5 key concepts for blockchain newbies

blockchain

(André François McKenzie, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Peter A. McKay, Content producer, Dispatch Labs, Hanns-Christian Hanebeck, Founder and CEO, Truckl & Nadia Hewett, Project Lead, Blockchain and Distributed Ledger Technology, World Economic Forum


One of the little talked-about challenges in the blockchain space is the need to communicate effectively to an audience that encompasses wildly divergent needs. While entrepreneurs, developers and other early adopters are often the loudest voices in the public conversation around blockchain, there’s also a vastly wider constituency of ‘blockchain curious’ beginners who require more introductory information.

Often, these groups’ needs must be served simultaneously, as we discovered recently while working on a whitepaper for the World Economic Forum’s Centre for the Fourth Industrial Revolution about the deployment of distributed ledger technology (a broad category that includes blockchain) in supply chains. Our paper – the third in the series – delves specifically into whether supply-chain projects should use public or private blockchains.

This is one of the hottest areas of debate right now among start-ups and other stakeholders already active in the blockchain space. At the same time, however, we had to be cognizant that many people who might read our paper, including non-technical senior leaders within enterprises and government, might need some extra help to contextualize this public/private debate.

What is the World Economic Forum doing about blockchain?

Blockchain is an early-stage technology that enables the decentralized and secure storage and transfer of information. It has the potential to be a powerful tool for tracking goods, data, documentation and transactions. In this way, it can cut out intermediaries, reduce corruption, increase trust and empower users.

The potential uses of blockchain technology are essentially limitless, as every transaction is recorded and distributed on a ledger that is almost impossible to hack. Though the most well-known use case is cryptocurrencies, blockchain is being positioned to become a global decentralized source of trust that could be used to collect taxes, reduce financial fraud, improve healthcare privacy and even ensure voting security.

Blockchain has the potential to upend entire systems – but it also faces challenges. Read more about the work we have launched on blockchain and distributed ledger technology – to ensure the technology is deployed responsibly and for the benefit of all. We’re working on accelerating the most impactful blockchain use cases, ranging from making supply chains more inclusive to making governments more transparent, as well as supporting Central Banks in exploring digital currencies.

To that end, all the white papers in the supply chain series so far have included glossaries of basic blockhain terms, for the benefit of readers unfamiliar with the space.

Here are five key terms we thought newcomers might find particularly useful:

1) Distributed ledger technology: Software that uses a blockchain or similar data structure shared over a network of participants who distribute and verify information about transactions.

2) Cryptography: The methods of using mathematical cyphers (or codes) to protect or ‘encrypt’ transactions from third parties as the transactions are being stored or shared.

3) Token: A digital asset used in a blockchain transaction. A token can be native to the blockchain, such as a cryptocurrency, or it can be a digital representation of an off-chain asset (known as a tokenised asset), such as the title to a house.

4) Network nodes: Nodes represent agents or participants on a blockchain network, such as banks, government agencies, individuals, manufacturers or securities firms. Depending on the permissions set in the network, they may be able to approve, validate, send or receive transactions and data.

5) Consensus protocol: A set of rules and processes that determine how nodes on a blockchain network reach agreement about a set of data and whether to approve, or validate, transactions in the network.

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