THE WORLD’S NEXT BIG REVOLUTION: THE RISE OF BLOCKCHAIN TECHNOLOGY

Imagine a world without the need to pay banks for transferring money, or the need to pay Uber for finding you a driver to get you home, or the need to manually keep track of what you bought or sold. How great would that be? This could be made possible with blockchain technology. Yes—you heard it—saying that it is revolutionary is an understatement. Many are calling this the “next big thing” since the internet itself was invented. But above all, this might just be the next big revolution for the world economy.

Blockchain technology was invented for trading digital currencies like Bitcoin—which is the most well-known. It is a platform that enables exchange of cryptocurrencies and is essentially a decentralized database system that is distributed in a network. This may sound complicated but we will get there...

SHARED DATABASE

To simplify the concept of blockchain, you can think of it as a regularly updated spreadsheet containing all past digital transactions and encrypted identity information, which is accessible across a network. This acts like a shared database that is ultimately public, which maximizes transparency. You might think, “Why would I trust in this technology with all my important private information?” The truth of the matter is, this is arguably the safest network that was ever invented. This is partially due to the decentralized attribute of blockchain. In other words, it cannot be controlled by solely one party and therefore there is no single central authority. Rather, it is based on user-to-user interactions, which encourages mass collaboration.

“The blockchain is an incorruptible digital ledger of economic transactions

that can be programmed to record not just financial transactions

but virtually everything of value.”
Don & Alex Tapscott, authors Blockchain Revolution (2016)

BLOCKCHAIN AS A GOOGLE DOC

Without delving too deep into the technical details, blockchain could be imagined as Google Docs, as suggested by William Mougayar, a venture advisor and a blockchain specialist (Rosic, 2017). Before Google graced us with Google docs, it was common to use the traditional method of sending Microsoft Word documents back and forth when collaborating. You had to wait until peer revision is done before getting it back. Then you had to revise it again and send it back. The process was relentless. But Google docs allowed for simultaneous collaboration on their cloud, eliminating the trouble of having multiple versions of the doc stored on your harddrive, then forgetting which is the newer version. Essentially, there is one version of the doc that is accessible to the parties involved. Blockchain achieves just this.

NODES

In the blockchain world, nodes are the computers connected to the blockchain network, essentially playing the role of “administrators”, who are responsible for transferring cryptocurrencies and making transactions.

BITCOINS AND LEDGER

So, what are Bitcoins? It is a type of digital currency that could be used to exchange products and services.

To keep track of your savings and spending, blockchain includes a ledger, which functions as a digital file that records all your previous Bitcoin transactions. The difference between this and any other form of ledger out of the blockchain world is that it is not stored in one place. Rather, it is distributed across the nodes in the blockchain network. This is far from different to the way ledgers are kept by a centralized entity like banks.

1. It allows people within the blockchain network to access all blockchain transactions.
2. There are no concerns for security given that the blockchain system is guaranteed by mathematical coding. Hence, unlike banks, no one is there to answer phone calls to solve banking problems.

WALLET

Now, where do you store your money? It’s quite simple—just as you have a physical wallet to keep your cash in, there is a cryptocurrency wallet where you can store and exchange Bitcoins.

You might ask, “How would it be possible to keep something to yourself when it’s centralized?” Well, each wallet will consist of two keys that are connected and cryptographically protected:

1. Public Key

·       The owner of the paired private key can decode the messages

2.     Private Key

·       The paired public key can decode it

The encrypting of the transaction with your private key acts like a digital signature where the system verifies your identity and the authenticity of the transaction.

WHY THE NAME “BLOCK”-CHAIN?

As you might have guessed, it was called “blockchain” for a reason. The blockchain network categorizes transactions into blocks that contain a specific number of transactions and are connected to past blocks, hence the name blockchain.

For better visualization of this concept, here is a simple graphic representation of the block chain sequence.

Diagram courtesy of Michele D'Aliessi’s article “How Does the Blockchain Work?” from Medium

Within a block, the transactions are regarded to have happened at the same time. Transactions that are not allocated in a block are not official yet. The placement of transactions in blocks are solved cryptographically by computers then gets broadcasted to the entire network.

POTENTIAL USES OF BLOCKCHAIN

Backtrack to when blockchain emerged, while it was created for trading digital currency, its applications are far from being limited to such use. Now it has potential use for other purposes. One of the most primary functions of blockchain is to cut out intermediaries like banks, hence facilitating peer-to-peer transaction. In the case of a bank, when this technology commercialises, we no longer need such an institution to help with transferring money to another person’s account and save us from paying high interest rates. Nevertheless, this is not limited to banking institutions but is applicable to companies like Uber and Airbnb. With blockchain, drivers could directly contact people needing a ride without having to pay part of their salary to Uber. It is a win-win situation since the passenger is likely to benefit from cheaper price as well. The same goes with Airbnb—the host would be able to reach the guests without a governing company. On another hand, this revolutionizes stock trading as it makes for more efficient trade confirmations with virtually not clearance time, neither does it require clearing house or auditors.

With all that said, there are numerous benefits to adopting blockchain technology. Here are some of them:

1. It is decentralized, which means there is no single central authority and guarantees full transparency.
2. It is safe as it cannot be controlled by solely one party, which means it would be difficult for hackers to hack data. The use of encryption technology improves security, eliminating the need for accessing by username and password
3. It is virtually simultaneous as the transaction is completed and secured within hours, encouraging mass collaborations
4. The cost of transaction is low, which encourages micropayment
5. Users have complete control of their cryptocurrencies.

Nevertheless, there are problems that might arise in the system that have yet to be solved:

• Cryptocurrencies are volatile in general, such that the demand for it fluctuates quickly and drastically. It is also highly influenced by major events or changes in the cryptocurrencies industry.
• Anonymity of blockchain users could be abused for black-market activity despite the advantage of user privacy as the identity of users is not traceable.

We can never be sure of what the future holds for this technology. But I can assure you that it will be sizeable and far-reaching. We might just be in the midst of the world’s next digital revolution for our world economy. In a world where change is the only thing that is constant, I believe that it is vital to keep up with blockchain, or else you will be left behind without the endless benefits and possibilities it has to offer.

WORKS CITED

D'Aliessi, Michele. “How Does the Blockchain Work? – Michele D'Aliessi – Medium.”Medium, Medium, 1 June 2016, medium.com/@micheledaliessi/how-does-the-blockchain-work-98c8cd01d2ae.

Gayde, William. “As Blockchain Technology Becomes More Popular, It Could Change the Digital World.” TechSpot, TechSpot, 27 Sept. 2017, www.techspot.com/news/71124-blockchain-becomes-more-popular-what-does-mean-world.html.

Hackett, Robert. “Wait, What Is Blockchain?” Fortune, Fortune, 23 May 2016, fortune.com/2016/05/23/blockchain-definition/.

Marvin, Rob. “Blockchain: The Invisible Technology That's Changing the World.” PC, PC, 29 Aug. 2017, www.pcmag.com/article/351486/blockchain-the-invisible-technology-thats-changing-the-wor.

Rosic, Ameer. “What Is Blockchain Technology? A Step-by-Step Guide For Beginners.” Blockgeeks, 2017, blockgeeks.com/guides/what-is-blockchain-technology/.

Zhang, Terry. Blockchain 101: What Exactly Is Blockchain? Linkedin, 26 Mar. 2016, www.linkedin.com/pulse/blockchain-101-what-exactly-terry-zhang/.