Updated: Apr 3, 2020
The following is an article “Blockchain”
by Marc Primo.
What is a blockchain?
It is crucial we understand what this emerging technology is and why people seem to think it can solve almost any problem.
Blockchain, invented by Satoshi Nakamoto back in 2008, has started to become popular in the mainstream when Bitcoin made a splash recently with its seemingly never-ending upwards value trajectory and people began to take notice.
The primary rationale between blockchain’s functionality is the decentralized consensus. What this means is that people using the blockchain can interact without having to depend on a single, central point of authority and this is great regarding security because, by design, a single prominent target of attack does not exist. Any transaction carried out on the blockchain is recorded on a list of records called “blocks” which give blockchain its name and changes cannot be made on already existing blocks unless attackers expend much money and effort which makes this system more transparent than centralized systems. However, due to the decentralized nature of blockchain, it also ends up being less efficient than traditional, centralized systems as it requires much more in the way of computational resources to validate each user’s transactions.
Fakes or Alternatives
Due to blockchain's growth in popularity, other products have rissen to take advantage of this, and label themselves as blockchains, yet they are not. Some claim to be more computationally efficient than “traditional” blockchain and that they eliminate unnecessary players to reduce times between transactions. In an excerpt from the economist, Garrick Hileman talks about central banks and blockchain technology: “Central banks, as our data shows, are actively testing blockchain technology for a variety of different use cases, everything from new central bank digital currencies, new payment systems, to records management…” (Moore, 2018).
Central banks would then serve as the single point of authority that blockchain aims to eliminate. Another flaw in this argument is the fact that central banks already provide digital currency in the form of whatever is in your bank account. Banks rarely have the equivalent paper value in stock for all of their customers’ bank balances. We can, therefore, conclude that blockchain is not a replacement for transactions processing and any product that touts itself as such is inaccurate in its understanding of the technology.
The blockchain decides-unless we say so
A major overlooked feature of blockchain is the fact that it is not immutable and change is possible though at great effort. Blockchain can be changed when an overwhelming majority of participants agree on the change, and this is illustrated by what happened when significant thefts of funds were effected due to bugs in the underlying code. One such situation was when a critical bug in one of the first Ethereum applications (DAO) allowed funds to be looted and members in Ethereum agreed to perform a change that would radically undo the transactions that led to the theft in the first place. To summarize, blockchains are merely contracts that depend on the people who’ve signed up to enforce them.
Decentralization is everything
The foundations of blockchain are also what makes it so innovative. Decentralization, no need for trust or resistance to censorship. The idea that participants need only agree to the baseline protocols to have a functioning network is what differentiates blockchain from other technologies.
At the moment, blockchain is still in the experimental phase, and it is also relatively more expensive but the potential it shows for revolutionizing the way we approach issues is immense.
Moore, F. (2018, January 9). Central banks are experimenting with blockchain technology — here's why.
Retrieved from Business Insider UK: http://uk.businessinsider.com/why-central-banks-using-blockchain-technology-could-be-beneficial-2018-1?IR=T