What it is and why it matters
A blockchain is a type of data store that stores anything of digital value. Each new transaction is stored in a block that gets added to a chain of existing records. A typical blockchain duplicates data across an open network so all parties in the blockchain see updates simultaneously, and all updates are validated through a public verification process that ensures accuracy without the need for a central authority, like a bank.
History of Blockchain
The technology behind blockchain data stores and workflows has been around since the 1990s. Bitcoin was the first full blockchain implementation. Created in 2008 and released to open source in 2009, Bitcoin is a peer-to-peer digital asset and payment system with no single point of failure.
Earlier attempts to create a digital currency system failed because digital transactions could be copied, allowing users to spend money more than once. Bitcoin solved the double spending problem with blockchain’s universal ledger and confirmation processes.
Blockchain offered Bitcoin a fixed set of mechanical rules so transactions can take place between private users without intermediaries. As Bitcoin rose to popularity, other digital currencies quickly followed with blockchain implementations of their own. Each new, successful implementation of the connected technology has led others to take note, causing an explosion of interest in blockchain across industries and applications.
Different types of blockchain
Not all blockchains are the same. Several current cryptocurrencies (also known as digital currencies) started with the Bitcoin code base, and many use the same blockchain. For example, Bitcoin and Litecoin use the same binary format for the blockchain but differ in the cryptography and consensus approaches. Zcash is a cryptocurrency that is based on an earlier version of Bitcoin but made major changes to support added anonymity and privacy. Permissioned blockchains such as Hyperledger, Chain, R3 Corda and BigchainDB use an underlying NoSQL database to store the blockchain data. Permissioned or private blockchains appoint authority to specific parties in the network to authenticate blockchain transactions through an access layer. While private blockchains do not require a consensus process, they are less disruptive because they depend more on a built-in authority.
While blockchain was initially explored by the financial services industry, the realised potential of this emerging technology has expanded to include energy, telecoms, health care, automotive and even voting systems. Mike Quindazzi Managing Director PwC
Blockchain in Today's World
Because blockchain solves many issues of privacy and security, its use is increasing where data security is a concern.
Blockchain for health care
When blockchain is used in a health care setting, each event in a patient’s care cycle generates a new “block” of information that’s complete, permanent and can’t be modified. Events might be medical record updates, payment transactions or phone calls to a nurse. This type of approach puts control of a patient’s private records in the hands of the patient, as opposed to many health care providers.
Blockchain analytics for IoT
As blockchain use increases, more organisations will need to access and analyse the data, even as it grows in complexity and volume. How do you apply analytics to data in this new format? And how can you analyse private data as it streams into blockchain? This post includes a practical example of analysing blockchain data generated by the Internet of Things.
What about cybersecurity and fraud?
Public blockchains for cryptocurrencies are under significant pressure to address topics such as anti-money laundering (AML) and fraud. With the surging market value of cryptocurrencies, regulatory pressures are increasing all over the world. The way we handle Bitcoin and other cryptocurrencies now will inform how we handle blockchain implementations in the future.
Blockchain: What It's Not
Given its potential, few terms are more hyped than blockchain. To understand its business applications, however, it’s important to understand not only what blockchain is, but also what it isn’t.
Blockchain is not just Bitcoin. Though originally associated with online currencies, blockchain is not solely a Bitcoin technology or just an internet sensation. It has broader appeal across industries, and is being used as a secure data network for many markets, including supply chain and food safety solutions.
Blockchain is more than a database. At a high level, a blockchain is a protocol that describes how transactions are defined, connected, transmitted and collected. The blockchain includes processes that provide consensus for updating the data store. While blockchain is not technically a database, many blockchain implementations do use a key/value database as their data store, so the data is encrypted as part of the system. Likewise, permissioned or private blockchains do operate as operational data stores that are appended at each step of a transactional process.
What is blockchain?
See how blockchain technology actually works, and how it can be used as a foundation of "digital truth" for online transactions, music sharing, cryptocurrencies and more.
