Using Blockchain to Decipher Data
Over the past decade, blockchain — the technology underlying the popular digital currency Bitcoin — has become a buzzword in the emerging technology industry. Entrepreneurs have worked to find ways to either implement this technology into their existing businesses or to build new businesses around it.
Many use cases exemplify that blockchain can help build efficiencies in today’s ever-changing world, but, at the end of the day, it will always come back to a single concept: data. Data is all around us and is being constantly gathered. Data is often referred to as the “new oil” in today’s economy. Each and every day, companies are working to find effective and efficient methods to gather and interpret data in order to enhance their businesses.
Blockchain Meets Data
A blockchain is essentially a ledger that verifies data integrity. A blockchain does not exist without data as it is made up of data inputs, or blocks of data, which are then linked together forming a chain, hence the term “blockchain.” This chain of blocks, as represented by the example of the Bitcoin blockchain, forms a decentralized, immutable ledger or database. Any bad actor wanting to change the data would need to possess an enormous amount of computing power in order to essentially rewrite every link in the chain, which already has a decentralized consensus mechanism implemented across its network. A consensus mechanism is used in computer systems across a distributed network where all actors or users on the network agree on the current state or changes made to the network.
Benefits of Blockchain to Decipher Data
Blockchain technology can be useful to help decipher and interpret data in many ways:
Real-time Data Analysis
A blockchain can be updated at any point in time once information or data is uploaded to it. For example, the Bitcoin blockchain executes transactions instantaneously, however, blocks of data are broadcast to the network only every 10 minutes, solidifying that batch of transactions into the blockchain’s ongoing chain. Using a blockchain for data analysis provides up-to-the-minute data in real-time so that the data set is current. Since data is critical in today’s world, using relevant inputs is essential to be able to utilize outputs and to make decisions. The whole concept of data science and data analytics is to improve decision-making and improve efficiencies.
Eliminating Dirty Data
Dirty data is made up of duplicative or incorrect data. This has been identified as one of the biggest challenges to data science in recent years, and blockchain eliminates this problem. Through a decentralized consensus model using cryptography, blockchain validates data by making a digital record that is time-stamped and immutable. The Bitcoin blockchain works using an “append-only” function where users can only add new records to the network but cannot change previous ones. Eliminating unnecessary or incorrect data helps produce better results, allows for quicker validation tests on the data as a whole and provides an effective audit trail for all users.
Complete Data Sets
As a result of the elimination of dirty data and the premise that a blockchain maintains data since inception, a user, therefore, has a complete data set to rely on. Without blockchain, in order to validate the completeness of extracted data today, extra steps need to be completed which increases costs and decreases efficiency.
Smart contracts have increased in popularity. A smart contract is a computer protocol that can digitally execute, verify and enforce the negotiation or execution of a contract. It allows the performance of credible transactions without the need to include third parties, resulting in faster and cheaper transactions. Smart contracts offer the ability for users and companies to enter into an agreement and maintain a historical record, eliminating the need for a middle man that might otherwise be required to complete a transaction. Users can then use data embedded in smart contracts as part of their data analysis.
Data is an integral part of today’s world and continues to grow each and every day. Finding a cost-efficient and productive way to sort through this data while making sure that the data we are receiving is accurate remains crucial to our decision-making process.Integrating blockchain technology with data science can lead to more effective business practices for deciphering data and expansion of data analytics.
This article appeared in the March/April 2020 issue of New Jersey CPA magazine. Read the full issue.