Blockchain is revolutionary technology and as its use and application continue to grow and evolve you need to ask yourself – why should I care?
There have been issues with doing business via the internet since its inception. Privacy and security have always impeded the freedom of business, to the point that it became apparent that doing business on the internet would require a leap of faith. For example, to transfer money, a third party is required – whether it’s a bank or a credit card company – and that third party creates a weak link, where privacy and security is weakened.
The concept of the Blockchain removes the need for a third party, allowing us to use our own data and to increase the privacy. It’s a decentralised system, created essentially from a process of transactions, which create a ‘chain’. Each transaction is independently verified by others to make sure that all the requirements are met, and once verified they are added to the chain. However, the transaction is verified across multiple chains, each verification an original copy, meaning if a person manages to hack and alter one aspect of the transaction, they won’t be able to hack and change all the copies. Further, the chain continues to grow as each verified transaction creates a link, or a block, which is added to the chain. A hacker, to successfully access and alter the information would need to hack through a number of irrelevant transactions across thousands of chains. Further, there have been competitions offering prizes to those who can successfully hack the Blockchain, so that those who are created the technology are able to fix up the weakness and increase the security of the system.
The system, and how its infinitely more secure, was discussed by Don Tapscott in his Ted talk on Blockchain:
Now, you’re probably wondering: How does this thing work? Fair enough. Assets — digital assets like money to music and everything in between — are not stored in a central place, but they’re distributed across a global ledger, using the highest level of cryptography. And when a transaction is conducted, it’s posted globally, across millions and millions of computers. And out there, around the world, is a group of people called “miners.” These are not young people, they’re Bitcoin miners. They have massive computing power at their fingertips — 10 to 100 times bigger than all of Google worldwide. These miners do a lot of work. And every 10 minutes, kind of like the heartbeat of a network, a block gets created that has all the transactions from the previous 10 minutes. Then the miners get to work, trying to solve some tough problems.
And they compete: the first miner to find out the truth and to validate the block, is rewarded in digital currency, in the case of the Bitcoin blockchain, with Bitcoin. And then — this is the key part — that block is linked to the previous block and the previous block to create a chain of blocks. And every one is time-stamped, kind of like with a digital waxed seal. So if I wanted to go and hack a block and, say, pay you and you with the same money, I’d have to hack that block, plus all the preceding blocks, the entire history of commerce on that blockchain, not just on one computer but across millions of computers, simultaneously, all using the highest levels of encryption, in the light of the most powerful computing resource in the world that’s watching me. Tough to do. This is infinitely more secure than the computer systems that we have today. Blockchain. That’s how it works.
In a way, it’s not unlike how the banks hold a history of customer transactions. Originally created as the technology to support bitcoin, an electronic currency, there are now numerous block chain systems, each with a specified purpose. Traditionally it has a basis in financial transactions, and a result the banks are already attempting to integrate the technology into their systems. From a legal perspective, the concept of smart contracts is one which encapsulated within the Ethereum system. Under the system users are able to create contracts which can be executed by any computer running the Ethereum system. The potential under this system is the concept of a digital smart lock which is unlocked when a fee is paid, or the potential for musicians to release songs for people to repurpose.
The Blockchain seems like such a huge potential technological change, and yet there is a reason why every individual should be interested. At the moment when you want to transfer money, you can end up paying fees to the third party that the money has to transfer through. Instantly sending the money to your friends and family without the excess fees is something which the Blockchain technology can provide. If you wish to discover the land titles of owners, or a user of social media who wants to be able to track the data that your tweets generate, the potential is limitless.
