Why the Blockchain hype ? Here you will find out why it is not going to go away.
The word “Blockchain” seems to be everywhere you look. Well… at least within the discussion of digital developments. It is one of those things that you know you should understand, but you can’t be bothered right now. It doesn’t seem to impact your life, so no urgency required right?
No, Watch Out! I would encourage you to learn about this. Those that you work with, be it clients, companies, colleagues or your peers, are becoming aware of Blockchain technology. It is currently being widely adopted across many industries and businesses.
It is more important and transformational than you probably realise. Don’t get caught out by not making the effort to learn about this, make sure you keep informed. It will be something that we are going to be using in our everyday daily lives. It has functionality that can transform the way we interact and exchange goods.
So there is no time like the present, to get a better understanding. I am here to help and highlight the most important elements. There is a lot of information out there for you to read, but don’t let that discourage you. I hope that by the end of reading this, you’ll have an understanding of the basics and be able to see why it’s important.
The basics should not be complicated to understand, just focus on the most important parts and you don’t have to know it all.
Blockchain is a technology that makes it possible to store and transfer digital information. It stores the information through a network.
Due to this unique way of storing the information, it cannot be copied or controlled by third parties. Distributing information through a network makes it decentralised and secure. This is why it’s so valuable. It is often referred to as a distributed ledger. Blockchain is being developed for both public and private usages.
Investopedia nicely describes the blockchain name. It breaks it down into:
- The Block being the information
- The Chain being the database
The chain gets formed through the linkage of multiple blocks. In other words, the database is comprised of multiple information blocks that are linked together in order.
The blocks of information that get stored are details on a transaction, the participator, and a unique identifier for that block.
One way to think about this is that you have a group of friends and each one of you has a USB with your unique data on it. You are given a number for your USB stick, the first person to join was given the first number. The next person was given the next number and the number of the first person. You now have a network of friends. Since each one of you will hold your USB and hold a USB identical to that of your friends this forms a database. No single person controls it, but collectively you manage it. New additions to the group are only allowed if the collective group agrees to it. No changes can be made to existing USB sticks, each one has a unique number. Any new information needs to go onto a new USB.
The concept of this technology was originated through the idea of a timestamp. A digital timestamp that can not be altered. The first blockchain was created through Bitcoin to represent a public ledger for it’s digital currency. Accreditation was given to Satoshi Nakamoto, but this individual or possibly group of people have remained anonymous.
It is important to know that each new block of information is linkedin sequential order at the end of the chain. A blockchain allows digital information to be recorded, but not edited or deleted. Blockchain is near impossible to be changed due to this type of coding. Each block of information gets given its own identifier called a “Hash”. But, each block will also be stamped with the hash from the block before it. This makes it difficult to hack.
Changing any information on one block will cause a change in its code. The block following it will now appear out of sequence as it still had the old code. This means you will have to edit every block that follows, which requires an impossible amount of computing. If a change for some reason gets made, it’s no longer the same block. This helps keep intact its history.
Another layer of security is created through a checking process called “Proof of Work”. This adds additional checks and time before a new block is created. In terms of computing power, this makes it even harder to alter any block.
New transactions are verified by a network of computers. This network is referred to as “Peer-to-Peer (P2P)”. This feature is what makes Blockchain so special. Once this network is can solve the complicated mathematical problem (the hash), the system will record it and build a new block. A whole network of computers is required to verify a hash and it must reach consensus.
Each computer in the network is a host for this Blockchain, there is not one central party. These computers/servers are referred to as “Nodes”. Nodes are managed by “Miners”.
Only the person with access to the private key owns the information on a block. To transfer ownership, you exchange keys. Cryptography proofs identify through the combination of a set of public and private keys. Through a public key, the users can interact. This public key is however derived from a private key. The private key is not shared and secures ownership. This also provides a method of anonymity.
The network verification process allows for the creation of an authentic system. This method of record-keeping results in a fairer and more secure system. It can be thought of as the ultimate double-entry system. It allows for identification through the use of keys. It is transparent to everyone that is involved and no need for anyone to be in control.
Not requiring an intermediary is a BIG DEAL! It eliminates the fees associated with having intermediary institutions (Banks, Wholesalers, Retailers, Distributors…) or expensively paid professional service fees (Agents, Lawyers…). Anyone that is considered a market-maker is at risk of losing out on income streams.
Processing is faster and it can be accessed at any time around the world. Data is easily shared whilst maintaining security. It can significantly reduce bureaucracy and improve record keeping. This technology can be adapted across many of our current ways of working.
All of these features make Blockchain transformational to our current system.
As demonstrated above, the technology is greater than just digital currency, the concept can be adopted across many uses. Blockchain is not a technology of the future, it is here already! It is being incorporated and developed as we speak across many industries.
It is especially impactful in the financial world. Long gone are the days of accounting on slow and outdated ledgers. Welcome, public accountability and around the clock international high-speed clearance. Bitcoin became popular during the last banking crisis as the technology allowed for enhanced trust.
Blockchain can be used privately or publicly. In terms of cryptocurrency, this required a public distributed ledger. However, the network can also remain private when the technology is set up. This opens it up to even more usages and makes it very popular with large institutions.
Below are some possible ways it will be used in our everyday lives:
- New Smart Contracts
- More Secure and Fairer Voting
- Improved Data Storage
- Reliable Personal Identification
- Easier Ticketing
- Safe Medical Records Storage
- Effective Tax Collections
- Enhanced Transaction Processing
- Faster Bank Clearance
- Better Insurance Products
- Easier Property Exchange
- Accurate Deed Recording
- Faster Digital Notary/Signature
- Improved Stock Exchanges
- Stronger Online Security
- Smarter Energy Usage
- Better Inventory Management
- New Lending Solutions
- Accessible Currency Exchange
- Reduction in Public Service Bureaucracy
- Exchanging of any Ownership & Services
Traditional market-maker services (any middle person that charges a fee for their service) are in theory no longer needed. Creative individuals will be able to have greater control of their work and able to share this directly with their customers. For example, expensive music distributors that take advantage of musicians can now become something of the past.
There could be even more significant implications for some of the largest companies that we know today. Blockgeeks, mention a potential impact on Uber, Airbnb, and even Amazon. The technology allows for the decentralisation of retail; transferring of goods straight from the producer to consumer. Blockchain is here to disrupt our traditional ways of working. The most notable impact is likely in health, finance and legal services, however, the use is unlimited.
Now that you have an understanding of the basics, you can go on to explore this further and what it means for you. You might enjoy finding out what’s going on in your specific industry and how it’s being adapted.
The use of blockchain can be a highly sensitive subject. Our economies are heavily dependent on the service sector. Many of which are market-making services, with the most notable being Banking and Financial Services. If not carefully controlled, there is a risk of a complete overhaul of our banking system, which will be difficult to accept.
More likely, our system is here to stay and this technology will be carefully implemented to enhance and supplement services. Regulators will play a big part and we will want to oversee and control its implementation in certain industries. This advancement is, therefore, to be celebrated and not something to be hesitant towards.
We have already reached that future of significant technological advancements. Embrace it and enjoy the ride!
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