Sharing data securely across the world is a costly and difficult endeavour
Cloud-based computing services have sped up the process, but there is still a way to go. Many large international organizations operate centralized databases. Often, these are not regularly updated with the latest information that exists elsewhere in the world. This creates problems everywhere, from international trade to immigration. Additionally, the data is often insecurely stored.
This is where blockchain comes in.
The term blockchain was first coined in 1991. Its creators wanted to timestamp documents to prevent people from backdating or tampering with them. They intended to use it as a kind of online notary service, but it never really took off.
Until, in 2009, Bitcoin entered the scene. A person believed to be Satoshi Nakamoto, with the help of a coder named Hal Finney, created the first digital currency. Bitcoin exists outside the control of any central bank. Blockchain is best known for its use concerning cryptocurrencies such as Bitcoin and its competitors. Yet, its current and future applications expand far beyond these.
So, what is a blockchain?
As the name suggests, a blockchain is a chain of blocks that contain information or data. Data entered onto a block is immutable; once it is on the blockchain it is unchangeable.
A blockchain functions as a distributed ledger technology. But what do we mean by that? A distributed ledger technology, or DLT, is a decentralized digital database. Different people and groups all over the world share a synchronized version.
An easy way to think about a blockchain is like a shared Google document. You can share a Google document with anyone you want. You can edit it together in real-time. Everyone sees the most updated version. Everyone agrees on every new entry on the Google document. Blockchain functions in this way, but for almost anything.
Each block in a blockchain contains three different pieces of information:
● Data. For example, cryptocurrencies store transactional details in each block.
● A hash, which is a long string of numbers. It functions as a unique identifier, like a fingerprint. The term “hashing” refers to the encoding of data by running it through an algorithm. This produces a long string of numbers, called a hash.
● The hash of the previous block. This is what creates a chain of blocks, or blockchain. Each block contains the previous block's hash. The next block uses the hash of the current block.
How are blockchains secured?
Anyone who has a copy of the blockchain is on the peer-to-peer network which anyone can join. This makes it transparent and safe. If you were to try and tamper with the data in a block, any subsequent block will be invalid as the hash will not match. This is part of a process called proof of work. Proof of work confirms new data added to the block. This process adds new blocks to the chain.
Each person who joins the peer-to-peer network receives a full copy of the blockchain. After creation, each new block gets sent to everyone on the network. To prevent tampering, every node (a device that contains a copy of the blockchain) verifies the block. This creates a consensus among the nodes on the network to show which version of the blockchain is valid. To maintain its integrity, several synchronized copies of the blockchain exist.
The decentralized control is the key feature of blockchain technology. No single person has control over the entire network. Peers on the network share the control of the infrastructure. Those on the network work together even if they have conflicting interests.
How to "fool" the blockchain?
You would need to change the data in every single individual block. You would then need to redo the proof of work for each block. Furthermore, you must also control more than 50% of the entire peer to peer network, to ensure your version of the blockchain is the “accepted” version. Blockchain is secure due to the near impossibility of carrying out a successful “51% attack".
Cryptocurrencies and the blockchain technology that underpins them have been widely successful. Many are seeking to advance new uses of technology in nearly every field. Smart contracts are one of the newer developments to have helped move the technology into new and exciting areas.
Smart Contracts simply explained
Smart contracts are computer programs stored on a blockchain. They can perform certain actions, such as sharing your data when you give a digital signature. This could allow you to securely store your medical history on a blockchain and only allow medical staff to access it at your discretion. This could also work in reverse. The medical staff could share their qualifications via the blockchain-based network.
How could we use blockchain?
Blockchains could soon provide a secure way for any consumer to be able to find the origin of any product. This could improve the efficiency of international distribution chains and would also allow every consumer to quickly assess whether their product has come from an ethical or sustainable source. Sectors this might be applied to include: clothes, food, technology, cars, diamonds, and medicine.
For a moment, imagine you work in recruitment. You’re tasked to interview five candidates for a position. You could easily check the validity of any candidate's degree, visa status, or criminal background. Each candidate could share their credentials with you by using a digital signature. You wouldn't need to fill out a mountain of paperwork or wait two weeks to hear back from multiple agencies. All their credentials would go through a verification process. Used in this way, blockchain would revolutionize the recruitment industry.
One of the most exciting future uses of blockchain will be digital voting. Although the technology is still in development, it was successfully trialled in Sierra Leone in 2018. Voters were able to see the results of the election and check every vote on a decentralized distributed ledger.
In this way, blockchain could mark the end of election fraud and voter suppression. It could increase voter participation. Once fully developed, governments could poll their populations daily. Any nation could hold any level of elections using this technology. Citizens could vote from anywhere in the world using only their phone and a digital signature.
In the next article, we will cover some exciting ways blockchains are being used today. Stay tuned!