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A consumer's guide to blockchain

When I spoke to Peter Kirby, chief executive of blockchain startup Factom, he laughed when I described myself as a “blockchain traditionalist”. I meant that I still think of blockchain as the technology that made bitcoin credible – a peer-to-peer distributed ledger which immutably logs all transactions.

This all sounds like jargon, so what does it really mean? Being immutable means that, once recorded, data on the blockchain cannot be unwritten. In the case of bitcoin, this prevents individual coins from being spent multiple times, a key problem in the early days of the cryptocurrency.

A distributed ledger is simply a public record of who owns what. But the reason so many people are excited about blockchain is that, since there is no single authority, unlike in a centralised system, there can be no single point of failure. The “distributed” nature of the technology is of the essence because it is what makes it robust against information disappearing: the more people there are in the network, the more difficult it is to disrupt the blockchain.

Read more: Blockchain technology is useful - just not for everything

As Kirby says, the fundamental point about blockchain is that it cuts out a trusted third party (like PayPal in online payment transactions) and allows multiple parties to agree on a single version of the truth, while not being owned by anyone. The reason he found my “traditional” understanding amusing is that the technology has moved on. In the past two years, a lot of people have realised its value, and “traditional” blockchain has paved the way for a second generation of the technology.

Development, as Imran Gulamhuseinwala, head of fintech at EY, explains, has gone something like this. First, the big (largely financial) institutions looking at blockchain have “taken a clean piece of pap...

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