Essential things you need to know to understand Blockchain and its Potential for Change

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.

  1. 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.

  1. Scope

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).

  1. 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?

Conclusion

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.

 

Dis­claimer*

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.

About Rebecca Mifsud

Dr Rebec­ca Mif­sud, born 6th May 1994, attend­ed the Uni­ver­si­ty of Mal­ta and is an LLB Hon­ours grad­u­ate. She also grad­u­at­ed in the Mas­ters in Advo­ca­cy and will be sit­ting for her Mal­ta War­rant Exam in 2019. She suc­cess­ful­ly defend­ed her dis­ser­ta­tion enti­tled: ‘Imput­ing respon­si­bil­i­ty for foot­ball injuries inflict­ed by minors in the Mal­tese sce­nario,’ in 2017.

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