptocurrency expert to recognise blockchain’s transformative potential. Some of the world’s largest businesses are leveraging the technology to execute contracts without lawyers
, simplify records management
and facilitate secure cross-border payments
Gartner says that while blockchain is still five to ten years away
from mainstream adoption, its impact on IT departments will be significant. As a result, every IT professional should know what blockchain is, possible use cases, and associated risks.
Let’s take a closer look.
What is blockchain?
Blockchain is the underlying technology that makes cryptocurrencies like Bitcoin
possible. It is a secure, online ledger shared by all parties participating in a network.
Unlike other types of ledgers, blockchain maintains a record of every transaction ever made. Changes to records, such as money spent or received, are reflected in every copy of the ledger. Blockchain records cannot be lost or manipulated. This makes it possible to conduct transactions
without a ‘trusted’ third party, such as a broker, payment processor or lawyer.
Blockchain’s disruptive potential
While blockchain is disrupting industries such as financial services and accounting first, no sector is immune. In addition to finance-centric applications, like improving online identity management
and enabling real-time fraud protection
, other applications include:
•Secure voting systems
•Tracing the origin of diamonds
The challenge for IT professionals is to assist organisations to harness blockchain’s power, while maintaining security, performance and compliance.
What can go wrong – and how to fix it
Blockchain has its fair share of security and performance risks. As with any new technology, IT professionals should be aware of what can go wrong, and how to keep enterprise information safe.
Blockchain increases security in three ways: preventing identity theft, blocking data tampering, and thwarting denial of service attacks. However, it is important to remember that it is not a silver bullet solution.
Last year, a $79 million cryptocurrency heist
cast doubts on blockchain’s future. Sabotage is also a real threat, with miners theoretically able to work together to control and manipulate a blockchain network in a 51% attack
A private blockchain is one way to minimise security risks. Both private and public blockchains both use the same ledger technology
to record transaction data. The difference: only businesses can use private blockchains. Private blockchain applications are considerably more secure, and diminish the threat of rogue miners.
Longer verification times
Blockchain-dependent cryptocurrency payments are sluggish compared to consumer payment standards. As a blockchain grows, verification times increase. More computing resources are required to process even small transactions.
In Bitcoin’s busiest week, for example, the average transaction took two hours
to confirm. That’s much longer than the couple of seconds it takes to withdraw cash from an ATM. In fact, experts say that slow verification times are one of the biggest limitations
preventing blockchain from being widely implemented.
The solution? There isn’t one. Yet. For now, the best way for IT professionals to ensure fast verifications is to give precedence to less time-critical blockchain applications.
It’s still early days for non-Bitcoin blockchain applications, and the impact of blockchain on industry is uncertain. What is definite is that IT professionals with a detailed understanding of what blockchain is, and how its technology operates, will be positioned to leverage opportunities and dodge unexpected surprises and risks.