There’s been a lot of buzz lately about cryptocurrencies like Bitcoin and Ethereum, but more recently, people are starting to talk about the technology that powers all of these cryptocurrencies. Blockchain.
How Blockchain Works
Blockchain is a distributed, decentralized, digital ledger. This basically means that everyone has a copy of this ledger, there is no one with superuser access like a government, and it’s completely online. Blockchain is used right now to transfer money, but can be applied to any form of data. Let’s take the example of Bitcoin (BTC) for how Blockchain actually works, and let’s say that Bob is sending 0.5 BTC to Joe.
First of all, Bob needs to get a digital wallet. Your wallet holds your public key, which is what everyone on the blockchain sees you as (kind of like a username, but just a random string of numbers and letters.) Your wallet also holds your private key (again a random string of numbers and letters), which is basically your password. You also use it to authenticate transactions, which I’ll get into later. Finally, your wallet has all of your cryptocurrency in it. When Bob sends Joe 0.5 BTC, he basically writes on the ledger, “Bob sends Joe 0.5 BTC,” and “signs” it with his private key, basically just making sure Joe didn’t write that. When Bob writes that, a cryptographic algorithm creates a hash of it, and puts it in the next block to be mined.
I know what you’re thinking. Hash? Block? Mined? A hash is just the output of a function that has inputs of specific information from the transaction, like the amount, public keys, timestamp, etc. Blocks are bundles of transactions. Miners are people that try to solve for the hash by literally guessing billions of numbers. This takes a lot of computing power, which is why the first miner to solve a hash gets a reward of 12.5 bitcoins created out of thin air. Once the transaction is mined and the hash solved, Joe receives his 0.5 BTC. Now that the transaction has been verified and completed, it appears on everyone’s ledger so that no one can dispute its existence.
The ledgers constantly check with each other to see that they are all the same, and no one is trying to mess with them. If, for example, Dave erases that transaction from his ledger, it will pop right back up again, because it checked with the other ledgers and noticed that it was the only one with that missing transaction, therefore, by law of majority rules, it must be wrong.
Real-World Uses of Blockchain
In healthcare, there is a huge problem with health records. They’re on paper, lost in seconds, can’t be sent to a different doctor if you’ve passed out while in Florida, and aren’t always as confidential as they’re supposed to be. By putting health records on the Blockchain, all of these problems could be solved. Everybody could see who got the health records, when, and where, nobody could misplace them, they would be perfectly organized, and could be sent anytime. This is yet another industry that Blockchain will be impacting.
There was a lot of controversy around the 2016 election that I really don’t want to go into, but that could have never happened if we had had Blockchain. By simply using Blockchain for electronic voting, there could be no hacking and editing the records, or anything like that. Voting would still be completely anonymous, and everyone would know whether their vote was counted or not.
The music industry has some serious problems with ownership rights, royalty distribution, and transparency. The digital music industry focuses on monetizing products, while overlooking ownership rights. With Blockchain, a database of music, its owners, producers, etc. can be created, and with the help of some smart contracts, all of these problems could be solved. Blockchain would provide transparent transmission of royalties and real time distribution of money to everyone involved.
Blockchain’s Impact on Our Future
Blockchain has a ton of applications that aren’t being explored yet, but this technology is still in its early stages. I believe that it will have a huge impact on so many different industries, and I am really looking forward to being a part of this blockchain revolution!