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In my efforts to stay abreast with up and coming technologies, I did quite a bit of research into Blockchain and how I could explain the concept in very layman terms.
The below is an attempt to summarize what I’ve learned!
Disclaimer: I read lots of articles and watched TONS of videos while learning – if you see any sentence that sounds familiar – its probably coz I really enjoyed a talk/article and happened to replicate the same info 🙂
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“Every now and then a truly stellar technology emerges and takes us to places we’ve never imagined. We saw this with computers, mobiles phones and of course the internet. We’ve experienced how each of these technologies transformed the way we live and interact with each other.
And now another one of these breakthroughs is about to transform us and that is blockchain technology.” – A TED talk by Mile Schwartz
In this blog, I will go over a brief history of blockchain, the features of blockchain that make this technology so powerful and some example industries that the blockchain can completely transform.
How and when did blockchain start?
To explain this, I need to divert a bit and give a short background on another very popular buzzword. Bitcoins.
In 2008, the financial crisis showed us that the existing economic system had major flaws. Banks. The very institutions that we rely on to protect our money were collapsing and could not be trusted.
6 weeks after Lehman Brothers collapsed, an anonymous person with a pseudo name Satoshi Nakomoto published a white paper on the internet. The whitepaper proposed a completely new monetary system with a new form of alternate digital currency called bitcoin. Bitcoin does not require any type of central authority to create or control money. This technology uses all of the lessons learnt during the financial crisis and aims to build a more foolproof system.
This was the start of bitcoin and blockchain.
2 things to note:
The digital currency that was proposed in the whitepaper is called bitcoin.
The underlying technology that enables moving these digital coins and maintaining the records is called the blockchain.
You can think of blockchain as an accounting book, a digital ledger in which every transaction is recorded chronologically and publicly.
Now, what makes blockchain technology so powerful and why do people believe it to be as transformational as the Internet?
Blockchain has 4 main features:
1) It’s a Transparent and Open Ledger
All transactions made in this ledger are available for anybody who participates in the network and every transaction can be traced from its origin to its most recent activity. Its like having a $10 note and knowing the history of that $10 note from the time it was printed by the central bank until it got to your hands.
With blockchain, Firms or individuals can no longer manipulate their balance sheets and scam the public. It eliminates forgery, black money and many other financial scams.
For eg: Think of donating to a charitable organization – blockchain can ensure that the money you donate to a charity truly goes to the people who prosper from it and not eaten up by intermediaries
Another huge benefit of this audit trail is in supply chain industry. Blockchain can be used to monitor cost, labor and even waste and emissions at every point in the supply chain for a product. It can help us understand and control the real impact of products on our environment and climate
2) It is Distributed and Decentralized
Blockchain uses vast networks of independent computers to maintain the open ledger. In other words, there is no central server that maintains the data. This makes the network practically unhackable and the information in this network is extraordinarily secure
3) Transactions require public consensus
The machines in the network decide if a given transaction is valid using a consensus system. If you take the example of say Lehman Brothers trying to make a $1 billion dollar transaction in 2007, if we had blockchain technology at that point in time, the machines in the network would have rejected the transaction because Lehman had no money in their accounts.
With blockchain, Firms cannot forge transactions or make bets that they cannot afford. This can transform any industry that has an intermediary that is collecting fees or building trust to make a transaction. Eg: You no longer need banks to make international money transfers, you don’t need retail companies that act as intermediaries charging fees and increasing the price of the products we buy.
4) Blockchain is Anonymous and Permanent
Even though all transactions are public, the network lets you protect your identity or protect any piece of digital information using very sophisticated cryptography and mathematical concepts. Also, Every transaction that gets validated and added into this ledger is permanent. There is absolutely no way any individual or company can wipe out a transaction from this ledger.
The beauty of this technology is that it can be used for any type of transaction, be it money, property rights, any legal documents and even voting ballots.
The blockchain is likely to disrupt many industries in the next 5 to 10 years.
Some of the industries it can disrupt are:
1) Banking and Payments
2) Supply Chain management
3) Retail Industry
5) Real estate
and even 6) Voting during elections in democratic countries
In summary, blockchain is one of the most promising technologies for the future. It has the potential to transform economies, industries and even governments.
Sure, the existing blockchain solutions in the market may not be mature to transform industries as yet and require further research and trial and error. And this trial and error can be very scary because there is already a substantial amount of money at stake. But there is no doubt that there has never been a more promising and a more direct linkage between technology, economic growth and well being of the society.
If you are interested in learning more about blockchain, a site I would recommend is blockgeeks.com
I hope you learned something new today. Thank you.
