This one important aspect of blockchain has business leaders in a number of industries turning their heads.
With the rise in the Internet of Things, more people making their homes “smart” and the rise of Big Data, the sheer volume of valuable consumer information has driven the need for protecting that data. And blockchain is the technology that will enable the level of security needed for our private data.
It’s this aspect of the technology that makes blockchain so revolutionary.
Why Entrepreneurs Care About Blockchain
With Bitcoin in the international spotlight as its value skyrockets at an astronomical rate, more people in the mainstream business world are looking at blockchain technology that underlies the cryptocurrency.
In simplest terms, blockchain is a secure digital ledger. Technically speaking, it is a distributed database.
In other words, it is replicated and stored on thousands of different computers. The redundancy in the system makes it extremely secure. No one computer is necessary to make it work. That makes it nearly impossible to hack or shut down.
By solving the centralization problem, blockchain has the potential to radically alter a number of industries, from finance, to data storage, to content distribution.
In an article on Medium, Alexander Lange summed up the inherent weakness in centralization.
“The problem with centralized systems is that they lack transparency, allow for single points of failure, censorship, abuse of power and inefficiencies.”
To put it another way, centralized systems are fragile.
The Importance of Redundancy for Keeping Data Secure
Nassim Taleb wrote extensively about fragility in his best-selling book The Black Swan and built on those ideas in Antifragile. He argues that fragile systems are more prone to complete failure, and that antifragile systems have certain features including redundancy and some level of compartmentalization.
Blockchain facilitates both.
Have you ever wondered why you have two kidneys? You don’t need two. You can make it through life just fine with one.
Humans also have two lungs. Two eyes. Two ears. Nature likes redundancy.
Redundancy makes a system more robust and less prone to complete failure – in other words, less fragile. If you damage one kidney, you can continue to live and function.
If you damage one eye, you can still see. Redundancy serves as nature’s insurance policy.
Mother Nature also avoids too much interconnectedness, because it introduces fragility.
How Antifragile Decentralization Works in Real Life Situations
While on some level all things share connectivity, ecosystems tend to function predominantly as independent units. Take the BP oil spill in the Gulf of Mexico.
As bad as it was, and despite the impact on the immediate area, it had virtually no effect on the ecosystem in Antarctica.
On the other hand, a tightly interconnected a system becomes more vulnerable to severe damage by the failure of a single part.
Consider an epidemic in a remote Mexican village. It will ultimately affect a relatively few people. Now consider that same epidemic originating in New York City.
With its interconnectedness to the entire world, the epidemic could easily become global.
The 2008 financial crisis vividly illustrated the weakness of centralized, highly interconnected system. The collapse of the subprime mortgage sector set off a domino effect that threatened the entire financial system.
In Black Swan, Taleb argued the centralization of finance into a few big banks seems safer on some levels. But it’s an illusion.
“The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen, they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that resemble one another. True, we now have fewer failures, but when they occur…I shiver at the thought.”
Nature provides a model we can study to help build antifragile systems.
“The idea is simply to let human mistakes and miscalculations remain confined, and to prevent their spreading through the system, as Mother Nature does,” Taleb wrote.
How Blockchain Accomplishes These Goals
Because information is decentralized
and replicated on thousands of computers, the failure of one, or even several links in the chain, won’t bring down the system. It is both redundant and compartmentalized.
Blockchain represents a complete paradigm shift away from centralized, controlled systems to decentralized models. This opens the door to radical new technological breakthroughs.
MORE BUSINESS TECHNOLOGY STORIES ON CAPITALISM.COM:
• Beyond Bitcoin: How Blockchain Is Changing the Way We Track, Share Data
• Behind The Hype: How to Leverage Blockchain and Cryptocurrency w/ William Mougayar
• What is Bitcoin and How Does It Work? Trace Mayer Explains