- By Keith Kirkpatrick
- March 15, 2022
A blockchain is a decentralized, distributed database that stores information electronically, and is designed to permit the collection of information or records in groups, known as blocks. The goal with using a blockchain is to allow digital information to be recorded and distributed, but also preventing it from being altered, deleted, or destroyed. When a block is filled, it is closed and then linked to the previously filled block, forming a chain of data known as the blockchain. All new or additional information that follows that freshly added block is compiled into a newly formed block, which will then also be added to the chain once the block has been filled.
The difference between a typical database and a blockchain is the way data is structured. In a typical database, information is usually stored in tables, whereas in a blockchain, data is stored sequentially in blocks that are strung together. This data structure creates an immutable timeline of data; when a block is filled, it is given an exact time stamp when it is added to the chain.
A blockchain is structured to hold the blocks across several network nodes at various locations, which provides redundancy, but also maintains the fidelity of the data stored within the blockchain. If someone tries to alter a record at one instance of the database, the other nodes would not be altered and thus would prevent a bad actor from doing so. If a user were to tamper with the record of transactions held in the blockchain, all other nodes would cross-reference each other and easily pinpoint the node with the incorrect information. As a result, no single node within the network can alter information held within it. Further, if a copy of the blockchain fell into the hands of a hacker, only a single copy of the information, rather than the entire network, would be compromised.
Blockchain technology was originally popularized as the technological underpinning of the Bitcoin cryptocurrency, which requires an accurate, decentralized ledger that keeps track of all transactions between parties without requiring a centralized authority that maintains the integrity of that ledger. However, a blockchain can be used in conjunction with several systems that are often deployed to manage and track customer information and interactions, thereby improving the security, transparency, and accuracy of data contained in a CRM or CDP.
Blockchain can be used to store and encrypt personal data within their own personal block presents companies with a universally accurate profile of personal information, past transactions, and their credit reporting data. This creates a trusted data source for customers that may want to make that data available to companies, in exchange for some benefit (e.g. rewards memberships, more personalized service, or other offer).
A company’s CRM system could then ‘subscribe’ to this customer data as permitted by each individual, thereby providing customers with more control over which company has access to each element of their personal data. Further, because it is an immutable ledger, purchasing, shipping, and product return transaction records, as well as customer service interactions between the customer and any associated vendors, can be recorded in a blockchain and serve as a single source of truth for this type of interaction data. This role as a third-party ledger that can’t be modified or deleted should engender more trust between all parties, thereby improving the customer experience.
Furthermore, because a blockchain is decentralized and distributed through synchronization using a peer-to-peer networking approach, carrying out successful external hacking or fraud attempts is more difficult. Indeed, a blockchain uses a protocol, or a set of rules that dictate how the computers in the network, called nodes, should verify new transactions, and add them to the database. The protocol employs cryptography, game theory, and economics to create incentives for the nodes to work toward securing the network instead of attacking it for personal or corporate gain. If the blockchain is configured properly, it is extremely difficult and expensive to add false transactions, but relatively easy to verify valid ones. While there have been successful blockchain hacks, most of these were focused on cybercurrency exchanges that use blockchain, rather than on the underlying blockchain itself.
While both cloud- and on-premises CRM data security has certainly improved, systems are still subject to data breaches (often due to human error), so using a third-party blockchain could improve the level of personal data security. Most importantly, customers’ confidence in sharing their data will improve, as they will be able to exert more control over which pieces of data are shared with the companies with which they do business.
Customer Data & Analytics, Customer Relationship Management, Contact Center, Personalization & Optimization, Customer Data Platforms, Customer Insights & Feedback, and Employee Experience
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