A blockchain is not the same thing as Bitcoin. They are two very different technologies, even if they are somewhat connected. Photo: Bloomberg
Let me start off by clarifying a huge misconception: a blockchain is not the same thing as Bitcoin. They are two very different technologies, even if they are somewhat connected.

Saying that a blockchain and Bitcoin are the same thing is like saying that Gmail and the internet are the same thing. Far from it: Gmail is an email service provider, like Yahoo or Hotmail, while the concept of email in general is a use case of the internet. Email is an application that runs on the internet, and, just like email, the internet has many other use cases, like instant messaging, social networking and video streaming. Yet, no one says that WhatsApp, Facebook or YouTube are the internet. They are simply applications that run on the internet.

Similarly, Bitcoin is one of many different types of digital currencies, also known as “cryptocurrencies”. Just like email is one of many use cases of the internet, cryptocurrencies are but one of many potential use cases of a blockchain. You can think of Bitcoin and its siblings as applications that need blockchain technology to function.

What exactly is a blockchain? It is similar to a database in the sense that it stores data. But the resemblance ends there because the ways in which a blockchain and a traditional database store and retrieve data are fundamentally different. To understand the difference, let’s consider an example.

Let’s say you are about to purchase a second-hand car. Naturally, you will need to verify certain information about the car, such as the seller’s proof of ownership, the car’s service and repair history, and any accidents the car has possibly been in, and the extent of the damage.

At present, obtaining this information is quite a mission. Different information about the vehicle is kept by a number of different organisations, and on separate, siloed databases. To get detailed and accurate information, you would need to bounce between a number of organisations like the police, the licensing department, service and repair agents and insurance companies, among others. Often, the companies holding some of the data have closed down, and there is no way to access the data any more.

Then there is the issue around data security and integrity. Databases are not completely hack-proof, but a far greater threat than outside hacking is insider-tampering, which is an ever-present threat in most government departments. By paying off the right people, it is possible to doctor just about any records. As a result, most people ultimately opt to either go on trust, or to purchase from dealers only. But who’s to say the dealers themselves have accurate information? Either way, buying a car is very risky.

Now imagine if you could eliminate much of the risk associated with buying a vehicle by having all the information you ever needed to know about every car at your fingertips. You could see every transaction that took place relating to the car from the day it was manufactured until the present moment. By simply entering the chassis number, you could get access to minute details about the vehicle.This information will come from a super-secure, tamper-proof facility. Additionally, the facility will not be owned by any individual, organisation or business, but rather by an entire community, so it is publicly available without the need to rely on slow, inefficient, costly and often dubious middlemen.

No doubt, this will most likely transform the used car industry and might even reduce car theft. But having that type of information readily available will also transform a number of other industries such as finance, education, health care, real estate and food. As far as the food industry goes, imagine being able to scan a food item and immediately knowing if it is indeed kosher, halaal, vegan, organic or fair trade as advertised, because the entire history of the item and its ingredients, from the source to shelf, is readily available. This is all possible with a blockchain and is the reason why there is so much hype about blockchain technology.

In my next article I will delve into the details of a blockchain, with a particular focus on the characteristics that make it a super-secure public ledger.

* Bilal Kathrada is an educational technologist, speaker, author, newspaper columnist and entrepreneur. He is the founder of CompuKids, a start-up that teaches children Computer Science skills. Bilal blogs at www.bilalkat.com.

** The views expressed here are not necessarily those of Independent Media.

Cape Argus