Understanding Blockchain: Report

Thursday, January 25, 2018 @ 04:01 PM gHale

Blockchain is the new topic hitting the security environment, but just what is it all about?

In an effort to clarify the subject for the benefit of companies and other organizations, the National Institute of Standards and Technology (NIST) released a straightforward introduction to blockchain, which underpins Bitcoin and other digital currencies.

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There are plenty of stories about these cryptocurrencies and the underlying blockchain technology that enables them. Much of the attention stems either from the value attained by the most well-known of these currencies, Bitcoin, or from the novelty of blockchain itself, which has been described as the most disruptive technology since the Internet.

In the blockchain, information ends up stored in blocks that record all transactions ever done through the network. Therefore, it allows validating the existence of assets to be traded and ownership. The technology requests several nodes to agree on a transaction to process it. 

Blockchain’s proponents believe it lets individuals perform transactions safely without the costs or security risks that accompany the intermediaries required in conventional transactions.
The NIST report’s authors hope it will be useful to businesses that want to make clear-eyed decisions about whether blockchain would be an asset to their products.

“We want to help people understand how blockchains work so that they can appropriately and usefully apply them to technology problems,” said Dylan Yaga, a NIST computer scientist who is one of the report’s authors. “It’s an introduction to the things you should understand and think about if you want to use blockchain.”

The NIST document, whose full title is “Draft NIST Interagency Report (NISTIR) 8202: Blockchain Technology Overview,” introduces the concept of blockchain, discusses its use in electronic currency, and shows its broader applications.

A blockchain is a decentralized ledger that maintains transaction records on different computers simultaneously. Once a group, or block, of records is entered into the ledger, the block’s information is connected mathematically to other blocks, forming a chain of records. Because of this mathematical relationship, the information in a block cannot be altered without changing all subsequent blocks in the chain and creating a discrepancy that other record-keepers in the network would immediately notice. In this way, blockchain technology produces a dependable ledger without requiring record-keepers to know or trust one another, which eliminates the dangers that come with data being kept in a central location by a single owner.

Blockchain has attracted enough supporters there are now several hundred digital currencies on the market, and the companies are investigating ways to employ blockchain numbers. Because the market is growing so rapidly, several stakeholders, customers and agencies asked NIST to create a straightforward description of blockchain so newcomers to the marketplace could enter with the same knowledge about the technology.

“Blockchain is a powerful new paradigm for business,” Yaga said. “People should use it—if it’s appropriate.”

The question is when it is appropriate. As with any new tool, there can be a temptation to employ it purely for its novelty value. The report outlines some possible use cases, including banking, supply chain management and keeping track of insurance transactions. The report, Yaga said, was created partly to help IT managers make informed decisions about whether blockchain is the right tool for a given task.

“In the corporate world, there’s always a push to adopt new technologies,” Yaga said. “Blockchain is today’s shiny new toy, and there’s a big push to adopt it because of that. We want to help people to see past the hype — as lofty a goal as that is.”

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