Blockchain: Democratized trust

Trust is a foundational element of business. Yet maintaining it—particularly throughout a global economy that is becoming increasingly digital— is expensive, time-consuming, and, in many cases, inefficient. Some organizations are exploring how blockchain, the backbone behind bitcoin, might provide a viable alternative to the current procedural, organizational, and technological infrastructure required to create institutionalized trust. Though these exploratory efforts are still nascent, the payoff could be profound. Like the Internet reinvented communication, blockchain may similarly disrupt transactions, contracts, and trust—the underpinnings of business, government, and society. Discussions of blockchain often begin with bitcoin, the cryptocurrency that gained notoriety as much for its novelty as for the volatility of its valuation. In a fog of media reports driven by bitcoin’s associations with dubious use cases,1 the far-reaching potential of blockchain—the technology underpinning bitcoin—remained largely obscured. Yet, that is changing. Organizations throughout the public and private sectors have begun exploring ways that blockchain might profoundly transform some of their most basic operations, from the way they execute contracts and carry out transactions to the ways they engage customers and more. What is blockchain? Simply put, it is a distributed ledger that provides a way for information to be recorded and shared by a community. In this community, each member maintains his or her own copy of the information and all members must validate any updates collectively. The information could represent transactions, contracts, assets, identities, or practically anything else that can be described in digital form. Entries are permanent, transparent, and searchable, which makes it possible for community members to view transaction histories in their entirety. Each update is a new “block” added to the end of the “chain.” A protocol manages how new edits or entries are initiated, validated, recorded, and distributed. With blockchain, cryptology replaces third-party intermediaries as the keeper of trust, with all blockchain participants running complex algorithms to certify the integrity of the whole. It seems ironic that as digital transforms the world, one of its more promising building blocks is a throwback to our decidedly analog past. Blockchain is the tech-charged equivalent of the public ledgers that were once used in towns to record everything of importance: the buying and selling of goods; the transfer of property deeds; births, marriages, anddeaths; loans; election results; legal rulings; and anything else of note. Instead of a bearded master wielding a long-stemmed stylus to record minuscule entries into an oversized book, blockchain uses advanced cryptography and distributed programming to achieve similar results: a secure, transparent, immutable repository of truth, one designed to be highly resistant to outages, manipulation, and unnecessary complexity.