Probably most professionals who deal with business data have at least heard the term “blockchain” bantered about as potentially the “next big thing” for a wide range of industries, agriculture included.
But what is it? One could imagine a Jerry Seinfeld comedy routine: “What is the deal with blockchain? Is it a block, is it a chain — what is it?” If you, like Jerry, are confused, you’re not alone. This article attempts to demystify the concept so, when it comes to a business discussion near you, you’re equipped with some sense of what all the fuss is about.
At its most basic level, blockchain is a system for organizing and storing related data points in a chronological order. In other words, blockchain is a virtual or electronic ledger that can be used to capture, organize and validate data.
Blockchain gets its name from being made up of a number of “blocks” of data. Each data block represents a single data point or a series of data collected concurrently. Each data block will include a date and time stamp.
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These blocks are sequentially linked together by a chain. The “chain” portion of the blockchain is typically a “hash” identifier generated by the blockchain platform through the use of a hash function. A hash is typically an alphanumeric sequence of a designated number of characters that is generated by running a data set through a hash generating function. If the underlying data of a block is changed, the hash will also change.
In blockchain, a hash that is based upon the data contained in the previous data block is inserted into each block. Thus, changing the data in a block will result in a different hash and this feature can be used to authenticate the data in the previous block.
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An added benefit of the blockchain structure is that it’s built upon a decentralized network — a copy of the blockchain is stored on a number of storage nodes instead of a centralized server. The blockchain is maintained through a syncing function, which updates and syncs the data on each node at a given time interval. The syncing function may include re-running the hash function for some or all of the blocks to validate that the underlying data in a block hasn’t been altered.
In some blockchains, a consensus of users must be obtained prior to a block being added to the blockchain. Because blockchain is decentralized, it can be set up for peer-to-peer transactions, and applications can be set up to regulate access to authorized users. In addition, data collected and stored in a block chain is irreversible, and blockchain platforms can incorporate programming to provide some automated actions to occur using — or based upon — the data.
One additional, significant feature of blockchain is that access can be set to regulate who has access and control of data at various levels. For example, some members can be authorized to update the blockchain by adding data, whereas another group of members may only be allowed to view data on the blockchain.
How does blockchain provide advantages from a legal perspective?
From a legal perspective, blockchain offers several benefits.
(1) Security features.
(2) Data authentication.
(4) The ability to control who accesses and uses data contained in a blockchain.
From a data security standpoint, conventional centralized networks, data storage and access systems are vulnerable in that data is stored in one location and accessed from many. If a hacker can access or infiltrate that one location, the hacker can steal or sabotage the data or take it hostage.
In contrast, the decentralized nature of blockchain requires a hacker to infiltrate each and every node to effect a permanent change in the blockchain before the blockchain syncs. And because there are numerous copies of the blockchain simultaneously maintained, a hacker would have a difficult time holding data hostage. And with increased adoption, blockchain security will get increasingly robust.
Authenticating electronic data has been a challenge. Data can be permanently altered without detection fairly easily. In many applications, having altered data can be worse than having the data stolen in the first place. The decentralized nature of blockchain provides safeguards of the data’s authenticity. And because access to the blockchain is limited and each action by a user of the blockchain is tracked, one can identify and follow track any questionable access of the data or actions to the authorized user’s account. While it doesn’t prevent someone gaining access to the blockchain without authorization, it may quickly help to identify the access point.
Finally, blockchain’s use of hash identifiers in each block allows verification that the data in the previous block is authentic as the hash function can be re-run to confirm that the underlying data has not changed. Accordingly, blockchain not only provides benefits from a data security standpoint, but also provides comfort from a data authentication perspective.
Many predict blockchain technology will be ubiquitous in the not-so-distant future. The first blockchain applications are just getting implemented, but most software developers and companies are still trying to create applications for this technology and to more fully understand how the application of blockchain technology can improve current business processes, create new efficiencies, and help create new revenue streams.
Although the application of blockchain technology in the marketplace is in its infancy, data-driven industries like precision agriculture stand to reap several benefits. Blockchain offers many advantages over traditional data storage and electronic record keeping. Seizing these advantages in precision agriculture applications may make transactions more efficient, streamline record keeping, allow the maximization of revenue from data licensing and help meet your contractual obligations without having to do anything to fulfill your contractual obligations after the contract is initially defined.