After my article on Cryptocurrency (Bitcoin), there are many that asked me questions on the underlying fundamentals that it is based on i.e. Blockchain – there are times when buzz words like this all the rage across industries. Y2K was one from a bygone era, Cryptocurrency, Blockchain and IOT are some others from this decade, but very few actually understand what these buzz words mean. In this article I aim to share my knowledge on the subject in as easy a manner as I can i.e. without getting too technical, read on.
Blockchain is exactly what it sounds like, blocks of data (records) linked together and secured using cryptography. And before you ask, Cryptography is the practice and study of techniques for secure communication. By design, blockchains are resistant to modification of the data; hence it is a good way to record transactions between parties in an open, transparent, permenant and verifable way. Let’s first understand the plus & minus of it.
- Open & Transparent – dependent on who created the blockchain though
- Governed by a network majority – hence records are permenant and can’t be modified
- Secure by design – subjective, still hasn’t been put to the test fully imho, but the consensus so far is that it is more secure than any other currency
- Limited only by a network infrastructure, i.e. no country boundaries etc
- Can be adopted by virtually anybody for anything – no limits in it’s applications, since most things are transaction based, and this is a secure transaction alternative relying only on a network connection to function
- Disruption on the current governance ecosystem for data – will discuss this further below under the title disruption
- Trust on Open governance – this is something that still has to be tested out fully, so far the most popular blockchain is Bitcoin and even that hasn’t fully caught on or been scrutinised yet
- Still a relatively new concept – i.e. has to be developed a lot more to be acceptable globally
- Dependant on the infrastructure i.e. bits of data all across the internet all strung together with code, though this infrastructure is secure since most of the developed world depends extensively on it, it is still something to consider. Since none of this will be available without a network to connect to
- Lack of supportive infrastructure – a lot of development has to be done around how this blockchain based system or solution will be implemented and how the data from it will be accessed, there is an entire ecosystem that will have to be developed to enable easy blockchain based transactions on a day to day basis for the average Jane or Joe
The best feature of this is everything I just mentioned plus the fact that all new records added have to follow a collective network protocol – i.e. a standard agreeable by all that are part of it. Once this data is recorded in a block, it cannot be altered without alteration to all subsequent blocks i.e. a network majority have to agree to any modifications. Hence the promise of security of data, since it’s in the majority’s interest to be secure. This is why it is getting more attention and is being adpopted in many businesses and governments primarily for data such as medical records, identity management, transaction processing in banks and other institutions. People are still figuring out how to implement it but it is certainly gaining popularity.
The first blockchain was the brainchild of a person or group named Satoshi Nakamoto for a cryptocurrency named Bitcoin – if you want to know more about it, here’s an article from me on the basics- Click to open article on Bitcoin.
Blockchain solves the fundamental problem of all record keeping – having to trust one entity or authority (a central server) with data i.e. an institution such as a bank or a government. In the current day and age i.e. after financial collapses of ‘too big to fail companies’, economic depressions, scandals and a world ruled by corporations; it is often that the average person thinks of an alternative to depending on the bank to store money, the government with their pensions or to regulate and strengthen currency. Any screw-ups by big institutions such as the recent ongoing Equifax scandal, and most of them get away with fines that they recover within days, weeks or months; whereas the people affected are sometimes set backward for decades or even life in most cases. And this is what I believe encourages people to look for alternative systems and solutions to currency, record keeping. The key factor driving them rapid adoption (in case of Bitcoin at least) is a lack of trust, and being one of the many that has lived through an economic depression and the effects there of till today, I don’t blame them one bit.
Hope you enjoyed the read as much as I enjoyed writing it. Feel free to share, like, comment or ask a question.