If you have spent some time in the tech ecosystem, or have a couple of nerds for friends, you probably have heard of the word Blockchain. For many, the concept of Blockchain remains elusive although it is relatively very simple.
What exactly is Blockchain?
Simply put, Blockchain is a ledger that can be publicly accessed where transactions are recorded and anonymously confirmed. To elaborate this, let’s take a look at how money is transacted. Before technologies such as Blockchain were available, companies and businesses relied on institutions such as banks and government to ensure certainty and trust. These institutions acted as intermediaries. Authentication and record keeping was essentially the work for middlemen to perform.
Now, imagine a situation where you are trading digital assets such as stocks, money and intellectual property, which are basically files in a database. This could lead to spending the same unit of value more than once (known as the double spending problem). Well, blockchain solves this problem by eliminating the need for third-party intermediaries such as banks.
Now you are probably wondering why the name Blockchain. A blockchain contains a list of ordered records known as blocks. Each of these blocks contains a timestamp and is linked to the previous block, forming a chain. Once data is entered into a block and is recorded, it cannot be retroactively altered. This makes blockchain secure by design. A blockchain can be accessed by many people from different computers and locations at the same time, while still maintaining its independence, transparency, and permanency.
Blockchains are not simply stored on a person’s computer, regardless of how large it is or how much memory space, it has. Bitcoin, for example, has its chain managed by several distributed nodes, which have a copy of the entire blockchain. Copies and access are all distributed and updated through these nodes. Thus you cannot have a situation where all data is erased from one single source.
Bitcoin and Blockchain: What is the relation?
It has been said that Blockchain is to Bitcoin, what the internet is to email. Bitcoin first broke the ice in 2008, authored in a white paper by Satoshi Nakamoto. It basically spelled out in detail, an innovative peer-to- peer system that did not need an intermediary, such that online payments were transferred directly. As much as Bitcoin was revolutionary and widely spoken about, it was quickly realized that the real treasure was not the cryptocurrency itself (Bitcoin) but the platform is was build upon.
Bitcoin is only one of over seven hundred applications that are currently using blockchain technology. Bitcoin, as we see, is a digital currency, and despite the name, does not manifest in actual coins. This brought about a new view of ownership of currency. You do not literally have a physical thing in your hand to trade with nor is it in your bank account. You simply transfer ownership to someone else by creating a record in the blockchain.
Is blockchain going to transform the way we carry out transactions?
There is no doubt about it. Blockchain is a highly anticipated disruptive technology that will change the world. The most exciting thing is that we haven’t even used it to its full potential yet, nor can we even grasp the magnitude of its reach. Blockchain is revolutionizing the internet, from being an internet of information, where people can easily and instantly communicate with each other across all borders, to the internet of value, meaning that people can instantly trade assets.
Blockchain is set to cause a disruption in several industries that rely on intermediaries, such as academia, real estate, healthcare, insurance, finance, banking and the public sector – just to name a few. Although it will probably render in some of the workforce redundant by technology, it will greatly benefit the economy as a whole.