First, to start off, Block Chain is not Bitcoin. Bitcoin or crypto-currency is one of the numerous applications that could be made using the blockchain technology. The idea of this post is to explain in the simplest way possible what is a blockchain and why it will or should disrupt all industries by 2030.
Block in the “Blockchain” refers to a block of information. This information generally contains 3 basic fields
- Data: This is the content what it is storing
- Hash: This is the Unique ID that is used to refer the data
- Previous block Hash: This is the Unique ID of the previous block
Any new transaction or information adds a new block containing the above data and hence it creates a chain. People with Computer Science or IT background may be reminded of the Linked List lessons at this point in time. A doubly linked list to be precise. Well, in terms of technological implementation, yes it can be thought of being like that.
So what is blockchain? The blockchain is a decentralised ledger system.
Photo credits: Savjee YouTube channel
How is it useful? Well, it provides one of the most transparent, fast and secure transactions that is possible.
In a centralised system, one central system holds all the power which validates the authenticity of that transaction, like a bank. Hack that, and the transaction is considered legal. Or the electronic voting system, hack the central core and the results could be hackable. Note: This is in reference to the recent US elections, and not the Indian elections. Indian elections use an EVM machine and to hack it, one needs to either hack the entire hardware by replacing it or get specially trained from Arvind Kejriwal.
Blockchain boasts of a decentralised system. For any transaction to be successful few things need to take place.
- A new block has to be added and the authenticity of it is validated by every person ( his block) on the network and the transaction information, the “block” is attached to every node in the network. To add a transaction, one needs to go through something called, “Proof of Work”
- A “Proof of Work” usually takes 10 minutes and this is the time that is used to validate the transaction and this is when a new hash ID is also created.
- Every transaction also creates a new hash id.
Why is it almost impossible to hack? To hack the system, one has to hack every single node in the network which can range from 10 to 10 million. This is because if any tampering is done to the data, this requires a new hash id. Now the block in front of it stores that hash which means it also has to change the content of the next block. Changing that block’s content changes the hash ID of that block too. This sets up a chain reaction. So to change the content of one block, every block from then on has to be changed. Technically, this would have been possible for a supercomputer to recalculate the hash ID of all blocks. This is where the genius of Proof of Work comes.
The Proof of Work deliberately slows down the process of creating a new hash ID, sometimes in the range of 10 minutes. So to change the data of a single block in a network that has only 1 million nodes, it would roughly take 15 years and 3 months.
Photo credits: Savjee YouTube channel
So will blockchain be used only in something that is currency oriented? The answer is NO. It can be used for anything that requires a transparent and secure way of keeping records. Hence the description that blockchain is decentralised transparent and secured ledger system.
Industries/Organisations that could be and should be disrupted
- United Nations
- Online identity
- Import and Export
- Government: Voting
- Cloud storage
Some generic usages
Currently a person who has all documents in place, for example, someone from a first world country has a better standard of living because insurance companies find it less risky to give insurance, banks find it less risky to lend money and the money transactions also come at a lower cost compared to someone from a third world country like India. If we had a user identification system implemented by blockchain, all that could be negated. The user’s identity could be tracked in no time.
This would also benefit the UN and other organisations to mitigate the immigration problem to an extent.
There are some startups which are already using the blockchain technology.
- Blockchain technology was first introduced in 1991 for adding a digital timestamp to documents so that they could not be tampered and backdated.
- It was used for a commercial interest only in 2007 for Bitcoin.