If you’re at all into technology, then you’ve probably heard about Blockchain. This is an ingenious invention that promises to create a new kind of internet and a new way of exchanging and storing information. It isn’t easy to understand unless you’re a dedicated tech geek, but you don’t need to understand it to use it. After all, you probably use your smartphone every day without even a basic understanding of the technology that makes it work. That being said, if you have a basic understanding of this technology, you will be able to use it. And because the technology promises to change or replace many of the old ways of storing information, this will be a great benefit as the world changes.
What is the Blockchain?
The blockchain is a digital ledger. It records transactions and information and then distributes and records them across a range of computers and devices. The creator made it to exchange cryptocurrency, but it has the potential to change the way every type of industry stores information.
To put it in the most basic terms, the blockchain decentralizes information. Today, most companies store their records on a dedicated set of computers. But the blockchain stores information across a network of computers. This makes it harder to hack and it also makes it very obvious when someone tries to change the information for their own nefarious purposes. Any changes to the ledger conflict with the records held by everyone else. And the system automatically removes any changes that can’t be verified.
Think of it this way. When you go to see a new doctor, you have to tell them all yourprevious medical information. Because they don’t have access to your previous records, they need to enter your medical information into their computers. However, if the blockchain works as advertised, you probably won’t have to do this in the future. Hospitals and doctors will be able to set up their own blockchain network. So every time you go to the doctor, no matter where you are, the new information will be added to your personal medical ledger. And if your new doctor is registered on that network, they will be able to access your medical records. This will give them all the information they need to give you the best medical treatment possible.
Private vs Public Blockchains
There are two different types of blockchains. The first is completely public, like cryptocurrency networks. These blockchains allow anyone to view the information they contain and to make changes. This sounds like the idea situation, especially considering the goals of the original creator, but it also creates security problems. Because anyone can see and change the blockchain, it’s resulted in black market trading and collusion amongst people who want to use the blockchain for their own purposes.
Private blockchains are quite different and have sprung up as a result of these security problems. They’re most useful for business and other users who want complete control over the information in their blockchain. Private blockchains allow their users to dictate who can make changes, who can see the information in their blockchain and who can verify the information. It’s an ideal system for people who want to participate in the blockchain but don’t know enough about the other parties to fully trust them.
Hybrid blockchains are also possible, which means that some parts of a blockchain would be private and others public. This would be ideal in a business setting. It would allow employees to have access to the information they need to do their jobs without being able to access everything about their company.
The History of Blockchain
The history of the blockchain is a little unusual. It was created by someone called Satoshi Nakamoto. Nobody knows who this is. It could be a man, a woman, or a group of people working under one name. The creator or creators originally made the blockchain to exchange cryptocurrencies. They wanted to create a currency that eliminated the role of the middle man. Basically, they wanted to bypass the banks and eliminate the double spending problem.
The double spending problem is a major concern for digital currencies because digital information can be reproduced so easily. With digital currencies, it’s fairly easy for someone holding some ‘money’ to reproduce it and send the reproduction to someone else as payment while keeping the original money. Because there’s no physical object, and no central authority to verify that the money is only spent once, this was a big issue for this type of currency. The blockchain promises to solve this problem with constant digital tracking and precise record keeping.
The ongoing mystery about the creator aside, the blockchain is probably one of the most important technological advances in recent years. And considering all the recent changes and updates to the technology we use every day, that’s really saying something.
What is a Block?
To understand the blockchain, you must understand what a block is. A block consists of a piece of data or information, the hash, and the hash of the previous block. The hash is a unique identification code that is created based on the information that’s inside the block. There are many different types of blocks that each contain different types of information. For example, a Bitcoin block may contain the information of a Bitcoin transaction, where one user gave another some Bitcoin. The block will contain the online identity of each user and the amount they exchanged.
Each block also contains the hash from the previous block, which connects these two blocks. A series of blocks connected in this way are a chain. Each block is connected to the one before and after it by the hashes, an unbreakable chain of information.
You can relate this back to your medical records as well. When you go to the doctor, it would create another block, a chunk of information that is connected to all of your previous doctor’s visits. And the more you go to the doctor, the longer the chain of your medical records will become.
What are Nodes?
