This article serves to act as a small glimpse into blockchain technology and some of the basic elements contained therein.
Everyone in the business world now seems to know about blockchain, but do they really understand it? The difficulty with understanding something like blockchain is that as a technology, it is in its infancy. It could branch in any direction. What even is blockchain?
Blockchain was initially developed in 2008 by an entity named Satoshi Nakamoto and was utilised the following year to create the most successful, and well-known variant of blockchain technology, Bitcoin. Bitcoin has been dominating current headlines in economic and business-related news outlets.
A definition commonly used is "blockchain is a distributed database of that holds a continuously growing increasing list of records chained together so as to prevent revision or tampering." This means that after a record has been created, it cannot be tampered with afterwards unless there is a network majority colluding to change the record. Information also includes dates and times of record creation.
A distributed database is a database where storage devices are not all attached the same processor. The system means that to keep information on each device current there is a system of replication and duplication where every user on the database can see any new information that is created almost immediately.
The list of records in a blockchain is secured together using cryptography. They are also secure by design, being resistant to hacking attempts and having a high Byzantine fault tolerance. This means that blockchain technology has excellent potential to be used for the cataloguing of confidential information such as medical records, transaction details, identification logging and the update of provenance. This is due to the fact that it is incredibly secure and tampering by one rogue element in a network would be especially difficult. Even more so for example, with Bitcoin where there are a large number of users and to get a majority to alter a record would be amazingly difficult to achieve.
The fact that it is decentralised, eliminates the risks of using a system where all of a network's data is held centrally. It lacks vulnerable centre points that hackers can target. Decentralisation also helps any information stored on a blockchain to be completely visible to all users, making transparency almost guaranteed. There are no admins' that have complete control over a public blockchain network either, meaning no one user has more privileges than any other.
Furthermore, it could lead to the cutting out of middlemen such as banks and other financial institutions as transactions across the network are done directly. This is in contrast to banking transfers where you put the money in your account and then essentially ask the bank to transfer the funds to the recipient.
There have been critics who have pointed out the disadvantages of blockchain technology. Nikolai Hampton from Computerworld stated that in a private blockchain where the database is restricted to privileged access, a 51% rate of control from an attack would not be required to change records. He stated the reason for this being, that the private blockchain most likely controls close to 100% of record creating resources in the network. Meaning, if you could gain access to a private server using blockchain, you would control the entire network and adjust it, however, you wish.
Mr. Hampton also stated that without the incentive to power records and discover them faster than their competitors, many blockchain solutions used in-house will be nothing more than "cumbersome databases".
Cumbersome, leading to the next point. Another disadvantage of blockchain is just the sheer potential size of it. As the blockchain consistently grows, more powerful devices are going to be needed to use it. For example, the runner-up competition to Bitcoin, Ethereum, another cryptocurrency, has accumulated 200GB of history data in its blockchain network, according to Kaspersky Lab. This was achieved in two years since its launch and after six months of active use. The sheer memory required to use something of this size, which is constantly growing, may eventually leave people with lower-end devices, completely incapable to use it.
Many institutions such as banks and law firms have begun to research into the development of blockchain technology and how it may benefit their business. With the technology being so young, the possibilities are very exciting. Tunisia and Senegal have shown an interest in using blockchain technology for their currency, the e-Dinar and e-CFA respectively.
There are, in fact already companies that utilise the technology. These are companies such as LaZooz which is a real-time ridesharing application, Swarm and Koinfy which are decentralised crowdfunding ventures and Steemit which combines blogging sites, social networking and cryptocurrency under one banner.
There is no doubt in my mind that with continued research and intelligent applications of the new technology that in years to come, it could become a staple of the infrastructure for many companies. This is because while not infinite, the possibilities for use with blockchain are substantial. There will be teething problems. There are always teething problems with new technology, nevertheless, the long-term reward will be worth it for the people who invest intelligently.
This is further illustrated by the fact that the Harvard Business Review claimed in early 2017 that blockchain is a "foundational technology" and therefore "has the potential to create new foundations for our economic and social systems." Although, it was also later stated that "it will take decades for blockchain to seep into our economic and social infrastructure."
With this in mind, it may be a long time before we see the fruits of this innovative technology flourishing but it appears that it would definitely be worth the wait.
Harvard Business Review
Computerworld: Nikolai Hampton
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