Blockchain: what you need to know and don’t need to worry about yet

While blockchain technology is best known for powering cryptocurrencies like Bitcoin, it will soon be used for far more than that, powering daily transactions and creating secure ledgers of data and information. Blockchain as a decentralized system of records has potential that reaches far beyond the world of finance.

Any system requiring transactions or data points to be recorded could use blockchain, a technology that’s already changing investing, supply chain management, healthcare, recycling and more. Blockchain will soon become the digital filing cabinet you didn’t know you needed, where you’ll store and access financial transactions, medical records and it could even help execute your will one day.

Also known as distributed ledger technology, blockchain technology allows for the tracking, trading and storing of pretty much anything. Think of it like a shared Google Sheet, a document shared across a broad network of users, but the catch is that it can’t be edited by a single user acting alone.

But what actually is it?

What is Blockchain?

At its most basic, Blockchain is database technology that allows for the secure storage of encrypted information across a network of computers. You can trace its roots back to 1991 when a pair of scientists were looking for a way to timestamp digital documents. But it wasn’t until Bitcoin emerged in 2008 that the technology really began to catch on.

You can imagine the uses for secure open transactions with cryptocurrencies: Blockchain now forms the backbone for Bitcoin and several others, but its usefulness goes beyond that in ways most people who don’t use crypto couldn’t yet imagine. This network of information has the power to impact everything from money to the environment.

How does blockchain work?

As a decentralized network of computers, blockchain anonymizes transactions by attaching an ID to each one. Each computer in the network, or block in the chain, agrees on that ID to verify that transaction. No one computer can change that.

This allows organizations and individuals to share access to the same data in real time without compromising security or privacy. Thinking back to the analogy of a shared document, everyone has access to the same information, and that information can be changed in real time, but everyone in the doc sees the same information. And while the doc may have had an original creator, everyone who is editing that shared file has contributed to its source of truth, or what the document contains. Changes must comply with a specific set of rules and changes are designed to be difficult to alter or hack.

What is blockchain currently used for?

The most common current usage for the blockchain is as a digital ledger to record financial transactions, but more common needs are starting to surface.

A Japanese startup is using blockchain to develop a self-executing will system that automatically distributes assets from a deceased person to their heirs.

German chemical company BASF has been experimenting with using blockchain to track recyclables and better incentivize recycling. Through pilot projects in Canada, BASF is using blockchain to track the full lifecycle of the plastic from pellet to bottle and back.

In Georgia, the national government is using blockchain to manage land titles. Because blockchain makes it easy to see the transaction history around a particular asset it’s difficult to falsify ownership records.

And, of course, Blockchain feels almost synonymous with Bitcoin, which was its first real-world application, but it’s also the foundation for other cryptocurrencies like Ethereum, Tether, Binance Coin and Solana. Blockchain is the technology that powers each of the cryptocurrencies.

Why should blockchain matter to me?

Because of how Blockchain is designed to decentralize control, it removes intermediaries like banks and lawyers, while creating a digital paper trail that allows owners of assets to maintain anonymity.

Because it’s difficult to hack and designed to monitor ownership and transaction history, blockchain is a powerful tool for verifying and tracing digital transactions. It can add speed, security and transparency to transactions, making it easier to close real estate transactions and allowing consumers to more quickly access funds that have been transferred to them. Blockchain also can be used to verify the authenticity and ownership of intellectual property like NFTs.

Why should I care?

Blockchain could revolutionize everything from money to new home purchases, to how your estate is distributed to your heirs. You could access funds faster and more cheaply than other transfer methods like Western Union or credit cards. Blockchain could reduce the power of central banks and upend traditional financial systems. Eventually, it could pave for cryptocurrencies to replace cash as a means of storing wealth.

With the potential to be the ultimate secure records manager, it also allows individuals to sidestep intermediaries like loan processors and lawyers and creates a verifiable record of transactions around assets like real estate. Property ownership records, too, become easier to track with blockchain, making it quicker and easier to close real estate transactions.

In the near future this technology could be used for public safety. Manufacturers can track down recalled products and contaminated foods before they malfunction or make you sick. Governments and hospitals can use blockchain to store medical records, like immunizations, so you never have to worry about keeping track of your paper vaccine cards anymore.

What are the risks?

Like all connected technology, blockchain is susceptible to cyber-attacks. Crypto hackers have successfully stolen money from cryptocurrency exchanges and investors. They’ve created fake websites to steal login information from people trying to access their crypto wallets, as well.

If you’re getting into crypto, remember to verify that you’re accessing accounts on correct websites and use two-factor authentication, the use of a code sent to your phone when logging into crypto exchanges.

Anonymity presents another risk for blockchain users. Unlike a safe deposit box at a bank, identity verification won’t get you back into an account if you lose your digital key, the set of randomly generated numbers you use to unlock your digital wallet. Losing access to a digital wallet also means losing access to whatever was in said wallet.

When used to support cryptocurrencies, blockchain poses risks to the environment. Cryptocurrencies are huge electricity consumers. Bitcoin mining alone consumes about as much energy as Argentina and emits about the same amount of carbon dioxide into the atmosphere each year as Greece.