After several years of skepticism and rejection the world community has decided that blockchain is a world-changing technology that is going to disrupt every sphere of our life. The biggest tech corporations, banks and governments along with institutional investors, best specialists and enthusiasts played a crucial role in this process. However, it is appearing quite often that people don’t know or simply misunderstand why blockchain is so important, and how this technology is going to change the world. Sometimes it even becomes a surprise for ordinary people that the problems solved by blockchain lie in front of anyone and have been around for hundreds of years.
In order to dispel any misperceptions, we decided to prepare an article about innovative mechanism of blockchain and explain again how blockchain is going to change our lives. Hope you will enjoy it.
The problem of trust
To begin with, the most important benefit of blockchain is not even its technological excellence and advance. The greatest strength of blockchain is that it becomes an ideal constant and secure source of trust for everybody. To be more precise, blockchain becomes the first and the only real solution for the existing for many years in mathematics and cryptography Byzantine generals problem or Byzantine fault tolerance (BFT) — an agreement problem described by Leslie Lamport, Robert Shostak and Marshall Pease in their 1982 paper, “The Byzantine Generals Problem”.
«We can’t yet predict what the blue-chip industries built on blockchain technology will be, but we are confident that they will exist because the technology itself is all about creating one priceless asset: trust»
MIT Technology Review
Let’s not plunge into difficult mathematical and technical issues and let’s take a brief look at how it works. The most important aspects of blockchain here is that blockchains use open source code, so all the information is fully available to all blockchain members (nodes). Additionally, systems are autonomous which means that any information cannot be imperceptibly changed by malefactor.
Thus, a blockchain is simply an electronic ledger — a list of operations. Those transactions can represent almost anything. They could be actual exchanges of money, mark exchanges of other assets, such as digital stock certificates. They could represent instructions, such as orders to buy or sell a stock. They could include so-called smart contracts which are computerized instructions to do something (if something else is true).
What makes blockchain a special source of trust, is that instead of being managed by a single centralized institution, such as a bank or government agency, it is stored in multiple copies on multiple independent computers within a decentralized network. No single entity controls the system. Any of computers on a network can make a change to a ledger, but only by following rules dictated by a “consensus protocol” — a mathematical algorithm that requires a majority of other computers on the network to confirm a change.
Why trust in important?
To answer this question, let’s imagine you are a representative of a large oil company and you’re going to make a big deal. According to your agreement, you will have to deliver oil in a month to your consumer, and in exchange you’ll receive a huge sum of money. How would you ensure that all conditions will be met on both sides? I’m sure that an honest word only will not be enough for you. This is the reason why we always use middlemen in almost all operations with other persons and companies.
These «centralized trust managers» such as banks, stock exchanges, and other financial middlemen have become indispensable, and this has turned them from intermediaries into gatekeepers. They charge fees and restrict access to creating friction, curtailing innovation, and strengthening their market dominance. This can be described as “the cost of trust” — money or special conditions that you have to provide in exchange for trust and protection from fraud etc.
Blockchain replaces all these middlemen and makes their services useless. In addition, it completely reduces all intermediary costs by excluding middlemen from transactions.
To sum up
The real promise of blockchain technology, then, is not that it could make you a billionaire overnight or give you a way to shield your financial activities from nosy governments. It’s that it could drastically reduce the cost of trust by means of a radical, decentralized approach to accounting — and, by extension, create a new way of structuring economic organizations.
Blockchain opportunities in the sphere of trust are unlimited and allow us to create new trust models and paradigms. Thus, for example, in Storiqa we created the feature of smart reviews based on blockchain — when the technology ensures that all reviews are posted by real buyers of the products. This helps us to solve the problem of fake and bribable reviews which have became a serious source of concern for traditional online marketplaces.
Follow Storiqa on
Facebook https://www.facebook.com/storiqa
LinkedIn https://www.linkedin.com/company/storiqa/
Twitter https://twitter.com/storiqa
Join our conversation on Telegram https://t.me/storiqa_en
Our website https://goo.gl/bepUwH
