What is Blockchain? And how is it used in the real world?
I am Yoshie who organises Women in Blockchain in Dublin.
(If you missed our first meetup, don’t worry! You can read this post and you are ready to go to the next meetup!)
Today I will talk about the followings:
- What are the benefits of Blockchain?
- What is Blockchain?
- How it is used in real world?
First of all I will talk about the benefits of blockchain. You might be thinking “why are you talking about the benefits before even explaining what it is?” Because the more certain we are that we will get a benefit as a result, the more we are more motivated to learn things. A lot of people told me “blockchain sounds too complicated to me” or “I am not IT person so I cannot understand it” but a lot of bitcoin investors are not tech people because they think they can get benefits as a result.
Also, some people say blockchain is the next revolution after the internet. What does it mean? The internet definitely made our lives easier but how many people actually know how the Internet works? Very few. Why? because they don’t need to. How many people use the internet? So many — because we know it is useful and the technology gives value to our lives. In order to use blockchain effectively and get value from it, it is essential to know how it can be valuable to us.
So, what kind of benefits can we actually get?
First, I would like to look at how the internet was the revolution for us.
Before the Internet, Let’s say you wanna buy a special clothes from US which you saw on magazine. You have to open a phone book, call them, send money, ask them to ship it or you have to go to US and get it finally. It costs a lot of money, a lot of time, you need a lot of papers, and you can’t even look up what brand it is on the Internet so all you can trust is basically the magazine and your gut.
But now there is no wonder we use the Internet to buy clothes from US. We use companies such as ebay, Amazon or paypal to buy clothes. Because it is faster, cheaper, you have to pay some fees to paypal sometimes, but definitely cheaper than going to US, you don’t need any paperwork, you don’t have to go anywhere, and you can look up what Amazon is on the internet and you trust them because they have guarantees and you can see the reputations.
So if we compare before the internet to now, it became faster, cheaper, lighter, and more convenient. So the internet was the revolution because it has made our lives much easier and more convenient.
We understand how the Internet changed our lives to better.
With blockchain, what will change is that if we use blockchain technology, we don’t need any middlemen like shops or Amazon, and we can buy the clothes directly from the supplier. Why is it possible? Because the blockchain technology itself is trustable and secure so that you don’t need any middleman because what Amazon provides us is trust. With blockchain, the technology itself is trust-worthy.
These days there are a lot of intermediaries in modern society. Amazon, ebay, uber, airbnb, government, banks, etc.
I would like to look at how we trade money now. Let’s say I send my money from Japan to here in Ireland. I used 2 banks, a Japanese bank and an Irish bank. I had some problems such as it cost a lot of money, a lot of time, I had to submit a lot of documents, and I was a bit worried if it can be sent properly.
If I use blockchain technology to send money, all the problems I had will be solved.
If we compare transfering money using banks or blockchain, blockchain is much more convenient. (I am using an example of using ether.)
You can actually do this by using transferwise. It is cheaper, faster and you don’t need to do any paperwork. But what cannot be solved is the trust. We trust banks and transferwise but they have all the data and they can be hacked. They pay a lot of money for security but it is not impossible to be tampered. However blockchain is almost impossible to be tampered thanks to the mechanism of the technology.
To sum up, the benefits of blockchain we can get are these.
Regarding accuracy, blockchain makes data more accurate. If you use banks, bankers type the data in the system they have and the data can be changed or deleted so if they make a mistake, it is hard to track and correct it. But blockchain it cannot be changed or deleted so you can easily track it.
So what are the mechanisms of blockchain? How can it be tamper-proof and so trustable?
Blockchain is a decentralised database that stores registry of assets and transactions across peer-to-peer network.
So blockchain is basically a database.
What is a database? It is sort of like a ledger. Like an accounting ledger you can put record or logs. Blockchain is append-only database so you can’t change or delete anything after you added a data.
What makes blockchain secure? I will tell you 2 key reasons why blockchain is more secure than the traditional database which commonly used now.
The first key which makes blockchain secure is that blockchain is decentralised. Database we are using commonly today is centralised. So why decentralised makes it more secure?
If this central server had a issue or hacked and your data is changed or deleted, it is gone. Whereas without any central server in this distributed network, everyone who joined this network has a full copy of data so that the data which is once added cannot be cheated or deleted.
How can the data be added? If you look into the 4 computers in the blue circle on the above map….
Blockchain uses a peer-to-peer network and anyone is allowed to join. So it means people who you don’t know can join as well. How can you actually trust that then?
When someone joins this network, they get the full copy of blockchain. All of them can use this full copy to verify everything is still in order. So in other words, everyone who joined it has equal rights, everyone is like administrators and everyone is watching. If you want to tamper a block, you have to control of more than 50% of the peer-to-peer network, means more than half of the people all over the world who join the network have to agree with you so that makes it almost impossible to do.
The second key is how blockchain makes it impossible to be tampered.
What makes it unable to be tampered? So blockchain is as its name, data is stored in each block and they are connected with chains in order. Every block has some data, hash of the block and the hash of the previous block. Hash is like a fingerprint or signature which identifies the block and it is always unique. Once a block is created, means once data is stored, hash is being calculated.
Changing something inside of the block will cause the hash to change so in other words, hashes are very useful when you want to detect changes to blocks. If the hash changes, it no longer is the same block. Block also has the hash of the previous block. This makes blockchain so secure because if you try to change the data of block 2 for example, the hash will be changed as well so that the previous hash in block3 is not the same as the hash of block2 anymore. This will make block3 and all following blocks invalid because they no longer have a valid hash of the previous block. So changing a block’s data makes all following blocks invalid.
Computer is very smart now so it is actually possible to change the data and hash is changed on block2 for example and reculculate all the hashes before them becoming invalid and make all valid again. But blockchain has the mechanism called proof-of-work that slows down the creation of new blocks. In bitcoins case, it takes about 10 minutes to calculate the required proof-of-work and add a new block to the chain. Proof-of-work makes it very hard to tamper data because you have to reculculate all the following blocks.
What blockchain makes great and secure is that we don’t need any intermediaries who control central server, we don’t have to trust anyone, we just need to trust its technology and the system, proof-of-work and peer-to-peer network, takes care of any trust issues we have.
So blockchain is a distributed ledger which does not have a central server, and has peer-to-peer network which allows everyone who is in the network to have a full copy of the data and the hash does not allow to anyone to change or delete the data. Thats is why blockchain is secure and transparent.
There are more mechanisms which make blockchain more secure but I hope to cover them in the future blog.
So what kind of companies are actually using blockchain?
I was actually surprised because so many companies are already using blockchain technology.
Walmart
With the store’s app, Walmart employees can see which farm the fruit came from and where it’s stored in the backroom. The technology could help customers understand where their food comes from and could streamline the restocking process.
Dubai
The world’s first blockchain-powered government. By 2020, the emirate wants all visa applications, bill payments and license renewals, which account for over 100 million documents each year, to be transacted digitally using blockchain. They think it could save 25.1 million man hours, or $1.5 billion in savings per year for the emirate. Much of this enhanced productivity will stem from moving to paperless government.
If you have any question or advice or anything you would like to share, feel free to contact us via linkedin or meetup!
Thank you so much for reading!!
Yoshie
