Blockchain is a hot button topic these days. You’ve heard the phrase before, especially in reference to Bitcoin and other cryptocurrencies.
But what exactly is blockchain?
It seems like a impenetrable term – like someone threw two random words together and decided it was a thing. But the technology is really quite simple to understand. What it is is in the name: blockchain is a chain of data blocks.
Before we go into more detail on what blockchain is, let’s understand what blockchain isn’t.
Blockchain Is Not Bitcoin
Blockchain and Bitcoin are related, but they’re not the same thing.
Bitcoin is a cryptocurrency, or a deregulated digital currency. Because it’s not controlled by a government or a bank, it can be traded freely and anonymously.
Blockchain is the network system where Bitcoin transactions take place. The system was created specifically for Bitcoin trading, but the technology has now been taken and applied to other applications.
So, What Is Blockchain?
According to IBM, blockchain is “a shared ledger recording the history of transactions – that cannot be altered”.
You can take the word “ledger” literally here. It’s the same as the personal ledger you keep at home (or the online ledger your bank keeps for you for all the Millennials reading this).
Where blockchain differentiates from a ledger from your bank is that everyone in a blockchain network has a copy of your ledger. They’re able to see all your transactions, both old and new. And whenever you make a new transaction on your blockchain network, everyone’s ledgers automatically update.
Also, where you could erase or delete transactions from your personal ledger, the blockchain transaction is permanent.
Let’s use a practical example to examine what happens when using blockchain:
You’re in charge of ordering supplies for your office. When you place an order for a box of pens on your blockchain network, everyone on your network – from the office manager to the CEO – will have their ledgers updated and be able to see the purchase you made.
When a transaction is made, a block of data is created. This block of data then becomes attached to the ledger, or the data chain. That’s why it’s called blockchain.
Now, this example only relates to a closed blockchain network. For cryptocurrency, an open blockchain is used that everyone can download onto their computers. To keep information private, user data is private and anonymous, but the transactions that are conducted over this open network are all open and transparent.
Why Should We Use Blockchain?
Blockchain holds significant benefits to the daily internet user, especially in the age of big data collection and privacy breaches.
One of the biggest benefits is users being able to manage their own data. This is because blockchains remove a intermediary party from a transaction. You don’t have to willing give up information to a third-party to make a sale – you can purchase art directly from the artist or a record directly from the band.
Blockchain also provides easy verification when making purchases. Think of purchasing a diamond as IBM does in this infographic. Finding the diamond on a blockchain network will let you see its origin and that it’s been verified by a certified curator to hold the exact specifications it’s been listed as having.
This, also, creates transparency in the public sphere and in your business or organisation. With regards to the public, government entities would have to be honest about where they’re investing tax dollars since those transactions will be found on the ledger. It also keeps governments from rewriting history if the public opinion on an issue turns unfavourable.
How Will Blockchain Help in Digital Marketing?
At SXSW 2018 we learned how important brand authenticity is and blockchain will help brands stay authentic. That’s because they’ll be able to show that they’re giving money to the causes they say they are and allocating their profits to improving their products rather than stashing them in a foreign bank account.
Privacy concerns will be alleviated since the consumer will be in control of how much information they provide brands. And audiences will see what brands do with that information. If the brands turn around and sell that information to a third-party source, it’ll show up in the ledger and lead to some disastrous PR.
So, the brands that stay honest with what they’re doing with the information will create a more loyal fanbase.
Most importantly, blockchain will allow for better audience targeting. All the guesswork will be taken out of whether or not someone is interested in a product because you’ll have definitive proof that they have purchased it, or something similar, in the past.
You’ll also see the your customer journeys mapped out in the blockchain, so you know where traffic came from, what attracted them to your site, and if they made a purchase.
With a better understanding of blockchain, you’ll be ready to take your marketing into the future.
Written by Jesse H. Laier