Let’s start off by comparing the evolution of the internet with the evolution of blockchain to understand the whole concept of Blockchain and how the world could shift towards digitisation, and potentially change; here is all you need to know.
The internet as we know it was first launched in 1994 and people were sceptic about its evolution. They did not believe in this system, but time proved otherwise as soon as there was the initial development of electronic computers. Today, everyone seems to be using the internet and finding ways and means of how to use it in a more efficient manner.
In this connection, we have nowadays moved away from the Internet era, and entered a Blockchain era to which people are also reacting cynically.
Let me explain what is Blockchain and how it can really shape our lives.
The whole idea of Blockchain traces its origins from a certain Satoshi Nakomoto back in 2008. Whether Satoshi Nakomoto is a real person, or a group remains to be determined.
The idea started with the urge of having a blockchain-based system that serves as a Distributed Ledger Technology [like a Public Ledger] which records transactions of a cryptocurrency [initially, this was specifically tailored for Bitcoin].
This invention introduced new terminologies which created a new jargon to be used specifically when referring to the chain, to the extent that a whole new ‘ecosystem’ was created. Cryptographic currencies were seen and marketed as the solution of the worldwide double-spending problem; and all this could be achieved without the need of an intermediary.
Around the time that the blockchain was invented, the world was being faced with a financial crisis, also known as the global financial crisis. Many economists consider such crisis as the worst since 1930. It is not proven that blockchain technology was created parallel to the global crisis, in fact it was specifically created in the wake of the credit crunch. However, was it a coincidence that a revolutionary technology was invented during a financial crisis? As you might know, this question remains unanswered.
Defining & Understanding Blockchain Technology – 3 things you need to know.
- Defining Blockchain
Blockchain may sound as a very complex term however it can be defined as a form of Distributed Ledger Technology that involves the advancement of many industries and not just the financial industry [in fact, Blockchain Technology has already been implemented in Banks & Government Entities].
In simpler terms, it can also be described as a chain of blocks that comprehends information.
Initially the aim was to eliminate the tampering of information by providing a distributed ledger. This involves the use of autonomous points in networks at which there can be electronic interaction (World, Bank, 2018).
- Blocks and Chains
Each block in the chain contains: data, a hash and hash of the previous block. A hash can be defined as a block and the data thereof (Anon, 2018).
Once a block is created, a hash is calculated and each block points to a previous block creating a secure blockchain, whereby everyone is sent a block and it is verified by each node, which is then added to everyone’s blockchain, creating a consensus [hence the ubiquitous term: consensus mechanism].
What are the benefits of Blockchain Technology?
A Blockchain may be hosted anywhere, and it is evolving to the extent that it may be used for medical records, collection of tax and for identity verification.
Let me explain. Blockchain technology may be useful in terms of being able to protect the stored information, given that “a change in a single block makes all the following blocks invalid” (Pezlogic, 2018).
Once a block is created, its hash is calculated and changing something in the block would need the changing of the hash. This means that in the previously mentioned case of identification, people will know that their information is secure and duly protected.
If there is tampering of some sort with the information of even one block, there would need to be the re-calculation of proof of work of each block, and thus, this effectively reduces cyber-attacks, theft and alterations, giving the control thereof to the users.
Blockchain technology would be beneficial in terms of having one system which is less likely to be hacked, unlike the present centralised traditional system. In fact, Blockchain technology is decentralized in nature, ensuring that the management and control is not retained with one central agency or power.
In this connection, blockchain’s benefits primarily lies in its aptitude to create trust, security mechanisms for the transfer of value, efficiency in restructuring business processes and its enhanced auditability and transparency.
Will we go completely digital?
The fact that blockchain technology takes a digital standpoint, may be considered as a disadvantage.
You all might know that the very first passport document was issued by the 1414 Act of Parliament, and people have gotten used to traditional documentation ever since, thus it will take time to be able to completely transpose to a digital system until people move away from what is traditional.
Not only, but also, when there was the invention of the mobile phone, the next stepping stone was the first actual telephone call that was made from a handheld equipment. We have now shifted towards a more technological world, but we are not living in a completely digital world.
Blockchain technology was based on other advances and contemporary technologies. In 2012, many attempted to extend the utility of blockchain which went beyond typical transfers of crypto currencies. Blockchain technology can be involved in the process of digitalising our world, so who knows what the world would look like in 2050?
Blockchain systems are increasing in their popularity because of their useful properties.
Different blockchains are being deployed in different use cases all over the world. Blockchain technology is bringing about the necessary change, having the potential of reducing trust- gaps.
Blockchain can have independent verifications of transactions and thus, this proves that it is an accountable and auditable system.
Furthermore, blockchain technology relies on trust and consensus. However, to be able to have a complete digital identity, people need to be further educated about the risks [if any] and benefits of importing more and more data onto digital platforms.
In the author’s opinion, this technology would be able to have control on uncontrollable situations, however, time is the key and there is still much speculation.
The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partner and cannot constitute any form of legal advice. If you would like to meet up with any of our representatives to seek further information, please contact us for an appointment.