Blockchain 101, Bollywood Style
Explaining the features of blockchain with Shah Rukh Khan and Priyanka Chopra
Every week, Team Kite comes together for a Kite Speaker Session. We invite both Kite members and individuals from the larger community to share their ideas and/or experiences. Yogendra Mishra, a developer on Kite’s backend team, recently presented on blockchain. Given the complexity of the technology and the fact that we are, well, in India, he decided to present it with a Bollywood twist. Below is his presentation adapted to pen and paper (pixel and screen?) — stay tuned for more posts like these to come!
– Kite HQ
While Bollywood released lots of movies in 2017, the world of cryptocurrency also issued a bunch of cryptocoins last year. While everyone discussed the box office success of films like Tiger Zinda Hai, the price of bitcoin was also the talk of the town.
Blockchain-based applications are emerging as the hero against the villain of dominant, centralized players. Blockchain is seen to have the charisma and the power to change traditional, age-old social issues.
Traditional transactions
There are two types of values we have used for a long time:
1. Bearable values
Bearable values are something which we can hold, were using and are still using it for trade. This includes things like grains or any commodity — cattle, gold and more. It can also be current fiat money, i.e government-backed notes and coins.
These exchange values have transformed and evolved with time, since there were different issues associated with each of them.
2. Registered values
Registered values have also gone through many modifications. What we now use is something like bond papers, which play an important role in verifying that you are the owner of property like land or a car.
Middlemen
Almost all systems have a series of middlemen, which also makes the people in that system quite powerful. For instance, Bollywood has a censor board, which has the power to approve or reject the screening of films. The banking system in India, meanwhile, deals with the Reserve Bank of India, as well as companies like VISA and MasterCard. You travel with startups like UBER, Ola, and Lyft. Many of these parties are centralized and prone to attack and get hacked, since there is single point of failure — we learned this the hard way through Aadhaar hacking and Equifax hacking scandals.
Lets us consider an example to understand problems facing the banking system:
If you want to transfer some money to your friend, you need to go through your bank. The bank maintains a ledger on your behalf and records every time there is money flow in one/several of your accounts. We have given so much power to banks, they can even deny your transactions or freeze your ability to use your money if there is any technical issue.
In some extreme cases, like in the case of the State Bank of India, a primary revenue stream for banks can come from enforcing charges for maintaining a minimum balance in your account. Bank of America also joins the party here.
What if the global film industry switched to blockchain?
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution
~ Satoshi Nakamoto in their white paper
In the traditional model, to establish trust amongst ourselves, we depend on individual third-parties. With blockchain, we try to leave middlemen behind and act ourselves as the third party to all other transactions. Let’s understand how blockchain works with an example:
Consider that, one fine day, the global film industry decides that the best way to create great movies is to have different national film industries support each other. They even decide to transact money amongst themselves.
There are different film industries in different parts of world, and so financial rules and regulations in each country vary. The film industry is relatively dynamic, especially given its revenues and need for forex transactions.
Drawbacks in the current system for the film industry:
- There are many intermediaries in the current forex system, which increase the cost of moving money.
- Since every system is centralized, the fate of your money depends on that system. It lacks transparency and involves a single point of failure.
- Final settlements take a lot of time, because there are so many intermediaries.
Noticing these above concerns, imagine the global film industry wants to skip these hurdles and freely transact with itself. The entire film community supports the initiative to skip these middlemen to have a safe and transparent money flow.
To support this, everyone in the film industry is participating, from actors to film crew members. Anyone from any region can join the crew — all they need is a video camera. Say Dwayne “The Rock” Johnson wants to send money to Priyanka Chopra—he will announce it with his autograph. Everyone in the crew will record this action using their camera. They will also authenticate and validate transactions through their camera, and store it securely on their computer’s hard drive. Everyone then has the same camera reel, stored securely on their computer’s hard drives. As a result, the more people start getting involved in the chain, the stronger it becomes.
