“In the sea of technology, blockchain has become a whale.”
No doubt that a lot has changed since the age of the pyramids. The internet has evolved, businesses are now digital, and blockchain technology has now taken it a step further by revolutionizing the way things have been done. How? You may ask.
That’s our goal today; to show you how Blockchain has gone from the “unknown tech” to the Whale of the Tech Sea.
Blockchain technology came into the limelight around 2008 when the peer-to-peer version of electronic cash called “Bitcoin” was introduced by Satoshi Nakamoto, whose identity is not yet known. Blockchain is the technology that runs the Bitcoin and has evolved tremendously over the last decade into one of the world’s biggest technologies with the potential of impacting most, if not all industries ranging from financial to educational to manufacturing.
There is a recent study released by Stanford Graduate School of Business on use of blockchain technology, where majority of organizations who participated in the study, mentioned that technology’s potential to make larger social impact is one of the key reasons behind them adopting the technology.
Due to the potential of Blockchain Technology, it has caught attention of tech enthusiasts across the globe. In order to have a competitive edge, it is essential to learn how to code in various programming languages like Java, Python, C# etc.
Technology magazine Wired, has quoted Patrick ByrneCEO of Overstock, Scourge of Wall Street, as Bitcoin Messiah. Where Mr. Byrne mentioned “The zombie apocalypse is coming, and there’s one thing that can save us: bitcoin.”
The price bull run of Bitcoin in 2019 was sparked by expectations that big technology companies like Facebook and iPhone maker Apple are planning to launch their own cryptocurrency by next year.
Marc Andreessen, one of the founding fathers of the web browser, has compared Blockchain Technology at Par with Personal Computers and The Internet in terms of its potential to revolutionize the world. As per Mr. Andreessen, “Bitcoin at its most fundamental level is a breakthrough in computer science.”
Let’s take a look at the history of blockchain technology.
At the Beginning of Blockchain, there was Bitcoin.
We cannot talk about the history of blockchain without first talking about Bitcoin. After the release of Nakamoto’s whitepaper, Bitcoin was offered in an open-source community in 2009. The new coin provided solutions to digital trust by creating a trustless system that records all important information in a public space and it cannot be removed by anyone. The system is transparent, time-stamped, and decentralized.
The very first appearance of the concept of blockchain was seen in the work on a cryptographically secured chain of block described by Stuart Haber and W. Scott Stornetta in 1991. This concept was improved in 1992 by Bayer, Scott, and Haber.
The 1991 concept was first implemented by Satoshi Nakamoto when he improved it and applied it to Bitcoin cryptocurrency using a Hashcash-like method to timestamp blocks without a central or trusted party.
What is Blockchain?
The 21st century has seen increasing trends in technology and has also given birth to blockchain technology as one of the highlights of the century apart from other technologies of the century including IoT and Augmented Reality. Blockchain, on the one hand, is a revolutionary technology that has impacted different industries with its very first modern application called the Bitcoin.
Bitcoin is simply a form of digital currency or cryptocurrency that can be used in place of fiat money when trading. The technology that holds this cryptocurrency is called Blockchain Technology.
Some people confuse Bitcoin with Blockchain, but this should not be as they have their different meaning and functions with each other.
Blockchain can be described as a structure of data that holds transactional records and at the same time ensuring the security, decentralization, trustlessness, and transparency of the system. in other words, we can see a blockchain as a chain of records stored in the form of blocks. A blockchain is a distributed ledger that is opened to everyone in the ecosystem.
Some key features of the Blockchain technology are:
- Transparent: It is opened to all in the network or ecosystem
- Unaltered information: Once any information is stored on the blockchain, it cannot be changed or altered
- Secured: Each transaction is secured using a digital signature or encryption to ensure authenticity
- Tamper—proof: All information or data on the blockchain is tamper-proof
How does the Blockchain work?
For us to appreciate the beauty of blockchain technology, it is important to understand how it works.
- Each block in a blockchain system stores data along with the Hash of the preceding or previous block. The hash is simply a unique mathematical code that distinguishes a block from other blocks. We can see a hash as a unique mathematical identifier for a particular block.
- The connection of blocks using these unique hash keys is what makes up the blockchain (and also makes the system more secure).
- As transactions take place on the blockchain, there are nodes that validate these transactions.
- The nodes in Bitcoin blockchain are called Miners and they make use of the Proof-of-work (PoW) concept to validate transactions on the blockchain network.
- With the Bitcoin blockchain, a transaction is only valid when each block refers to the hash of its preceding block and the transaction can only take place when the hash is correct. This makes it difficult for hackers to attack the blockchain since any change in the information in any block would alter the hash attached to that specific block.
In a nutshell, here is how transactions take place in a blockchain:
- A blockchain network uses public and private keys in order to create a digital signature ensuring security and consent.
- Once the confirmation is made through these keys, the need for authorization arises.
- Blockchain allows participants of the system to carry out mathematical verifications and reach a consensus to agree on any value.
- While one makes a transfer, the sender uses the private key and announces that transaction information over the entire network. A block is then created that contains information such as the digital signature, the timestamp, and the receiver’s public key.
- This generated block of information is broadcasted through the blockchain network and the validation process starts.
- Miners on the network start solving the mathematical puzzle related to the transaction in order to process it. Computing power is invested by the miners to solve the puzzle.
- Once the puzzle is solved, the miner receives rewards in the form of bitcoins. This is referred to as proof-of-work mathematical problems.
- Once the majority of nodes in the network come to a consensus on a common solution, the block is time-stamped and added to the existing blockchain. This block can contain anything from data to messages to money.
- After the new block is added to the chain, the blockchain is updated for all the nodes on the network.
