Blockchain has been growing in popularity across a multitude of sectors. As Blockchain becomes more and more popular, it is important to have a general understanding of how Blockchain works and what it does.
A Brief History
Many people associate blockchain technology with Bitcoin. Although that is how blockchain became mainstream- there is much more to blockchain technology. The start of blockchain could go back over 5,000 years ago. Ancient Mesopotamians used a similar structure of ledgers to track their inventory on clay tablets. This form of tracking data was an initial building block to a ledger and decentralized systems.
More recently, Stuart Haber and W. Scott Stornetta introduced time stamping in 1991 using cryptographically but it soon collapsed in 2004. Four years after the collapse, the idea of bitcoin was brought into existence and a seminal white paper was launched. The next year bitcoin was open to the public market and in 2010 the first purchase of Bitcoin was made. Since then, it has taken off rapidly, many other projects were influenced by the cryptocurrency such as Blockchain 2.0, NEO project, and Ethereum.
What is Blockchain?
Blockchain is a decentralized ledger, but what does that mean? A decentralized ledger is a set of widespread synchronized data, that to be altered must be agreed upon. In contrast, a centralized ledger requires a central authority like the bank or the government, to record and approve transactions or changes. The technology is extremely valuable as it keeps track of every transaction and can be easily verified. Blockchain has become increasingly popular in recent years because of the invention of Bitcoin.
Blockchain can be shared and used within private and public networks. The technology was created to track financial transactions and document records. CMO and co-founder of Sangwa Solutions, Josh Grift, describes Blockchain as, “not a database or a spreadsheet. It does not have a central authority. You can’t edit the data handled by a blockchain. It’s more like a shared ledger than a document. It’s a network of nodes that keep each other accountable.”
Josh uses a simple analogy to explain blockchain – imagine within your group of friends everyone has their own list. Everyone agrees that you will edit the list if the item added or taken away is agreed upon. If you altered the list without consulting them, they would know because it differed from their list. So blockchain is not just a list, it is a source of accountability.
Blockchain is decentralized, meaning it does not have central authority – which means that any edit requires a group confirmation. This could be both a positive and negative attribute. Because this technology is fairly new, blockchain is extremely volatile. The ledger system allows for high levels of accountability and is a major asset. However, the prices fluctuate based on the number of users and investors. As the market and technology continue to grow, this will most likely change. Because it is rather new, Bitcoin and other cryptocurrency awards users for confirming the existing ledger. In saying this, there is a process before concepts, like Bitcoin, become usable blockchain technology.
Benefits & Uses
Bank transfers are sometimes not completed due to technical issues, transaction limits, safety issues, or transfer charges. Forms of cryptocurrency run on blockchain to avoid this. This form of currency is immune to counterfeit fraud, excludes the bank, and is highly secure. Each transaction consists of ‘blocks’. Through the blocks, transactions are recorded in detail which creates a ledger, or series of blocks. It allows for a large range of transparency as everyone has access to this ‘shared ledger’. This also makes verification extremely easy.
Blockchain was created for the purpose to be used in the finance industry. However, the more we learn and discover about the technology, we discover more uses for it. In recent years it has been discovered that blockchain can be used for more than recording and confirming financial transactions.
Walmart used blockchain when facing problems with getting their products to reach their customers. The company was able to determine where in the supply chain the issue was occurring. During the manufacturing, transportation, and processing steps, detailed ledgers were created using blockchain to determine where the problem was occurring and stopping further development.
As mentioned previously, blockchain allows for high-level transparency and easy verification. Recent explorations have shown that blockchain could be used for voting, and even led to the creation of the mobile blockchain voting app, Voatz. Virtual voting has the potential to increase voter turnout by making it more accessible. Blockchain is an established, secure, technology that would allow tracking votes. However, there are still concerns about using it for voting, as it could bring forth more issues in the future.
For example, on September 9, 2018, Moscow used blockchain as their voting platform and trusted it, but also tested it. There was a limited turnout as many people have a limited understanding of how blockchain works or faced technical difficulties. Another challenge is that experts have no way to identify every single irregularity in blockchain voting. Check out a recent report by MIT that explores the pros and cons of voting through blockchain technology.
The Future of Blockchain
Blockchain is an emerging technology in 2021. It is not just used for Bitcoin – it has a wide range of versatile uses we are just beginning to explore. Blockchain is a source of accountability, but since it is a contemporary technological invention, we still have a lot to learn about its scope and applicability.