“A Blockchain is a diary that is almost impossible to forge.” Blockchains are becoming incredibly popular. But how do they really work, for what purpose, and how can it add value to us at all?
Blockchain is a term coined by a group of researchers in 1991 and was initially meant to put digital timestamps like a notary for digital documents so that they cannot be tampered with. Stuart Haber and Scott Stornetta worked on the first Blockchain. By the following year, Bayer, Haber, and Stornetta integrated Merkle trees to the design. It made the technology more efficient by allowing several document certificates to be collected into a block.
Each block in the Blockchain carries encrypted information distributed into multiple devices, that check and validate every bit of information added, all at the same time. It’s almost impervious to any form of tampering that a regular cyberattacker can easily do on a conventional network.
But it wasn’t until 2008, when a group who called themselves by the pseudonym “Satoshi Nakamoto,” adapted the technology for Bitcoin that the technology began to gain momentum. They released the whitepaper entitled Bitcoin: A Peer to Peer Electronic Cash System that described Bitcoin as a “purely peer-to-peer version of electronic cash.” It was when blockchain technology went public and was utilised by 2009. Since then, it has transformed into one of today’s leading ground-breaking technologies, conceived to impact every industry and sector of society.
By 2014, some experts began to look at Blockchain in a new light. They realized there was more to the technology than just running bitcoin. It can revolutionise many other industries, from pharma to education, legal to government, and the like.
Security experts, for example, are now exploring Blockchain to bring defense systems against cybercrime and data breach to a whole new level.
Blockchain removes intermediaries being a peer-to-peer (P2P) system of data collection and sharing. As a result, proactive consumers are getting warmer to Blockchain as a viable alternative aside from the Internet. Blockchain technology can provide consumers direct access to information without middlemen or third parties, like the Internet does. In truth, Blockchain can protect consumers more than any internet network can. So, the P2P nature of Blockchain and the greater security and privacy it brings is making the technology more and more desirable for a market besieged by severe cyberattacks, data breach, and theft.
Elements of a Blockchain:
- Data: It can be any data regardless of industry, such as home records, medical information, and even voting records.
- Hash Function: Is a mathematical formula that takes a variable number of characters and turns it into a string that has a fixed number of characters. Even a small change in this mathematical string creates an all-new hash.
Every hash function is unique and acts as a digital fingerprint. It identifies the block and all its contents. Once a block is created, the hash is automatically generated and distributed throughout the entire Blockchain. The use of hash functions makes it easy to detect any tampering to the data in any of the blocks throughout a Blockchain immediately.
- Hash of the previous block: this technique makes a blockchain more secure. Except for the Genesis block, every block will have its unique hash function and the unique hash function of the block before it. If somebody would try to tamper even with a block, it invalidates the rest of the Blockchain because the hash function recorded on the next block will be different.
Characteristics of a Blockchain
Nicknamed as the new and safer Internet, Blockchain also makes it possible for data to be distributed without duplication, different from the current structure the Internet has today. “Blockchain is to Bitcoin, what the Internet is to email. A big electronic system, on top of which you can build applications. Currency is just one,” reveals Sally Davies of FT Technology (Blockchain Revolution: Understanding the Crypto Economy of the Future/Bradley Lakeman © 2018).
It has disruptive capabilities to existing systems the Internet has in place due to the Blockchain’s characteristics:
- Democratised: The blockchain network does not use central authority. The information in it is open for all in the network to see because it is a shared and immutable ledger.
- Decentralised: The data in Blockchain is cryptographically stored inside. It is not owned by a single entity.
- Immutable: As I mentioned, it is close to impossible to tamper with the data that is inside the Blockchain. All nodes or computer device in a Blockchain, usually numbering to hundreds, even thousands, would have to simultaneously approve any change made.