Major Features of Blockchain Technology
We highlighted some features of Blockchain technology before, but we are going to elaborate on the major features that distinguish the technology from other technologies.
The following features make the revolutionary blockchain technology stand out:
The key feature of blockchains is that they are decentralized. This means that no single person or group has the authority over the whole network or ecosystem. Despite the fact that everyone in the network has a copy of the distributed ledger, no one person can modify it on his or her own copy. This allows for a transparent and secure system that gives total power to the users and no central body.
Blockchain allows users to interact between themselves through a peer-to-peer model that does not require the intervention of a third party. This is usually referred to as a P2P protocol and it allows all participants to hold an identical copy of transactions. This enables approval through a machine consensus.
Simply put, blockchain is immutable because of the very fact that any data written on the blockchain cannot be changed. This is a unique feature of the blockchain technology that ensures that once data has been processed, it cannot be changed or altered. If anyone tries to change the data of one block, he has to change the entire blockchain. The reason for this is due to the fact that each block stores the hash of the previous block and a change in one hash will lead to change in all the following hashes. This complicates the changing process for anyone as a lot of computational power is required to do so. Therefore, the data stored on a blockchain is non-susceptible to hacker attacks or alterations due to immutability.
With the feature of immutability possessed by the blockchain, it becomes easier to detect any tampering of data in the network. This makes blockchains tamper-proof since any change in a single block can be easily detected and flagged.
As we have seen before, each Hash is unique to a specific block. We can consider it as a fingerprint of that specific block. Any slight change in data will lead to a change in the Hash function of that block as well as the entire block linked to that block. For a hacker to succeed, he has to change all the hashes of the entire blocks that precede that block. This is in reality quite difficult to do.
Types of Blockchain
Blockchain has evolved over the years through many levels since the inception of the technology. Despite this unwavering fact, we can place the technology into two broad categories;
- Public Blockchain
- Private Blockchain
Although they have different characteristics, let’s highlight the similarities between these categories of blockchain.
- Both Public blockchain and Private blockchain make use of a decentralized peer-to-peer network
- All users or participants of the network (ecosystem) maintain the copy of the shared ledger.
- The blockchain network maintains the copies of the ledger and synchronizes the latest update using a consensus methodology.
- The features of immutability and security hold for both public and private blockchains
Now we know the similarities, let take a closer look at the different blockchain technologies one by one.
Private Blockchains are the ones which are shared only among trusted participants. The entire control of the network is in the hands of the owners. Moreover, the rules of a private blockchain can be changed according to different levels of permissions, number of members, exposure, authorization, etc.
Private Blockchains can be integrated with other blockchains or can run independently too. These are usually used by organizations and enterprises. Therefore, the level of trust required amid the participants is more in private blockchains.
Hyperledger and Multichain are good examples of private blockchain. Examples of companies that use private blockchain include; Fabric and Sawtooth.
A public blockchain is a permissionless ledger that can be accessed by any and everyone. Anyone with access to the internet is eligible to download and access the blockchain. Also, anyone can check the entire history of the blockchain along with making any transactions through it. Public blockchains reward its network participants for performing the mining process and maintaining the immutability of the distributed ledger. We see an example of the public blockchain is the Bitcoin Blockchain.
Public blockchains allow for an open and secure way to exchange information globally. However, one disadvantage of such is that the blockchain can be compromised when the rules are not strictly followed by the network participants. A very good example of a public blockchain is Litecoin, Ethereum, and Bitcoin.
The concept of a consortium blockchain has to do with a system that is partially decentralized or we can say a Semi-decentralized system. It is usually controlled by a group of organizations opposed to being controlled by just one organization. All member organization has the authority to participate as a node by mining. An example of this is the EWF (Energy web foundation).
Evolution and Application of the Blockchain Technology
Judging from the history of Blockchain technology, we can see that blockchain is evolving into mainstream technology and is taking over the market rapidly. As of 2017, the global market for blockchain technology stood at $339.5m. This is projected to grow to $2.3 bn by 2021. Blockchain has paved the way for many individuals and organizations from different fields to look towards the technology and apply them even beyond cryptocurrency and financial models.
Reduction in Operational costs is one of the key reasons why various companies are interested in adopting blockchain technology. However, in spite of various benefits, there are various challenges with its integration.
We have seen major companies embracing the new technology from Microsoft to academia to IBM; they are all exploring the potentials held within the blockchain technology. As per Venturebeat, Blockchain is finally becoming the database of choice due to its features. Hence, there cannot be a better time to jump in and build a career in this field.
Although bitcoin and cryptocurrency still remain the pioneer applications of blockchain technology, they are not the only players in the application of the technology.
Some of the major applications of the technology include:
- Smart Contract
- Smart property
- Digital Identity
- Machine learning
- Health care
- Government Elections
- Distributed cloud storage
- Cryptocurrencies (Bitcoin)
- Financial services
- Video games (CryptoKitties)
- Supply chain
- Identity management
- Intellectual property protection
Infographics and facts on the Blockchain technology
Advantages of the Technology
Disadvantages of the Technology:
Statistics on the Blockchain Technology
In Conclusion: what the future holds
It is obvious that there is much potential on the prospect for industries when it comes to the implementation of blockchain technology
Immense amounts of time, energy, and money will be saved, all of which can be redirected in a more positive direction going forward.
Along with IT industry’s major players there are many smaller, niche players are offering specialists offerings related to Blockchain Technology. Online platforms, like Simpliv, are helping professionals to pick up the required skills and reap the benefits.
While there is still a way to get involved now before blockchain takes over the industry, you certainly need to be prepared for the rollercoaster that is on the horizon. Let us know what are your thoughts about the technology about its potential of connecting the virtual world with real world.
In our next publication, we would delve deeper into the application of the blockchain technology and what the future holds for us.