The blocks and the blockchain itself aren’t kept on one computer. Thousands of computers hold the blockchain network, making this a decentralized system. The computers that contain the blockchain are called nodes, and they’re basically the administrators of the network. For example, looking back at the medical network, the major hospitals in your country would probably end up being the nodes. And the medical centers and doctor’s surgeries would be able to access the information, but probably wouldn’t have the computing power to perform the tasks of the node.
Being a node takes a lot of power, so an ordinary computer isn’t usually large or fast enough. The nodes work to verify any new information in the network and store information and transactions. In cryptocurrency networks, these nodes earn money from the transactions and get rewards for verifying information. There are also different types of nodes in the blockchain. Some are full nodes, which means they contain the entire blockchain. This doesn’t mean they contain every blockchain in existence of course, just the ones that are relevant to them. So a hospital node wouldn’t contain a blockchain related to finance for example, only the ones that hold medical records.
There are also partial nodes in the system. These nodes don’t contain all the information in the relevant blockchain, so they don’t need as much computing power. These nodes only contain the information that’s relevant to the transactions that are necessary for their operation. They’re also in contact with the full nodes so they can access any transactions that eventually become relevant to their work.
Verifying Information in the Blockchain
It isn’t enough to simply keep the information on a range of computers. Without a way to verify any new piece of information, the blockchain would end up full of mistakes and incorrect information. Remember that a range of people connected to the blockchain can add new information, so it’s important that there be a foolproof way to verify the accuracy of new information. This is one of the most important tasks of the nodes.
Cryptography and the Blockchain
A number of nodes have to verify new information before it can be added to the blockchain. The processes used by the nodes are usually kept top secret. Obviously companies that are concerned about security wouldn’t want this information going public. As a result, little is known about the verification processes that businesses use.
Cryptocurrencies, as public networks, are a little more transparent. The nodes in these blockchains have to complete a difficult cryptographic puzzle to verify any new information they receive. This puzzle verifies all the information in the transaction, ensuring that the seller has the currency to give away and isn’t trying to use currency they’ve already promised to someone else. The first node to complete the puzzle wins a reward, and the new block is only added to the blockchain when a whole network of nodes have solved the puzzle and verified the information independently. This is called a consensus protocol. Private companies with blockchains based on information would probably have a similar process for verifying new information.
This makes it very hard to change the information in a blockchain without the proper procedures and verifications. All the information has to be verified by a range of nodes and users and any information that isn’t verified is immediately noticeable. If someone adds false information to the blockchain for whatever reason, there are countless digital copies of the information that don’t contain the change. This immediately highlights the copy that’s out of sync as incorrect, and the system automatically marks and isolates the false data.
The Benefits of Blockchain
There are a number of obvious benefits to this kind of technology. Some of the most important to the future of information and perhaps even the future of how the world does business are:
The blockchain exists on a range of computers, which means that it’s almost impossible to hack. Not only would a hacker have to take control of hundreds, if not thousands of computers, they would have to do it all at once. And that seems like a nearly impossible feat.
The blockchain updates its information every ten minutes. During these updates, nodes in the system can identify any new or false information and deal with quickly before it can cause any problems. It also means that any transactions are extremely fast, much faster than other types of transactions.
There are no intermediaries with the blockchain. The most obvious benefit of this is the fact that you can exchange money without paying bank fees, but it can apply in other ways as well. For example, if you’re trying to buy a house, then you want to ensure that the seller actually owns it. Usually you’d have to go through a lawyer to get this information. But if the blockchain works as advertised, one day you’ll be able to ask the seller for access to that information and look it up on your phone. You’ll be able to see the entire history of the house, culminating in its current ownership. This will save a lot of time, money, and back and forth.
You can use it in a range of industries.
People and companies are using the blockchain mostly for cryptocurrencies at the moment. However, in the future you will probably be able to use it in a range of industries and businesses. Any industry that needs to store a lot of information safely may be able to use this flexible system to their advantage. That’s why so many big companies are experimenting with the blockchain at the moment.
Transactions take time in the real world. Even exchanging funds through banks can take days as everything is verified and moved. But the blockchain can process transactions in minutes and works 24/7. So everything is processed immediately and there are no delays over the weekend or holiday days.
Paper copies and digital copies of information and ledgers can be very inefficient. With the current system, you usually end up with multiple copies of the same information. But with the blockchain, you have one copy that everyone can access. That’s a much more efficient way to store information.
