Blockchains could be every Data Scientist’s dream
Bitcoin is currently trading at over $1250 and if you are someone who invested a grand in bitcoins back in 2011, your investments are potentially worth over $600K. The most valuable contribution of the bitcoin community is not in the financial returns itself, but in the introduction of blockchain technology.
Blockchain is a distributed database system that serves as an “open ledger” to record and manage transactions. Each record in the database is called a block and contains details like the transaction timestamp as well as a link to the previous block. This makes it impossible to alter information about the records retrospectively. Also, since the same transaction is recorded over multiple, distributed database systems, the technology is secure by design.
At present, digital transactions take place with the help oftokens. This is a unique code generated by a third party (such as Visa or Mastercard, for example) and is shared with the token requestor (the retailer you are shopping from) and the account issuer (the customer’s bank). Tokens make online transactions more secure by concealing actual customer-identifying data. Since the token is generated by a third party which by itself does not have information regarding the transaction, there is no scope for any sort of data for a data scientist to play with.
This changes with blockchain technology. Here, it is theoretically possible to get a hold of every transaction that has ever happened and this provides data scientists with everything they need to analyze trends and patterns with online transactions.
To be fair to cryptocurrencies like bitcoins, they were designed on the exact opposite premise of providing a secure and confidential transaction mechanism. While that hasn’t changed, blockchains provide banks and financial institutions with the technology needed to mine more useful data from their customer transaction history. Beyond financial institutions, blockchain as a technology also has use-cases across several industries including healthcare and gaming where it is making possible for data scientists to dig through massive troves of data that were hitherto unavailable for mining.
Recently, a consortium of 47 Japanese bankssigned upwith a company called Ripple to allow money transfers between bank accounts using blockchain. The main reason behind the move is to allow real-time transfers at a significantly low cost. One of the reasons traditional real-time transfers were expensive was because of the potential risk factors. Double-spending (a form of transaction failure where the same security token gets used twice) is a real problem with real-time transfers. With blockchains, that risk is largely avoided. Big data analytics makes it possible to identify patterns with consumer spending and identify risky transactions a lot quicker than they can be done with current day technology.