You'll learn about distributed trust and the consensus mechanism in blockchain from Oliver Schabenberger, Executive Vice President, Chief Operating Officer and Chief Technology Officer of SAS. "Blockchain actually has a record of historically accurate, validated transactions that everybody in the chain agrees upon," he explains.
Who's Using Blockchain?
Blockchain can offer safer options for sharing patient data between insurers, providers and multiple doctors. Blockchain promises to improve information accuracy and information sharing – and help prevent fraud in health care settings.
Retail and Manufacturing
Complex supply chains – and all the items in them – can be tracked consistently and securely for all interested parties, including purchasers and regulators. Grocery supply chains have been early adopters of blockchain to improve food safety.
Banks can share parts of a blockchain with each other to keep track of suspicious activity and track the flow of transactions. Permissioned blockchains can be used to re-engineer business processes, like moving transactions from front to middle to back office while eliminating the need for data reconciliation. Emerging uses include blockchain for trade finance, global payments, securities settlement and commercial real estate.
Blockchain can help coordinate routes and modes of transportation around cities. A blockchain network can work across bus, car, bike, train and other transportation partners to plan the best multimode route for customers, ensuring smooth transitions between vehicles and offering a single payment for users.
Blockchain is being used as a refuge in the face of highly devalued currencies. Bitcoin also offers money management options to 2 billion unbanked people around the world. Payments and transfers can take place between countries without high fees.
With validation and privacy at the core of blockchain technology, anticipated blockchain implementations in the insurance industry include smart contracts and smart claims processing. A private blockchain implementation can reduce fraudulent claims and allow all parties – insurers, providers and customers – to view accurate claim updates simultaneously.
You can understand how a lot of this [blockchain] technology is very disruptive to the way banks do things today. But they have to re-engineer a lot of things to make it happen. Sam Penfield Advisory Solutions Architect SAS
How Blockchain Works
Digital currency, inventory transactions and legal documents are common items to store in blockchain. Information in the blockchain is stored in many connected ledgers, or lists, that are spread across a network, providing the security and authentication throughout the system.
In blockchain, transactions are created by an application called a client or wallet, collected by a miner and stored in a block. The block is then appended to the blockchain data store using a consensus algorithm. A blockchain is an immutable list of linked blocks. Each block contains a list of transactions.
Blockchains include a layer of cryptography that makes tampering with the data in the network very difficult, giving it the potential to improve security and traceability in many types of transactions.
The more data that gets added to a blockchain, the more secure it gets. Since each new block is building on the shared accuracy of the last block, anyone trying to break in and edit the data deceitfully would have to edit all previous blocks as well – and all blocks across the network.
While blockchain can help prevent fraud, it’s not a fool proof method against sloppy security and poor data practices. It does promise, however, to improve the security of transactions for people and “things” in real time. While the use of blockchain technologies is still in the early stages, blockchain is actively being investigated as a new type of distributed data environment for many virtualised network systems applications.
Analysing blockchain data
As we consider the role of analytics for blockchain, we can identify two categories of data related to blockchains:
- Data at rest – static data that already exists in a blockchain's immutable data store.
- Data in motion – data that is being produced each and every time a transaction is created in the blockchain.
Exporting the static blockchain data into an analytics platform allows you to review various transaction characteristics, segment transactions, analyse trends, predict future events, and identify relationships between the blockchain and other data sources. Making blockchain data available for analysis can be helpful for anti-money laundering (AML), customer intelligence, fraud detection, revenue forecasting and new services creation.
With the advent of streaming analytics, blockchain data in motion offers additional opportunities for analysis, which can help you identify, in near-real time, changes in the blockchain’s activities. Seeing these changes as they’re happening gives you an opportunity to take immediate action to address activity in the blockchain as transactions are occurring.
Analytic models developed using static data can be applied to the data in motion to ensure the integrity and authenticity of a blockchain. A good example is identifying and combating real-time payment fraud in transit. Blockchain analysis in real time can identify the fraudulent activities and deny any suspicious transaction as its happening.
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