You too can understand Blockchain!
Bitcoin is widely known across the globe. People think blockchain is Bitcoin. In fact, a large number of people who trade Cryptocurrencies do not understand blockchain and assume blockchain is just all about digital money. I used to be one of them.
I agree that there is a kind of techy haze surrounding blockchain; hence, it may be slightly difficult to understand by an average non-techy human. Quite a number of people think blockchain is like a website or a complicated tool for only tech savvy people. I have heard someone describe it as an online factory. These descriptions, as much as they do not clearly explain what Blockchain is, tell of how its application are perceived at large.
Yes! blockchain births ideas like a factory. It can be accessed directly online, hence one may liken it to a website. Of course, lots of tech savvy people are involved in blockchain- it is a technological tool. And Yes! You can understand how it works. Let’s break it down.
WHAT BLOCKCHAIN IS
Blockchain is a software created to record huge processes and keep large data safe by ensuring that data is not stored in a central location.
As the name suggests, it is a group of blocks chained together. It is created through some computer coding to record huge amount of transactions all over the world, swiftly, efficiently, securely, without involving a central authority like the bank or government.
The first transactions powered by blockchain is currency exchange with the invention of Bitcoin in 2008. Hence, people assume Bitcoin is Blockchain.
1. BLOCKCHAIN IS A LEDGER
Blockchain is a record keeping technology that never forgets what you store. It is designed like a ledger to record, store and manage transactions by following a set of rules. These records are stored in blocks that are linked together. The linking is what makes blockchain unique because one block is linked to another block as a form of security.
A new block confirms the data stored in the previous block. And any attempt to change the information in a block will make other blocks invalid.
Every block contains 3 things: a) A transaction data, b)Signature called Hash and c) a Timestamp
Case Study: Blockchain of a Beans farm.
· Block A has a record that a specific number of bean seeds were planted on 01–01–19. All the information about the planting process is in block A. And block A has a unique signature called Hash
· Block B will contain the record of the first bean sprouts, the hash of block A and the timestamp.
· Block C will record bean-pod formation and stalk growth, hash of block B and timestamp.
Until the beans is harvested, sold or used, the recording process continues endlessly, with the next block keeping the information of the previous block while storing new data.
It is a chain of information blocks.
2. BLOCKCHAIN IS A TRANSPARENT PUBLIC DATABASE
One of the most valuable features of a blockchain technology is that it is a shared database. All participants in a system have access to the transaction database real time. Using the example above, if the beans farm belongs to a society, every member of the society will be able to see the records as they are added. i.e. Once a block of information is created, everyone can see, when it is verified, it will be added to the chain. Individuals can choose to be anonymous while having access to the database.
When data is stored on a blockchain, there are numerous copies of that data shared all over the world on computers. Therefore, it is tamper proof.
3. BLOCKCHAIN IS A DECENTRALISED SYSTEM
Decentralisation simply means giving power to everyone and not just one central authority. In the traditional form of transaction, we often rely on middlemen e.g. Bank to execute our transactions. Blockchain technology allows the trust to be shared by all parties involved. Here, there is no central control.
It guides against fraud. Large corporations and firms like banks store their data in locations that are usually privately-owned, inaccessible to the public and can be susceptible to fraudulent attacks that cripple networks.
Decentralisation removes Government meddling. It creates a fairer system unlike trusted centralised system where unfavorable decisions are made by the authority involved mostly influenced by greed, sentiments and government policies.
4. BLOCKCHAIN STORES DATA IMMUTABLY
Once data is stored on the ledger, it can never be changed. This ability solves the problem of trust. Blockchain records are the truth, and cannot be altered. If there is any attempt to tamper with data it will fail. Because, the chain will break and everyone on the blockchain will be able to identify this disturbance. In traditional databases, records have been known to be successfully manipulated.
5. BLOCKCHAIN BIRTHS DIGITAL MONEY
There is hardly a blockchain that does not have a cryptocurrency embedded in its creation. The digital currency on a blokchain maybe coin or token. At the emergence of this technology, projects were basically supported by crowdfunding. People from all walks of life that are interested in a project give money and in return get a token of that project. This token can either be used when the project is complete (utility token) or the token can give part ownership rights as a form of Security (security token). This security token is similar to Shares in the Stock market. The crowdfunding process is referred to as Initial Coin Offering (ICO) or Security Token Offering. At the end of the day, the token is the cryptocurrency we spend e.g. Bitcoin, Ethereum, Ripple.
6. BLOCKCHAIN CAN BE APPLIED TO ANY PROJECT OR BUSINESS
Blockchain is for you if you have an idea, a business enterprise or project that would benefit from;
- Large consummation of transactions/processes
- Decentralisation
- Crowdfunding
- Tamper proofing
- Transparency
Since the creation of Bitcoin in 2008 by Satoshi Nakamoto, we have seen a great increase in the use of blockchain that are beyond creating digital monies. A few among many are;
Fashion Industry: This is one of the biggest industry in the world today because it solves the basic human need. However, beyond solving that need, there is a lot more to clothing and fashion. Consumers are now interested in production processes. In 2017, London designer Martine Jarlgaard, began to produce “smart labels” that allow a consumer scan a clothing item to see every step in the production process. This transparency is backed by blockchain.
Another example is Primpy, a fashion company that has created a blockchain to give everyone in the fashion industry an edge by connecting all fashion stakeholders in a unique way.
Food Industry: There is a massive agitation all over the world on food sources and how they are transferred from the farm to the stores. There is a belief that when these processes are open and traceable, there will be food safety and less loss e.g Meat industry. Producers will also be responsible in their production. Walmart is currently working with IBM on a blockchain that will keep the record of food production from the farm to the retailers.
Cybersecurity: The world has evolved to such an extent that we rely so much on technology. We depend on technology to keep our money, friends, jobs etc. In fact, our daily live activities are controlled by artificially intelligent apps like Alexa. Therefore, there is a need to ensure for data security. Polyswarm among many other companies have ported to the blockchain side.
Real Estates: We all know how stressful it is to process acquisition of landed properties and obtain the legal title. Blockchain technology is already being used to create ease of access to landed properties, property financing and property management. A good example of such is Dominium
Voting: As much as we like the idea of removing government meddling from our transactions, we need to meddle in governmental processes. Transparency in election process is possible with blockchain. Although, this has a lot of mile stones to conquer before it is widely accepted, Sierra Leone made an unprecedented use of Agora, a blockchain based Voting platform in 2018.
These are but a few use cases of blockchain today. There is much hope and aspirations that the world will come to accept crypocurrency as a legal tender. This is a dream I hope will come true sooner than later.
I will be writing about what blockchain is not and the opportunities in the world of blockchain in my next posts.
Feel free to drop a comment if you feel the post has been helpful.
