In the past two years, “blockchain” has become a magic word, able to open doors and investor wallets, panic industry juggernauts, and guarantee headlines. But much of its power comes from mystery and misunderstanding—we all know it’s important, but not how to talk about it. And meanwhile, we see headlines touting all the ways blockchain is transforming whole spheres of society: finance, security, transportation, public information and beyond.
BLOCKCHAIN BASICS
Blockchain is self-descriptive: blocks of data are sequentially added to a chain of similar blocks. All blocks in a chain must follow the same set of rules, established from the first block. As each new block of information is added, the entire chain is tested to make sure nothing is out of place. Chains are unbreakable or “immutable”–once a block is in place, it can’t be moved or changed without taking the whole chain apart. At its core:
- Blockchain is a framework optimized for immutable, distributed, public ledgers. It allows the direct transfer of value between parties without requiring those parties to trust each other. The value can be any digital record—currency, property, identity, loyalty, votes, media, etc.
- Blockchain is not a single thing; it’s a set of ideas. Blockchain protocols (like those defined by Bitcoin, Ethereum, Hyperledger, etc.) are essentially programming languages— each has various strengths and weaknesses.
- Blockchain is nascent in its development. At an MIT-hosted conference on blockchain in April, blockchain was compared to the 1989-1990 Internet—a time when today’s protocols (like HTML) were still being figured out. This comparison suggests: 1) blockchain could have a powerful and widespread future; 2) blockchain still has a very long way to go; and 3) blockchain is ripe for experimentation.
Gartner Inc. has placed blockchain on their Hype Cycle near the “peak of inflated expectations.” According to their model, this means blockchain may slide into the “trough of disillusionment” for a period of years before it comes into its own and has a transformative and lasting impact.
