The Power of Blockchain
As the world moves online, a universal source of truth is required. Blockchain can do just that with its secure and transparent design.
The Internet as a worldwide computer network has always been a valuable conduit for sharing and storing information whether that be through communication with email, video, telephony or social platforms, and by the ability to share digital goods such as books, papers, music and video. What was lacking was a trusted method of transferring value virtually without the time consuming and expensive use of third party actors such as banks or governments to enforce contracts. To solve that problem digitally, blockchain was invented with the characteristics of being immutable, distributed and decentralized resulting in a consensus protocol which overcomes bad actors.
What is blockchain exactly?
Blockchain is a secure chain of blocks that contains information. This technology was invented in 1991 with the intent to time stamp digital documents to eliminate tampering. The technology was not utilized until 2009, when Satoshi Nakamoto in 2009 created the digital crypto currency Bitcoin, which is founded on blockchain. Blockchain is a distributed ledger open to anyone. What makes blockchain so unique is that once data has been recorded within the blockchain it can’t be altered without breaking the “chain”. Each block contains three key pieces; data, current block’s hash and the previous block’s hash. Data can contain any piece of information and is dependent on the type of blockchain, whether that be Bitcoin units or healthcare documents. A hash, similar to a fingerprint, identifies all of the block’s content through a unique code. Once a block is created, its hash is being calculated. Tampering the block will cause a change in the hash. This means hash’s will allow one to detect when block contents have been tampered with. A new hash is created at each one of these new instances with association to a new block. Each block also contains the previous hash of the last block, creating the secure chain of information. The first block created is named the genesis block because it does not have a previous hash to refer to. When a chain has been created, and a block has been tampered with the hash will change. This prevents the blockchain from functioning further because the preceding block is no longer containing the correct previous hash. Keep in mind, computers are smart and can create countless codes in the matter of minutes to find the correct hash and continue tampering the blocks. This is why blockchain uses a technique called proof-of-work. Proof-of-work slows the creation of new blocks. This makes tampering even harder as tampering with one box will need one to calculate the proof-of-work for each block to then tamper with the following blocks. Blockchain further secures themselves by being distributed through a peer to peer network where anybody can join which eliminates the need for a central entity. Anybody who joins the network will receive a full copy of the blockchain. The node can use this to verify everything is in order.
What is blockchain’s purpose?
Blockchain gives humans the ability to store an immeasurable quantity of data without requiring a central authority to verify. It simplifies the manner in which we transact through an online ledger that user data structure. The technology allows for secure and accountable manipulation of the ledger without the need of a third party. Its most recognizable use, cryptocurrency, is free through a decentralized environment. Blockchain provides full transparency due to the type of distributed ledger. This allows many network participants to share the same documentation as opposed to individual topics. Blockchain limits the participation of third parties or middlemen to make a guarantee, ultimately reducing transaction costs. All in all, the technology offers a whole new approach for authentication and authorization in the digital world that can meet the needs of centralized administrators. This enables the creation of new digital collaboration and relationships.
How has blockchain impacted society and the economy?
Blockchain has revolutionized the world with its unique ability- decentralized, secure transactions. Blockchain has the ability to exchange money faster, in a more efficient and secure manner than traditional. Currently, banks are working towards making payments and banking through blockchain the norm. Blockchain assures data is verified and encrypted using cryptography, allowing it to have increased cybersecurity and resistant to unauthorized modifications. Unlike centralized systems, the data is stored in the cloud allowing it to be more robust and protected against attacks. Blockchain has the ability to address critical security concerns in relation to the Internet of Things because it decentralizes all of the information and data. Blockchains allow for quicker, safer and more reliable automated communication. Automated communication functions on pre-built algorithms and is being used presently in scale in some industries. Blockchain can reduce bureaucracy and increase safety, efficiency and accountability. Welfare and unemployment benefits can easily be verified and sent while voters can use blockchain for counting and verification of results for legitimacy. Crowdfunding can be utilized for secure and truthful transactions to legitimate causes. Blockchain enables healthcare employees to transfer documents safely amongst themselves through a blockchain centralized and secure database shared strictly amongst verified doctors and patients. Blockchain also can be applied to transactions via apps, like that of a rideshare where decentralized peer-to-peer applications can allow users to auto pay for fees.
Where has blockchain been implemented?
Many of us recognize blockchain technology being used in cryptocurrencies. Blockchain enables cryptocurrencies to utilize encryption techniques to regulate the creation of monetary units and to verify the transfer of funds. However, blockchain has been used in many other interesting ways. In 2016, Dubai was considered the Smart City when they invested in a blockchain base system which favored the development of various industries to make Dubai “the happiest city in the world.” Technology entrepreneurs and developers were fortunate to use blockchain and collaborate with investors and leading companies. Later in 2017, the United Nations World Food program initiated a blockchain based project called Humanitarian aid. The project, first tested in rural areas of the Sindh region of Pakistan, sent money to beneficiaries. Through the blockchain technology, food and all transactions were registered to ensure safety and transparency of this process. Most recently, blockchain has been seen with Crypto Art. As digital art has greater difficulty with authenticity, Non-fungible tokens, or NFTs, have been created. These are cryptographic units that are unique pieces of data. Unlike cryptocurrency in which 1 Bitcoin is equal to any other Bitcoin, one NFT represents one unique piece of art. This allows for trackability of the art piece to help identify the original artist.
What are blockchains limitations?
Blockchain is not currently perfect and there can be some downsides especially as they relate to large public chains. To establish consensus the more nodes (hosts) the better, but without incentive few would participate as miners. Some blockchain applications increase node numbers by providing incentives (generally in some form of currency). Scalability can be an issue when there are many transactions occurring at once. The result is very slow transaction time, which can be a problem if quick authorization is required, like at a retail outlet checkout line. Some blockchains setups, because of the mining requirement, utilize a lot of computer resources which translates into very high electricity use. In fact, it is estimated that the crypto currency Bitcoin blockchain network uses as much electricity as the countries Sweden or Malaysia does in a full year! The good news is that blockchain technology is still in its infancy and these issues are actively being worked on.
Blockchain is being deployed in many different industries due to its secure and efficient properties. As with many new technologies, there are some limitations, but because the possibilities for blockchain technology are endless, solutions are actively being sought and continuously implemented as new blockchain projects come on line . In the end, blockchain will enable society to live in a world where value can be recorded and ownership tracked throughout their life cycles in a safe, transparent, efficient and low cost way.
References
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Flatyz, Shovava, Day, T. is A., Comma, & Colorsheets, V. (2021, February 11). Crypto Art: How Artists Are Selling Their Work on Blockchain. My Modern Met. https://mymodernmet.com/crypto-art-blockchain/#:~:text=Blockchain%20allows%20art%20collectors%20to,are%20unique%20pieces%20of%20information.&text=Instead%2C%20one%20NFT%20represents%20one,digital%20items%2C%20or%20domain%20names.
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