Blockchain - coming to a database near you

Blockchain is the latest development in secure database and transaction systems, operating on the principle that the recording and storage of every transaction only occurs through a consensus mechanism across the connected computer network. Blockchain is best described as a distributed database system in contrast to the conventional, centralised systems with which we, the consumers, are generally aware.  In simple terms blockchain operates as follows -

• data, for example a single transaction, is encrypted as it is stored,
• access to that data is also encrypted,
• each block within the system is only generated once multiple parties (best described as nodes) reach a consensus and validate the data, 
• as a distributed database, multiple copies of data exist across multiple computer systems which together create the peer-to-peer network,
• the loss of one node means that Blockchain can survive as the master copy is shared via its distributed design,
• it is impossible to alter historical records meaning the data points are immutable. This is one of the strengths of the system as its means that in order to attack the ledger, simultaneous attacks would need to be launched on all copies.

Blockchain's development has been centred on a consortium called R3 which comprises 45 banks including J.P. Morgan and Goldman Sachs. Other major non-banking corporations now involved include, not surprisingly, Microsoft, American Express, Visa, Mastercard, NASDAQ, NYSE. At the moment blockchain is used for making international financial transfers however the intention is to use it for online transactions. Apps are already being trialled for music distribution, sports betting and a new type of financial auditing. Proposed expansion of the platform will include services such as smart contracts, crowdfunding and auctions.

So what are the weaknesses of this system ? There are quite a few, for example in the legal and regulatory sphere, data privacy (being a foremost one), cyber security (albeit the possibility of breaching the network if not able to corrupt it) and cost-benefits are not fully established. The very fact that large banks like the system, is perhaps reason enough for the wider community to be wary.