In today’s electronic era, as digitalization moved everyone to the online space, there are also some legitimate concerns regarding the “safety” of online data. Mainly, there are questions over what exactly the governments and companies are doing with a person’s data. The founder of Facebook — the biggest social media network in the world — Mark Zuckerberg, found himself in hot waters due to the same issue.
Amidst all this debate, the cryptocurrency boom allowed a solution: using blockchain technology to decentralize the Internet. Soon, the movement picked off, and netizens began to raise their voice for the protection of their fundamental right — to keep their data safe and secure. Here is how blockchain is transforming the online world with Internet decentralization.
What Is Blockchain?
It is simply a chain of blocks that record transactions across several computers that are connected in a peer to peer network. Stored data on the blockchain is immutable; that means it cannot be backdated or tampered. Without any involvement of a central authority such as a bank or government, the blockchain allows secure transfer of items such as money, business contracts, property, etc.
Blockchain technology comprises of four main components.
- A Peer-to-Peer network that enables decentralization
- Consensus protocols for the peers (computers and devices) in a network system to establish good trust between them
- Cryptography for user privacy, and data security and integrity
- Public Ledger is a distributed database that saves all the transactions within a blockchain network
Let’s dive little deep into these components while exploring how could each of these components help to fix current Internet centralization issues.
1. Peer-to-Peer (P2P) Network:
Commonly referred to as P2P, the peer to peer network is the heart of the blockchain. The complete opposite of legacy client-server models, P2P networks have no central point of storage such as a server. P2P is considered to be an unconventional breakthrough in the technology industry even when compared to the modern cloud-based architecture, which also stores data at one location.
BitTorrent platform is one of the best examples of Peer-to-Peer network where the computers in a BitTorrent network (a group of computers downloading and uploading the same torrent) transfer data between each other without the need for a central server.
In the same fashion, the blockchain network is made up of nodes, which are a group of computers or devices on the Internet forming the peer-to-peer (P2P) network. All nodes on the network store the same copy of the database with them rather than storing data in a central storage location such as a server. Nodes also get rewarded as they validate and process the transactions, called mining.
What Kind of Problem Does P2P Network Solve?
It solves the single point of failure problem because the same copy of the database is distributed across all nodes on the P2P network. Failure of a single node doesn’t cause the denial of access to all dependent clients. Additionally, the speed of the network improves because bandwidth is shared across the nodes. In the worst-case scenario, we can rebuild the whole network even if we have one healthy node available on the network.
2. Consensus Protocols:
When we have a network of computers and devices formed as a p2p network, these nodes should follow some rules also known as protocols to trust each other over the network. The consensus protocols enforce the rules and bring the network of the nodes to reach an agreement about what data or transactions should be added to the blockchain database. We have various blockchain consensus protocols available that will be chosen based on the requirement of the blockchain platform.
Here are two notable facts about Diaspora, that makes you feel more comfortable to socialize over the Internet:
- Decentralization: There’s no use of large central servers owned by a corporation. Instead, everything runs on a P2P network.
- Privacy: Users own the data; this means that it is totally up to the users whom they want to share information with and how. In other words, you are in charge of your content.
What Kind of Problem Does Consensus Protocols Solve?
There is no need for a governing authority, and as such, no single party can control and use the network to push its agenda as there is no central point of data storage. This technology revolution will be a significant #IOwnMyData# movement from the current centralized social platforms such as Facebook and Twitter, wherein these centralized social platforms become the owner of the data that the user uploads.
Cryptography is used to prevent third parties from viewing and hacking private data. Essential concepts in blockchain cryptography include hashing, digital signature, public-key cryptography, and Merkle Trees, which is a data structure for storing the hashed blocks of the data.
Hashing is a method that uses a hash algorithm to convert any data and produces a short length of a unique hashed text. It is almost impossible to get the original text from the hashed text. Any changes to the original text will produce another hashed text; this ensures that for any given text, the corresponding hashed text is always the same.
Each transaction in a blockchain consists of properties such as timestamp, transaction data, etc. Multiple transactions are executed in one block for quicker processing, and generate the hash for the entire block; this hash value will be used in the next new block to link the currently created block. The first block of any blockchain does not have a previous hash link; this first block is called a Genesis block. The following blocks that get created after the genesis block compute the hash value using the previous block’s hash value, along with the timestamp and it’s transaction data.