Whichever crew member does this first gets a reward. If the crew member says they’ve recorded it first, other crew members have to confirm the validity of that recording before the reward is given.
Benefits for the film industry by switching to blockchain:
- There are fewer fees as there is no centralized player involved in the process.
- Since everything is recorded and available to public view, things become more transparent. This data is stored safely across all the crew’s cameras, so there is no single point of failure.
- Money flows more quickly, as lot of hurdles are removed, like middlemen and centralized storage.
If you want to know the technical details:
- The autograph in blockchain is known as the private key of the sender
- The crew acts like the nodes of blockchain
- The process of recording is called ‘proof of work’
- The reward to the crew is known as an ‘incentive’
The key features of blockchain
Let’s search some of the key features of blockchain in the name of the king of Bollywood, SHAH RUKH.
S: Speed
Blockchain has speed as one of its main features. There are no central clearing houses, and all the transaction ledgers are shared among the nodes, irrespective of their location. This makes blockchain best suited for use cases like forex transactions.
H: Hashed
Hashing is everywhere in blockchain. Each block in blockchain contains hashed data. Hashes enjoy advantages of security and privacy, such as the cryptographic hash function. For example, if a movie script is recorded in a digital format, and the hash of the script is stored on a blockchain, there is no way for someone else to claim that they were first to create that script that produced the hash, without knowing the script itself; someone can’t write a script and tamper with its hash.
A: Auditable
Blockchain is best suited for audit purposes. It maintains all data in a distributed ledger, so it is difficult to alter anything in a blockchain or anything that goes into a blockchain. So data in a blockchain can be reviewed and checked from the blockchain at any time and from anywhere. For example, we can check all the transactions that have ever happened through bitcoin here.
H: Honest
The backbone of blockchain is its consensus mechanism, which makes sure that only valid and authentic blocks will get added to blockchain. Every node scans all block data and solves some mathematical puzzle in order to append it in blockchain. Nodes do it honestly as they have to maintain consensus without which nodes’ claim to include that block won’t work. There is solid reason why nodes do this work. Just as actors get awards for their efforts in movies, nodes get rewards. Popular consensus mechanisms which are in use are proof of work and proof of stake, which have their advantages and disadvantages (beyond the scope of this post).
R: Removal of middlemen
Blockchain may help to eliminate the power of middlemen, as that power is distributed. Since blockchains hold all the previous records, there is enough trust between two parties to remove intermediaries. The cost of movement of facts is reduced. This video does a great job of explaining how middlemen do (or don’t) fit into blockchain.
U: Uniformity
All the records on blockchain are always uniform across all the nodes of a blockchain. Every block is linked with previous block with the help of the hash function and through Merkle trees. This makes every block hard to touch or delete from the blockchain.
K: Well, the ‘K’ is silent.
H: Hack-proof
Blockchain is a decentralized, secure, immutable ledger whose data is not stored in one node but across nodes. Data in blockchain is computationally irreversible. In order to control any public blockchain, a hacker needs to take control of at least 51% of the network, i.e. have simultaneous control of nodes across locations. This would require a practically infeasible amount of capital and energy. This is what makes the blockchain unhackable and tamper-proof.
Conclusion
If you think about the web, the web has been an incredible development platform, and everything today is developed on the web. In the future, everything is going to be developed with the blockchain in mind.
~ William Mougayar
Imagine the early days, right when the wheel was being invented. The person who invented the wheel may not have realized how major an innovation it was! There will always be those who resist change — naysayers existed in the wheel era and exist today.
Similarly, blockchain is in its early days, and is facing a lot of resistance — even from governments. We’ve been trying to look through the noise at Kite, trying to understand how blockchain can be applied at Kite to our products — to create and use technology that can benefit people on a substantial level. Hopefully, through the help of The Rock, Priyanka Chopra and Shah Rukh Khan, you now have a better understanding of how blockchain may be an opportunity to create decentralized, secure forms of finance that work for people of all backgrounds.
NB: Use of above images complies with fair use standards. More information on the fair use doctrine can be found here.
