What is Blockchain?
Blockchain is the latest of the hot technology trends. With billions of dollars being invested in blockchain companies as well as in cryptocurrencies (a concrete application of blockchain), you might be wondering what all the hype is about. In this article, I will break down the underlying concept of blockchain, and illustrate some of its most disrupting applications.
What is Blockchain?
Bitcoin is analogous to the Internet – at its core, it is a highly interconnected network of computers, with each computer serving as a node in a mesh of connected machines. Such a network allows for data exchange and computation between devices. It’s an incredibly complex system, but think, when is the last time the Internet failed? Sure, websites go down for some time every once in a while, but the entire Internet remains intact as a system. This robustness of the Internet comes from the very design of it – it is decentralised and therefore, has no single point of failure.
Blockchain is inspired by the same design philosophy of decentralisation. It is an incorruptible distributed ledger of transactions that can be programmed to safely and securely record all items of value. The infographic below highlights different varieties of networks.
Why is it so Important?
Think of blockchain as a replicated and distributed copy of certain kinds of records, with its security backed by no single, central organisation, but instead by advanced mathematics. Some key benefits of a blockchain-based system include the following:
- Robustness – Each record in a blockchain is replicated across all computers in the network, which makes the records practically incorruptible. To mess with a record, you would have to manipulate more than half of all records across all computers of the world at the same time (known as a 51% attack) – a virtually impossible task.
- Security – Blockchain is inherently backed by advanced mathematics, and each transaction is safe and secure against malicious agents.
- Transparency – All the data is embedded in the public network, thus making all transactions completely transparent.
Some Applications of Blockchain
- Cryptocurrencies – Blockchain was introduced in a paper originally intended for Bitcoin, which is the most popular cryptocurrency today. The idea of cryptocurrency is to have anonymous and secure means of transactions with no middlemen or central organisations. Bitcoin is not controlled or regulated by The Fed or the IMF, but by the ecosystem of users.
- Sharing economy – Services like Uber and Airbnb connect service providers and users in a sharing economy – you can share your car or home with a stranger because you trust the central organisation enabling the platform. With blockchain, you could allow for such a transaction without even needing a central organisation at all. This could revolutionise the peer-to-peer sharing economy.
- Governance – With blockchain, transactions can be made transparent and publicly accessible, resulting in less government corruption.
- Data management – Users give away their data for free to Facebook and Google. With a blockchain-based economy, users can sell chunks of their personal data in exchange for cryptocurrencies.
Ayush Sharma is a guest blogger for The Red Pen and final year computer science student at Massachusetts Institute of Technology (MIT)