- Transparent: All data created and stored in a Blockchain remains transparent. Everyone connected in the block is accountable for their actions. The data stored inside is also trackable because Blockchain acts as a distributed ledger system. Blockchain can be used beyond recording eCommerce transactions. It can be used for the medical database and keep binding agreements. It’s useful for tracking the delivery of goods, trace origin and authenticity of items or contracts, (like artworks, land titles, antiques, and the like). It can also help safeguard all your personal credit records.
The following video explains excellently what Blockchain is:
Some Blockchain Facts and Figures:
- Corporate spending on Blockchain technical services will amount to $20 billion per year by 2024.
- 74% of tech experts say blockchain technology will revolutionise the way we do business.
- The financial sector holds more than 60% of the market value of Blockchain globally.
- By 2025, the Blockchain technology market will be worth $57,641.3 million and annual revenue of more than $20 billion.
- By 2028, Blockchain’s global market value in food and agriculture will reach approximately $1.4 billion.
- Consumer products & manufacturing has the most significant percentage of companies implementing blockchain technology (29% of companies).
- Social networks have begun running on blockchains. (Steemit, CoinMarketCap)
- By 2025, more than half of healthcare administrations will be using Blockchain for daily operations.
- IT professionals have become the largest group of investors of cryptocurrency (15% market share).
- IBM has put 1,500 of its employees to work on more than 500 blockchain projects. IBM is integrating the technology on industries like shipping, banking, healthcare, and food safety. (CNN, IBM)
- IBM is also investing in Blockchain-empowered IoT (Internet of Things) amounting to $200 million.
- 44% of gamers have used Blockchain technology in trading game items or purchases.
- The world’s largest banks are spending about $50 billion in investments to develop a digital cash settlement system running on Blockchain technology, called Fnality, which could launch in 2020. These banks include UBS, Banco Santander, Bank of New York Mellon Corp, State Street Corp, Credit Suisse Group AG, Barclays PLC, HSBC Holdings Plc, and Deutsche Bank AG.
- The healthcare global market spending on Blockchain will hit $5.61 billion by 2025. Blockchain can make drug supply chains more efficient. It can also be utilised to heighten data accuracy, improve database management, and find the most qualified professionals much faster. It can also assist health providers in complying with government regulations as they’d have quick access to this kind of vital information unencumbered in Blockchain technology.
- Blockchain technology in the energy industry will reach $3 billion by 2025, according Global Market Insights, Inc.
- Only 0.71% of the world’s population (50 million people) use blockchain technology. (8-bit.io)
- By 2020, Dubai will be the world’s first blockchain-powered government. All of their government-related financial transactions will now be run through blockchain.
The Crown Prince of Dubai, HH Sheikh Hamdan bin Mohammad bin Rashid Al Maktoum, decided on this blockchain strategy to further advance technological innovations in Dubai. IBM and ConsenSys serve as official Blockchain Advisors for the country collaborating closely with the government on these matters.
- Gartner states that by 2020, several countries will launch their own cryptocurrencies, as follows:
- Dubai: Emcash
- Venezuela: Petro
- Estonia: Estcoin
- Russia: CrypytoRuble
- Sweden: E-Krona
- Japan: J-Coin
- Facebook and China are both developing global digital currencies that will most likely compete with each other soon. China “has expedited its development of a Central Bank Digital Currency” after Facebook’s announcement of their cryptocurrency, Libra.
Conclusion: Blockchain Will Become the Norm Soon
Blockchain technology is the future, but it will not gain mainstream status yet for at least the next five years. We still have time to prepare for future integration. The opportune time to invest in this technology is now, in preparation for what’s to come. We need to start building trust today for tomorrow’s digital economy. The big industries have foreseen this. That’s why we see money being poured towards the exploration, development, and integration of the technology into different industries and sectors. At the heart of all the acceleration, is the consumer—all of us. The relevance of Blockchain to our digital lives will be a major force in the years to come. It will give us greater assurance in terms of privacy and security, transparent access to information, and faster connectivity. Industries that are solely relying on conventional internet systems need to explore now how they will transition smoothly into a Blockchain-powered future.