What is Blockchain? — Management Perspective
By: Kent Nguyen
Tags: Management, Technology Strategy, Blockchain, Cryptocurrency, Bitcoin

The million-dollar question that is bothering the C-suites at the moment. A wise friend I know said “it’s like high-school sex, everyone talks about but no one knows how to do it!”. So allow me to share my understanding of blockchain and what it really means from a decision-maker perspective.

Warning: Treat this as a super-simplified version of a rather complicated concept. Enough to make you appear smart in front of your BoD or investors. Not enough to fool everyone, and … haters are gonna hate anyway.

What is Blockchain?

TL;DR: It’s a new type of database. Period.

The long explanation is of course more complicated than that. Blockchain is a new decentralised distributed database technology. The most fundamental and disruptive attribute of blockchain is that it stores data in append-only fashion. Once the data is written, it lives forever, it cannot be deleted, cannot be modified.

So how do you change something? Think of it as a chained equation. In the first ‘block’ you write A=1 and A will forever has the value of 1. Unless you append a new part of the equation ‘+1’ which makes it become A=1+1, means 2! i.e, to change something you must chain up the modifier to the previous value. Hence “block-chain”!

And to simplify things, everytime you append something, you pay fees to miners. Miners are basically server nodes that run the blockchain software, distributed and technically all nodes are equal. A bit like the bit-torrent days, remember?

Now you know what it is, the next million-dollar question you will have to answer to your bosses is:

Should I use blockchain in my organisation?

If you ask this most likely you won’t have a need to so soon: Blockchain is a new database, why do you need a new one when the old works just fine for past couple of years. Do you even know how database works? You probably have never heard of an incident regarding databases since the day you took your current job, unless some idiot accidentally wiped the entire production customer database thinking it’s a test one. Unfortunately for me, it happened to me more than I wish to remember.

Blockchain database is slow. Low through-put. Expensive to store transactional data, fees are applied per write-operation. Does it sound completely contradicting to the hype out there? That’s why it is a hype!

Why is there a hype?!

Because of Bitcoin.

Blockchain is merely a technical concept, it is not a tangible platform one can use. The version 1.0 of blockchain concept materialised in the form of Bitcoin platform. It is the very first world-wide ledger platform that stores how much virtual credit one owns. Because of the nature of blockchain, the trust and security is built-in. If the ‘network’ says person A has 2 units of BTC, then A actually own 2 units of BTC and no one else can change or deny that fact. If then say A transfer 1 BTC to person B and it is recorded ‘on-chain’ then the truth became A owns 1 BTC and B owns 1 BTC, plus the fact that the transaction happened will forever live on the network. So blockchain hype is because of Bitcoin, but Bitcoin ≠ Blockchain.

Is Ethereum just another Bitcoin?

No.

Again blockchain is just a technical concept. After Bitcoin platform was born, zillion other implementations of blockchain concept came to life. Most notably is Ethereum platform, which is by popular opinion, deemed as blockchain 2.0 technology.

Bitcoin was pretty dumb, you can’t do anything on it except recording the transactions. On the other hand, you can do a lot more with Ethereum. You can write code, store basic text data, make applications and enforce business logics that are permanently unchanged once deployed on the network. It allow zillion other organisational Tokens to be created on top of it. Here come the crypto flood.

Is blockchain = crypto currency?

No.

Perhaps you can guess that each Token, or crypto currency, was created for a purpose, each token is organisation-specific. So the need to exchange values to/from the ‘grandfather coin’ BTC organically sparked the crypto race. Suddenly everything was hyped up. You probably know the rest of the story since then.

Should I hold Bitcoin / Ethereum / Other coins?

Yes.

Now that you have done a good job showing off to your board. You start to wonder when might be the right time to visit the topic again, if at all.

There’s no other technology in the past decade that is as game-changing as blockchain; and judging by the hype, its applications definitely will be quite something. Think of investing in blockchain as a long-term investment, if you do, you are actually investing in the future infrastructure of the world’s technology. Just like the Internet back in the 90s.

In my opinion, Bitcoin might lose its value, same go for Ethereum. However the applications that were already born on-top of those platform have sparked the next Internet-like evolution and they will be around for a pretty far foreseeable future. A clarification here, you can’t exactly invest in “blockchain” as a ticker, you could only invest in its applications. If you decide to jump in the game now, do your homework carefully and pick projects that align with your interest, just like picking the right stock. Choose wisely and good luck!

What’s next?

There is another real game-changing concept grew out of this hype. The Smart Contracts. Follow me and look out for my next article, in which, I’ll explain in details Blockchain 2.0, aka, Ethereum and why it’s going to change the way we live.

… or buy my time and I’ll teach you what to say to your bosses.