The term blockchain technology is commonly used when talking about cryptocurrencies, specifically Bitcoin. After all, the first blockchain database was created to solve the ‘double spending problem’ for digital currencies. However, blockchain technology can be used for so much more than just digital currencies. The technology itself is highly complex and it takes time to understand fully, but if implemented correctly, it could revolutionize industries, and not just the financial sector. So lets delve a little bit deeper into blockchain technology and how it could be used to change everything as we know it.
What is a blockchain?
In order to understand how it can be used, we first need to understand what blockchain is. It was first mentioned back in 1991, and the idea was to use blockchain technology to timestamp digital documents so that they could not be backdated or tampered with. It was basically forgotten up until 2009, when Satoshi Nakamoto (an alias) implemented the technology to design Bitcoin, one of the most famous cryptocurrencies.
It is very difficult and wide concept, but to put it simply, it is a digital, distributable, decentralized ledger, in which records (referred to as ‘blocks’) are linked and secured using cryptography. Each block contains data, a hash (basically a fingerprint) and the hash of the previous block, creating a chain of blocks, thus the name ‘blockchain’. It uses peer-to-peer network in which anyone can participate. Everyone on the network has the same copy of the blockchain, and when a new block is added, everyone needs to verify it to ensure it has not been tampered with.
One of the main advantages of blockchain is that it is very secure. And what makes it secure is that you can easily identify when something in a block has been changed. Above, we mentioned that blocks contain hashes. They are used to identify a block and all the data inside it. Each block has a unique hash. When something is changed within a block, its hash changes. Each block also contains the hash of the previous block. In order to make it easier to understand, visualize three blocks connected by a chain. They all have unique hashes and contain the hash of the previous block. So for example, the second block on the chain would have its own unique hash but also contain the hash of the first block. Now, imagine if someone tampers with the second block. Its hash changes, and no longer matches the original ‘previous hash’ stored in the third block. This means the third and all the following hashes are no longer valid. Essentially, the chain is broken.
A new block is created regularly, and in it are the records of transactions performed since the last block was created. The new block then gets a unique hash, and appears in the blockchain copies of all people in the network.
You should now have a basic idea of what a blockchain is. And while it is true that blockchain is primarily used in cryptocurrencies, it could be used in other areas as well. This article will talk about implementing blockchain to create smart contracts, making digital voting safe and managing identify online.
A smart contract is a lot like a real-life contract, just entirely digital. Computer scientist Nick Szabo was first to come up with the concept in 1997, long before the creation of Bitcoin. His idea was to make contracts digital and automatic, so that payment could be delivered as soon as the conditions in a contract were met. He also wanted to use a distributed ledger to store all those contracts.
Since the creation of blockchain, smart contracts became small programs that are stored in a blockchain. Smart contract defines all programs that are based on the blockchain technology, and essentially remove the middle-person in a transaction.
Smart contracts bind parties until all the conditions of the contract are met. The concept is explained very well in this video, and the author uses fundraising as an example. Let’s say I need a certain amount of money to produce a product and you, along with many other people, are willing to support it. A middleman is this situation would hold all the money that supporters are donating until I reach my set goal. So for example, if asked for $10,000 and if the goal is reached, I get the money. However, if I only manage to make $5,000, the money is refunded. An essential part of this is trust. In order for this to work, we both need to trust the middleman. Now, imagine if we could create a smart contract that binds all sides until the set conditions are met, and it could not be tampered with. The smart contract would safekeep all the donations, and if I manage to reach $10,000, the contract would see that as conditions met and would give me the money. If not, the money would be returned. And since the contract is stored in a blockchain, everyone on the network has a record of it. So if the contract was tampered with, everyone would be notified of it. This ensures a fair ‘transaction’.
When talking about making voting digital, the first thing that pops up into mind is, would it be secure? If people were to vote online, what would ensure that no one hacks or takes advantage of the system to turn the voting in their favor. This is where blockchain comes in. Blockchain is decentralized and distributed, which means that if someone wanted to hack the ledger, the hack would have to happen on all distributed ledgers. Basically, it is currently impossible to hack a blockchain.
If an unchangeable and public ledger could be created, all voters would be able to check that their vote went to the correct candidate. No one would be able to hack the system to change votes, and voters will be able to verify that their vote has been correctly recorded. When it comes to offline voting now, we, the voters, have to completely trust officials to do their job honestly and not tamper with the votes. Digital voting based on blockchain technology makes elections transparent, as the results would be fully accessible to the public.
Such a voting platform is already offered by startup Follow My Vote. The company was created in 2012, and aims to ensure that online elections are conducted in a fair manor and are not influenced by hacks. However, many people still look at online voting with suspicion. It may take a while, but the startup believes that blockchain technology is the future of elections.
In 2017, we saw many data breaches, one the most serious being the Equifax hack. This just goes to prove that our information is not secure online. And every time you provide any kind of personal information, you are at risk of having your identity stolen. Some researchers are now saying that information would be much more secure if it was stored on a blockchain.
Technology news website Tech Crunch wrote an article about this, describing why data management on a blockchain would work, why it would not, and why it could. One of the experts explains that if personal information was stored on a blockchain, it would give people direct control over their personal data, and allow them to limit how much is shared, since people like to be in control of everything they do and they share, some people even purchase Maeng Da and other supplements online, to be sure they get exactly what they want for their health.
“Blockchain is the underlying technology paving the path to self-sovereign identity through decentralized networks. It ensures privacy and trust, where transactions are secure, authenticated and verifiable and endorsed by relevant, permissioned participants,” the expert interviewed by Tech Crunch explains.
Another expert, however, disagrees with that and explains why it would not work.
“Identity is not going to move to the blockchain in any big way (not as we know it). Blockchains were designed to solve problems quite different from identity management (IDM). We need to remember that the classic blockchain is an elaborate system that allows total strangers to nevertheless exchange real value reliably. It works without identity and without trust. So it’s simply illogical to think such a mechanism could have anything to offer identity,” Steve Wilson, an analyst at Constellation Research, explains to Tech Crunch.
Theoretically, identity management on a blockchain could work. However, practically, we are still far from this being widely used.
It is not news any more, that Blockchain is the technology Bitcoin is based on, but it is capable of much more than that. Some believe that is will revolutionize many fields, but experts are still in the stages of exploring its capabilities. Nevertheless, blockchain is a fascinating subject, and we are excited to find out how it will be implemented in our lives in the future.