There is a high chance that if you have been in the work force that is tech related for a while, you would have heard the term “block-chain” being used from time to time. With that being said, blockchain is one of the most confusing yet easy to understand concept/technology.
So what exactly is blockchain?
Blockchain is a database. It’s a record, a ledger and a new way of keeping information. It is a decentralize type of database and once it has been shared across a network of computers, it is extremely hard to change what is inside of it.
In Blockchain, a block is a piece of digital information while a Chain is the database.
If you want to learn more about how blockchain works, the following link contains graphic from Reuters that makes blockchain much more comprehensible.
Now for people with a little bit more background of technology, you might be familiar with this HTTP request/response cycle
The process is quite straight forward and most of the computation and data processing happens in the database, including hashing, salting and querying for information. These data are then stored by big companies such as: Oracle, Microsoft, IBM, Amazon in server farm which then response to the client per request.
Whereas in Blockchain, I will be using a bitcoin transaction to explain how the cycle can be a bit more different:
The transaction which holds data is pushed to a P2P computers system which is then processed through miners and then added to a chain of block. In blockchain technology, when a data is no longer stored in a centralized database, it is stored in multiple users who are registered as node and processed/validated by crypto miners in order for it to be valid and added onto a chain. For more information on nodes and peer to peer network, I highly recommend checking out Lisk Academy.
Now we know how it works, let’s discuss its history!
Satoshi Nakamoto! Get this name drilled inside your head if you ever have to learn more about blockchain. Both the concept and the application of blockchain was created by Satoshi Nakamoto in 2008 to serve to serve as the public transaction ledger of the cryptocurrency bitcoin. Satoshi Nakamoto is also infamously known to be an unknown person with lots of people claiming to be him. Satoshi envision a world where payment system is faster, cheaper and irreversible. No financial institution is needed, nor a 3rd party to mediate conflicts. Such a world pushed Satoshi into creating blockchain and it has been a phenomenal trend where both giant corporations and regular Joe are crazy about.
Yet the question remain, why do need a decentralize system? Is there something wrong with our existing system? The simplest answer i can give you is security
Worldwide spending on information security products and services will reach over $114 billion in 2018, an increase of 12.4% from last year, according to the latest forecast from leading research firm Gartner. The firm is also forecasting that the market will to grow 8.7% to $124 billion. It compares with a figure of $101.54 billion for 2017 — Forbes
Each year, large firms spend billion of dollars on cyber security with 2 main goals:
- Protecting their clients
2. Protecting themselves for operation in order to serve the clients
With the right implementation of blockchain technology, these firms can achieve that. As we discussed, blockchain makes it so that changing and adding data onto a chain will be almost impossible to achieve unless it is done through the system. In order for a hacker to access and exploit the database, the hacker will have to go through a network of nodes and successfully altering each node so that the hash will remain authenticated.
Thus if blockchain is successfully implemented, firms can save billion of dollars on security and invest it elsewhere. However, it has been 10 years, how come blockchain has not been widely used yet?
Blockchain has plenty of obstacles in order for it to be usable on a large scale.
“Blockchain can be slow,” researchers at the consultancy said in a report published on Monday. “In contrast to some legacy transaction processing systems able to process tens of thousands of transactions per second, the Bitcoin blockchain can handle only three to seven transactions per second; the corresponding figure for Ethereum blockchain is as low as 15 transactions per second.” — Deloitte
Not only is speed and scalability is the issue for blockchain, compatibility is also another issue. Blockchain’s complexity and uniqueness makes it hard for different firms with different version of it to connect and interact with each other. Hence transferring one sensitive data from one firm to another poses a great challenge. In addition to it, cost of R&D for blockchain is immense and could affect the development of some firms if not ultitlize correctly.
With all of this knowledge, the main take away you should have is this:
Blockchain is an unstoppable force that will bring changes to many industries. Specifically the leading industry which advocate strongly for blockchain is Finance, however, other industries have already begun in investing and exploring their options with blockchain, those industries include: government, healthcare, education and manufacture.
As an average Joe, maybe you don’t need to know so much about blockchain, however, as a developer or IT enthusiast, blockchain might become the norm for data processing and storage in the future. Thus having some knowledge about blockchain can help shaping your decision for you future career endeavor.