In the below image, you can see how the blocks are linked together to form a blockchain. Block 1 has it’s ‘previous hash’ as Block 0’s hash value, and the chain keeps growing with blocks linked this way as new blocks get added, which forms the basis of the data security and integrity in the blockchain.
If a hacker attempts to alter any transaction of data and injects that to the blockchain network, the other nodes on the network will naturally reject this data because of hashes mismatch; this ensures that stored data on a blockchain cannot be backdated or tampered.
A digital signature is used for securely transferring messages between two computers or people in a secure way, and public key cryptography makes it possible for anyone to encrypt a message. However, the only way to decrypt the message once it is encrypted is by using the corresponding private key; this ensures that the owner who has the private key owns the data.
We can take the example of Bitcoin, the cryptocurrency enabled by the blockchain technology, to better understand the concept of public key cryptography. Following is an example to show how the concept of cryptography works in Bitcoin.
Let’s suppose that your friend, let’s call him Bob, wants to send 0.01 bitcoins as a birthday gift to Alice, another friend of yours. To receive bitcoins from Bob, Alice creates a bitcoin wallet which automatically generates a public key and corresponding private key as a set. These keys are unique for each wallet.
Alice shares her public key address with Bob and Bob sends bitcoins to Alice after encrypting the transaction details (bitcoins 0.01) with Alice’s public key. Alice decrypts the transaction using her private key and stores the bitcoins in her wallet securely. After the transfer is validated, the transaction will be recorded on a blockchain.
Private keys shouldn’t be shared with anyone because, with private keys, anyone can steal your bitcoins or any cryptocurrency.
In the image below, I created a bitcoin cold wallet (also called a single wallet) at bitaddress.org. You can see that this wallet has two keys, one is to share (public key), and other is to keep it secret (private key); this is for illustration purpose only, and do not deposit bitcoins into this wallet address. We have many varieties of secure wallets available in the market.
What Kind of Problem Does Cryptography Solve?
It solves the problems of secure payments with no middle man and low transaction fees, high data security, and user privacy.
4. Public Ledger:
Every transaction that occurs on the blockchain network is timestamped and digitally signed. As a result, users on the network can trace back to the time a transaction was made. Additionally, they can find the corresponding party transaction details on the blockchain through their public key address. This audit capability of blockchain ensures a high level of transparency and security for each transaction in the network; this assures users that their data is authentic and not tampered.
For example, we can verify the transaction details of the public key address that I created in the cryptography section on the bitcoin public ledger.
In the image below, the Total Received and Final Balance fields are zero BTC because of the zero transactions.
What Kind of Problem Does Blockchain Public Ledger Solve?
Anyone can verify the transactions and data on the blockchain with a public key without compromising user identity and privacy; this brings transparency without any third party involvement such as bank or government.
What Are The Blockchain Technology Use Cases?
Blockchain has the potential to power up many industries, and one such is Finance, let’s see how!
In the future, cross-border payments will not be based on legacy systems and traditional correspondent banking. Instead, they will be based on the blockchain technology that allows people and businesses to make cross border payments faster and at reduced costs without any involvement of a central authority such as a bank.
Even SWIFT, as part of its Global Payments Innovation (GPI) initiative, is going to allow blockchain firms to make use of its GPI platform for real-time money transfers. Blockchain has a significant role to play in the future of the global remittance industry. A few real-world examples of cross-border payments with blockchain technology are Ripple, and Stellar.
In addition to the above, there are many other industries such as music, food supply chain, healthcare system, gaming, real estate, and IOT (Internet Of Things) that have been adapting blockchain technology.
Entrepreneurs and developers can explore this area, solve the problems faced by the community, and build profitable companies using blockchain technology. We have incredible blockchain platforms such as Ethereum, IBM Blockchain, Hyper Ledger Fabric, and the new upcoming platform, Facebook’s Libra to build Dapps (Decentralized applications), and fix the creepy Internet issues.
How to choose the right platform, and what are the future challenges to build smart Dapps is another fascinating chapter, best left for the next post.