Blockchain technology is a burning subject in the world of IT lately. The Tech community is all over it and the demand for blockchain developers is getting bigger by the day. What’s the big deal? The applications of this technology can change internet forever. How? We’ll explain it in the following text.
Let’s start from the beginning. Financial crisis of 2007-2008 inspired a person or persons behind the pseudonym Satoshi Nakamoto to develop a protocol for digital cash that used cryptocurrency named Bitcoin. Bitcoin enabled people to establish trust and do transactions without a third party. Implementation of this protocol required a new type of database, so blockchain came to life. Ten years have passed since Satoshi published a paper where he describes bitcoin and how it works. During that time blockchain evolved quite a bit and its application is now beyond just secure financial transactions.
But how does it work?
Digital assets (anything that exists in binary format and comes with a right of use) are decentralized. Instead being stored in a central place, they are distributed across a global ledger using high level cryptography. If, for an example, a transaction takes place, it is posted across millions of computers. Among those computers are miners with massive computing power. They present the nodes in this network and do the hard work. Every ten minutes a block gets created and that block contains all the transactions that occurred in the last ten minutes. Miners then compete, who will be the first to validate if the information in the block is true. That miner is rewarded in digital currency. When the block is validated, it is connected to the previous block. Which is connected to the previous block and so on – it’s literally a chain of blocks containing information.
Every block is encrypted and has a time stamp, like a digital seal. If someone wanted to tamper with the information in the block, he would have to have all the information contained in the previous blocks. That basically means the hacker would have to access millions of computers at the same time and decode the complex encryption on every block. That’s a very, very tough thing to do, especially unnoticed. Machine that could do that must have insane computing power, far more than currently available computers. So we are free to say that this system gives multiple times better security than the security of current computer systems.
This distributed database allows the information to be truly public and easily verifiable. Millions of computers connected to the network keep the data and make it accessible to anyone that uses the internet. Storing blocks of information that are identical all across the network doesn’t allow a single point of failure to occur. The information is transparent, accessible and easily verifiable. It is not controlled by a third party, but instead everyone contributes to this network of trust.
Bitcoin blockchain is just one among many. For example, Ethereum blockchain was developed by Vitalik Buterin and it can perform smart contracts (self-executing contracts) between two parties, erasing the need for a third. Besides enabling better security, this saves copious amounts of money over time. Ethereum has other projects, some being very ambitious like making a system that can replace the stock market or creating new models for countries and governments. To put it in Vitalik’s words: “Blockchain solves the problem of manipulation. When I speak about it in the West, people say they trust Google, Facebook, or their banks. But the rest of the world doesn’t trust organizations and corporations that much — I mean Africa, India, the Eastern Europe, or Russia. It’s not about the places where people are really rich. Blockchain’s opportunities are the highest in the countries that haven’t reached that level yet.”
Smart contracts are revolutionizing business and many aspects of modern industries. Take music industry for example. Streaming platforms like Spotify, Apple Music, Deezer and others are taking a big piece of the cake, leaving only crumbs to artists. To eliminate this third party Imogen Heap, UK singer and songwriter, founded Mycelia. Mycelia enables musicians to sell their songs and albums directly to the audience, as well as fair division of royalties between the producers, songwriters, musicians and others involved in the work.
Governments can also have big benefits with blockchain technology. Allowing data to be distributed but not replicated can bring total transparency to elections and any other actions that require voting. Talking about land title registration, some countries like Honduras, Republic of Georgia and Sweden already began experimenting with blockchain technology in this area.
If you want to know more on this subject, watch this TED Talk:
There are many more ways blockchain could revolutionize our lives and internet use. We can even go that far and say that blockchain technology can give birth to a new kind of internet. Now that you know its properties, you can see that it’s totally possible – some might say inevitable.
This incredible concept presents the future of digitalization. More and more of our personal and important business information is available on the web, and better tools are needed for protecting that information. Blockchain offers a solution for that issue, and beyond. Essential ideas of blockchain are trust, truth and transparency. Everyone is protected, data is accessible to anyone and you cannot tamper with the data without disturbing the whole system. Sounds too good to be true? Well, we are yet to see how this system will develop, but the current state of affairs seems promising.