Back before Detroit began to get its act together, the city's property records were a mess. With thousands of parcels in the city vacant, abandoned, foreclosed and often subject to mortgage or title fraud, it could prove frustrating, if not impossible, to even discover who owned a property.
A new technology called blockchain, best known as the underlying architecture for the digital currency bitcoin, can solve problems like messy land titles, plus a lot more. Industries from banking to the automotive world have been taking notice.
Last week, General Motors and Ford joined BMW and Renault and other firms to create the Mobility Open blockchain Initiative (or MOBI) to explore how this new technology could operate in the automotive world. Banks are also paying attention; so are many other industries.
But the technology for blockchain is so new (about 10 years old at this point) and so little understood by the public that it’s worthwhile to take a few moments to understand it. And so:
A blockchain is a digital network for transactions that eliminates the need for a middleman or central regulator like a bank or a government. Parties to the network create records of their transactions that, once entered in the digital "ledger," cannot be altered or changed without the approval of the broader network.
To use a simple example, say Mary lends John a sum of money. A year from now John plans to repay the loan, but disagrees with Mary on the amount. Each one kept a record of the loan but each disputes the other’s paperwork.
A blockchain, however, would record the amount of the original transaction — the amount of the debt — and this entry in the “ledger” would remain there for both to see. And because of the complex nature of the blockchain’s design, in which all parties to the network, not just Mary or John, must agree on changes to the stored data, the ledger is essentially unhackable.
As the Economist magazine put it a few years ago: “The blockchain lets people who have no particular confidence in each other collaborate without having to go through a neutral central authority. Simply put, it is a machine for creating trust.”
The term itself derives from "block" — the term for a batch of data in the system — and "chain," meaning the broader network.
