A beginner's guide to Blockchain
Blockchain is the next step in the evolution of the internet. Created by the entity known as Satoshi Nakamoto, blockchain was initially developed to solve the problem of double-spending in digital currency. Blockchain went on to be the basis for Bitcoin as it is an accurate, public ledger that doesn’t rely on central management and is virtually impregnable. It is gaining popularity for its potential in other applications and industries.
Blockchain’s collaborative maintenance means that it eliminates middlemen and creates a transparent ledger that ensures accuracy and reduces the chances of fraud. It does this by requiring validation from all holders of blockchain keys. It makes fraud almost impossible as every stakeholder must approve any addition to or alteration of the blockchain.
What does the future hold?
The three most important roles a blockchain performs are recording transactions, establishing identity and establishing contracts. That it can perform these three functions almost instantly with complete accuracy makes it revolutionary and its potential endless.
Currently, regardless of how slick digital operations become, they’re still at the mercy of old-fashioned systems, such as banking, and how well they integrate with new and emerging tech. Go-betweens, such as PayPal, have bridged the gap to an extent, however they are a conduit rather than a solution or an advancement.
In the short term, blockchain’s biggest impacts will be felt by the financial sector. Currently, fees are big business for banks. Fees for storing your money, fees for spending your money, fees for withdrawing, transferring or even looking at the too small figure on the screen. Decentralising the ledger and eliminating the bank’s role as middleman will allow for faster, cheaper and more accurate transactions. Blockchain and cryptocurrencies are borderless, so there will be no difference between sending money across the country or around the world. It will ensure that the money makes it to its destination without the “trusted third party” shaking down both ends of the transaction.
Imagine household utilities where manual meter reading is replaced by a smart contract — a self-executing contract that uses “if that then this” lines of code stored securely in a blockchain. Gas or power usage could be monitored in real-time, then when certain conditions are met, such as the level of usage, the provider is automatically paid. This automates not only the billing and payment processes, which can be done in a rudimentary way now with direct debits, but the whole process from beginning to end and in a completely transparent way. The provider and the customer can both see exact usage at all times, eliminating the chance of human error. No more estimated reads because the meter reader is scared of the dog, or misread meters.
Medical records, currency transfers, supply chain management – the list of potential applications is long and varied. A blockchain is essentially a spreadsheet duplicated across a network of computers. The network is designed to update the spreadsheet regularly, with the changes reflected everywhere it is stored. It is impossible to tamper with data undetected in a blockchain. It is designed on the premise that all eyes will be watching and verifying any changes or additions. Users will only be able to edit the blocks in the chain they “own” and will require the right crypto-key to write to the file.
While blockchain has huge potential, at the moment there is a gap between the theoretical and the practical. Blockchain could theoretically turn the energy industry on its head with the sale and trade of renewable energy by private citizens, however, that kind of storage capability is still in the embryonic stages. The Tesla Powerwall is the most well-known example of the technology attempting to embrace the concept, however the cost is still prohibitive at this stage. As the reality catches up with the imagined, the true value of blockchain will become apparent.