Blockchain technology, for all its merits, is not a new technology but rather it’s a combination of proven technologies (the Internet, private key cryptography and a protocol governing transactions) applied in a new way.
| Blockchains are built from 3 technologies | ||
| Private Key Cryptography | P2P Network | Program (the blockchain protocol) |
| Identity | System of Record | Platform |
Trust is a risk judgement between different parties, and in the digital world, determining trust often boils down to proving identity (authentication) and proving permissions (authorization).
Meaning, ‘Are you who you say you are?’ and ‘Should you be able to do what you are trying to do?’
In the case of blockchain technology, private key cryptography provides a powerful ownership tool that fulfills authentication requirements. The private key also spares a person from having to share more personal information than they would need to for an exchange, leaving them exposed to hackers.
Authorizing transactions is a result of the entire network applying the rules upon which it was designed (the blockchain’s protocol). This distributed network must also be committed to the transaction network’s recordkeeping and security.
Authentication and authorization supplied in this way allow for interactions in the digital world without relying on (expensive) trust.
Authentication is not enough. Authorization – having enough money, broadcasting the correct transaction type, etc – needs a distributed, peer-to-peer network as a starting point. A distributed network reduces the risk of centralized corruption or failure.
Blockchain has the potential to become the new gold standard of business and trade. But first, all nations need to accept the new technology. There are technical hurdles to overcome too as the blockchain protocol(s) used to secure the ledger of global trade and manufacturers must be trusted by all of its users and be effectively un-hackable.
For more thoughts on trust, check out the following articles:
“The Economist”, https://www.economist.com/news/leaders/21677198-technology-behind-bitcoin-could-transform-how-economy-works-trust-machine
“World Economic Forum”, https://www.weforum.org/agenda/2017/02/blockchain-trade-trust-transparency/
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