BLOCKCHAIN
If you don’t live under a rock, you’ve probably heard of Bitcoin — many think it’s currency of the future; Bitcoin has the power to transform industries valued at trillions of dollars. On the other hand there are also many people who think bitcoin is bubble waiting to burst.
To understand how Bitcoin can change the world, it is necessary to understand how it works. This article will offer a peak behind the curtain. We will explain the pros & cons of blockchain and how it relates to crypto-currencies (including bitcoin).
Blockchain (a chain of data blocks) is the principal technology behind digital currencies, it is a revolutionary technology whose aim is to decentralize the record keeping of databases that are used to keep track of transactions or store other types of information.
Centralization vs. Decentralization
Currently, transactions are recorded in a centralized ledger/database (they are siloed), where only an authority such as a bank, company, or government institution has access to the data. This system has worked until today, but there are huge problems that are emerging. THink of the healthcare system for a sec, when you go to a new doctor’s office or hospital, it is a pain in the ass because your information is located in a separate system. You need to fax all your information from your old doctor to your new doctor. This process is highly susceptible to human error, people can lose things or purposefully omit information.
Centralized databases are more subject to fraud, someone with access to these databases may change it (removing or altering transactions this is known as “cooking the books”), which also increases the risk of loss of information. For example, a hacker has the power to hack a database and steal important information because it is centralized in a single database — that is, attacks on certain centralized databases will give access to all information on it. If a database was decentralized by a factor of 1000, a hacker would have to do 1000x the amount of work to yield the same result.
Decentralizing a database can be more effective and beneficial to a ledger because it can prevent attacks and information fraud as well as make searching for information inside the ledger faster and more efficient.
For example, imagine running a casino, where one of the requirements is betting money, it will be necessary for someone to point all the transactions of the games, such as; who bet, how much was bet, and how much each player won or lost. Since a casino keeps there gambling data in a centralized database, it will be easier for a casino employee with access to the database to alter data in their favor & commit fraud.
On the other hand, if all the players at the casino are also recording all transactions from all games, it will be impossible for a casino employee to commit fraud because when everyone compares their version of the database, the employee’s data will be different than everyone else's.
This is how blockchain technology works — Everyone keeps a running tally of transactions, so if someone tries to cheat the system, the other users of the database will be able to catch him. this technology allows for the decentralization of a database (ledger) where transactions made by millions of people are kept.
Blockchain
Blockchain is a technology that allows the creation of a decentralized database whose purpose is to share any new information within the database among all members, eliminating the need for a single authority (like a bank) to control and record transactions. blockchain technology is decentralized and distributed because no central identity controls the platform, this makes the database more secure, equitable, and efficient.
Going back to the casino example, imagine that one of the players wants to audit all of the transactions that occurred during the game because he thinks someone cheated. instead of rely on one authority, he may obtain any & all information from every single member of the game. Since everyone has equal control of the data, the data is classified as decentralized & distributed. It becomes more efficient to get necessary information because you can ask any player to see if someone cheated instead of filing a formal complaint with the casino.
In order to add and validate (guarantee) information, it is necessary to have a consensus among the majority of members. No member can add information about the casino game without everyone agreeing, because for it to be validated there has to be a common consensus. This method (protocol) of validation also ensures that information is not entered more than once, because if someone tries to duplicate a transaction, the remaining members will catch it.
Blockchain works side by side with encryption, making any information within the database immutable. Consider the example of the casino game in which everyone has access to information. The blockchain works on a much larger scale with a variety of information, whether to keep track of product inventory or insurance claims. In conclusion, Blockchain technology looks to enforce the transparency, security, trust, and efficiency of databases and ledgers.
Use Cases
Blockchain can be used in a wide range of industries; from the creation of digital coins (cryptocurrency) to the quality control of food. The most famous and prevalent use of technology was in the creation of digital currencies such as Bitcoin, Monero, and Litecoin — whose aim is to make financial transactions more effective and to remove the need for central authorities, such as banks and financial institutions, to ensure confidence, security and the control and storage of our finances.
The technology is also being used to create smart contracts — contracts that are executed automatically when predefined conditions are met. Smart-contracts, with the help of blockchain, can greatly improve the insurance industry, quality of goods, and execution of services in several areas.
Internet-of-Things — IoT — (internet-of-things) will also use blockchain technology. This new technology promises to revolutionize our digital objects — to identify their needs and to solve them by themselves. For example, internet-of-things, with the help of blockchain, will allow your printer to automatically detect when it runs out of ink and buy a new ink cartridge online.
Blockchain can also be used in government institutions, such as property registration, as well as documents such as passports and data storage. The technology will allow the decentralization of this type of information making it almost impossible to lose or have such documents illegally altered.
The voting system will also be affected by the technology blockchain — the technology will allow the voting process in government elections to be more effecient, transparent, and accurate.
The above examples are only some of the areas where blockchain technology may be useful to society. Although promising, blockchain is still in its infancy. However, the progression of this technology has been fantastic! To conclude, it is necessary to understand the ideology behind blockchain in order to have a better appreciation & understanding of the potential benefits. To make these benefits a reality people have been creating digital coins, such as bitcoin, which serve as the gasoline that powers these innovations.
Example References: https://www.youtube.com/watch?v=kubGCSj5y3k
DISCLAIMER: The purpose of this article is to easily explain the usefulness of this technology. TO maintain simplicity, and many technical factors were omitted from the article.