The blockchain is useful for more than cryptocurrency exchanges. The blockchain can also trace the movements and histories of precious and expensive assets like jewels, paintings and historical artifacts. This would allow companies and individuals to verify the authenticity of these objects. It can also be used to verify the current and previous owners of an asset. For example, the blockchain is currently being used to verify the provenance of diamonds and to avoid the spread of conflict diamonds. This global digital registry for diamonds will make it nearly impossible to forge paper provenances or present synthetic diamonds as true ones because it will allow potential buyers to see the whole history of a stone.
The Environmental Impact of Blockchain
There are a couple of problems with blockchain and one of the most important is the environmental impact. The computers required to power the blockchain have to be incredibly powerful, which means that they use up a lot of electricity. These computers were fairly rare before the blockchain was invented, usually owned by companies and individuals who were directly involved in data storage or technology development. But the blockchain and the popularity of Bitcoin has changed all of that.
The extent of the increased power demand is hard to estimate because the bitcoin network is intentionally anonymous. But experts estimate that bitcoin users in the US could be using as much electricity as the country of Slovenia. And less conservative estimates put the use as high as the country of Ireland, which consumes twice as much as Slovenia. This problem will only get worse as the popularity of bitcoin keeps increasing and other uses for the blockchain are developed.
There are clear environmental concerns involved with this exaggerated electricity use. And these concerns will probably only increase as the technology becomes more common and more integrated with everyday life.
The Current Uses of Blockchain
At the moment, cryptocurrency companies like Bitcoin, Litecoin and Ethereum are the primary users of blockchain technology. On these blockchains, users exchange currency. They can even use the currency in their online wallet to pay for goods in the real world. People seem to be making a lot of money off this system. They work as miners, nodes who verify transactions and get rewards for completing them first. Despite the popularity of these cryptocurrencies, there is a lot of concern about the long term stability of the currencies and what will happen if they collapse. To be honest, nobody can know the future. All we can know is that the blockchain itself has the potential to change everything.
An Introduction to Smart Contracts
In 1994, smart contracts were introduced. Digital contracts are basically what they sound like. They’re online contracts that control and dictate the exchange of items of value such as property, money or goods. Usually, if you want to buy something expensive you go to a lawyer and pay them to draw up a contract. But you can bypass this part of the process by using a smart contract. They outline the penalties and terms of a contract just like a traditional contract, but it’s all done online. Smart contracts are connected to the blockchain, so the system automatically enforces the obligations of both parties. At the moment, people are using smart contracts mostly for cryptocurrency exchanges. But as the world becomes aware of the value of them, this will quickly change.
Using a Smart Contract
Let’s put it more simply by giving you an example. Say you buy a house using a smart contract. You go through the negotiation process and come to an agreement that suits you both. You draw up a smart contract and agree to pay a certain amount of cryptocurrency on a specific date. Once you’ve paid, the contract stipulates that you will get the deed to the house. Both the you and the seller agree to this contract.
You release the money earlier than the stated date and get a receipt from the system. The blockchain holds the money until the date of the contract. The buyer releases the deed on the date in question. Once the system has received the deed and the money by the specified date, it releases both to the respective owners. If the seller doesn’t release the deed for the property on the agreed upon date, the blockchain system refunds the money to your account. If one party breaches the terms of the contract, then the blockchain can pick it up immediately and respond.
The Future of Blockchain
People are using the blockchain technology mostly for cryptocurrencies and smart contracts at the moment. However, it has potential way beyond these uses. Some potential uses of the blockchain include the following:
- Storing medical records so doctors and other health professionals can access this essential information whenever they need to.
- Keeping a ledger of financial records for faster, more secure transactions.
- Establishing provenance of valuable assets including artwork, property and precious metals or gems.
- Storing property or goods ownership records.
- Government records.
- Improved insurance records and services.
- To reduce incidents of fraud and improve supply chains including those in retail, agriculture and pharmaceuticals.
- To improve data integrity in any field where this is key to smooth and trustworthy operation.
Blockchain may well be the future of technological record keeping and prompt fundamental economic changes in the world. The potential of this technology would seem to be endless. It promises new levels of connection and new ways to store and process information. But this technology has a number of problems. Companies need to solve these issues before the technology can replace and change the current systems. The blockchain needs to prove that it’s impossible to hack and incorruptible, and researchers need to solve the issues about the overuse of power. But if researchers manage to solve these issues, this technology promises to change the world.