“Blockchain was built on the philosophy that we don’t trust the government, but we trust math and technology. How do we build a trustless system which inspires trust built on Libertarian philosophies?” - Charles Macedo, AUTM 2019 Eastern Region Meeting
What is a blockchain?
To grasp the concept of blockchain, think of an accounting ledger. There’s a spreadsheet that has two columns; one for credit and one for debit. This ledger is a log of all the transactions that have occurred in a company.
Now, all ledgers are stored and owned by a central organization, let’s say your bank. When you want to see your balance, you log into your account and there it is. The bank acts as the source of truth that guarantees the accuracy of that ledger. The bank holds multiple ledgers for multiple companies. This means that your bank is what’s called a central authority: a central organization that ensures the ledgers they hold are true.
Okay, now let’s say there’s no bank and that you’re on the bartering system. And one day you exchange five home-grown apples for a pair of shoes. You wear the shoes for a few days but then decide to exchange them for a new bathrobe. When you go to make the exchange, your asked by prospective traders, “Where did these shoes come from?”
The traders will have to take you at your word, because what else can they do? There isn’t a ‘bank’ that they can go to confirm the transactions have in fact occurred, and that an item of equal value is being traded for something of equal value.
But now let's say these shoes have a magic box embedded in them. It’s unbreakable, and inside this box is a list of everything that has occurred to the shoes. It keeps track of where the shoes were created, who bought them first, and every transaction made to the present moment.
This magic box keeps the ledger for the shoes.
Every time that a transaction happens inside this magic box is called a block. And all the blocks together form a chain.
What’s the purpose of blockchain?
Blockchains were created to provide access to three main things:
The way blockchain manages to accomplish this is first by being a de-centralized authority. What does that mean? Instead of having one institution (such as your bank) that keeps track of your ledger and tells you your balance, requiring you to trust their information, there are 6,000 computers all around the world updating a ledger.
This is important because it promises authentication through auditing. Every ten minutes, a blockchain will get updated. All the computers compete to solve a mathematical equation that is the result of this blockchain update. One comes up with a solution and the rest will check to confirm the information.
If more than 50% of the computers agree, the block is added.
Because anyone can view the information within a blockchain, everyone is accountable for their actions, and there is no way to cover up any tampering that a hacker could do to the block itself.
This was the main reason that Bitcoin, the first and most well-known company to use blockchain, came into existence to begin with and is still the main benefit underlying the technology. Not to say there aren’t numerous other benefits, including the following:
- No transaction fee required – this makes it easy to sell and buy 1/100 of a blockchain.
- Enhanced security – recording transactions through blockchain eliminates human error.
- Quality assurance – if there is a discrepancy, it’s extremely easy to follow it up the chain to its source.
When did blockchain start?
Blockchain first appeared in 2008 as an independent technology, commonly known as the Bitcoin system. It came to existence when the creator published a white paper titled: Bitcoin: A Peer-to-Peer Electronic Cash System, under his pseudonym Satoshi Nakamoto. A year later, he followed this publication with the Bitcoin system’s original source code.
However, the nature of the Bitcoin system was too complex for it to be used in other manners. This remained the situation until 2015, when open-source platform Ethereum launched their public blockchain platform. It’s through this platform that the blockchain code can be developed for specific businesses and niches.
Which industries are currently using them?
Cryptocurrency is a medium of exchange that is entirely created and stored digitally in the blockchain. Cryptocurrency is the birth industry of blockchain, and Bitcoin is the baby.
The combination of cryptography and blockchain technology eliminates the need to synchronize internal ledgers, and results in tamper-proof ledgers. Because of this, the cryptocurrency industry has dominated the blockchain market since 2018 and is projected to continue to do so through 2024.
Three main characteristics that describe Bitcoin:
- No intrinsic value
- Contains no physical form
- The supply is not determined by a central authority
The cryptocurrency industry is growing due to the concerns citizens have about the fluctuation in dollar value which is in the hands of the bank or government. By eliminating a central authority system, customers are ensured a steady value on their currency.
Prevention of Voter Fraud
Voter fraud and cybersecurity has become a more prevalent issue in recent times. Voter fraud poses a critical imposition on the formation of democracy throughout the world. A startup, Follow My Vote, has started to utilize blockchain to create an un-hackable electronic vote-counting system.
The same way that cryptocurrency has utilized blockchain for the sake of transparency and honesty, a blockchain for voting creates a permanent ledger, giving the system credibility.
This system can capture voter registration securely and account for each voter identification to ensure the votes cannot be tampered with. This would restore trust into the voting system, and citizens can feel confident about the election.
“Credentials that are issued to students should be vendor-independent and recipient-owned. The ultimate end goal is for these records not to be … locked up in any way but actually to belong to the student in a useful format that they can use for the rest of their life." - Chris Jagers, CEO and founder of Learning Machine
Universities have already begun to utilize the power of blockchain. Starting in 2017, MIT and Southern New Hampshire University started issuing digital certificates for associate and bachelor degrees, along-side the traditionally printed format.
One benefit of a blockchain diploma is that students can share the link to future employers. It allows recruiters to verify the authenticity of the education without needing to contact the university.
Blockchain use in universities is expanding beyond digital diplomas. IBM and Columbia University created a partnership to research more ways this technology can help the education industry. Recently, a range of applications, computes and other cloud-based services have become available for participating universities.
Other ways that blockchain technology can help universities include:
- Maintenance of student records and credentials
- Copyright and digital right protection
- New course curriculum
- Boost the entrepreneurship platform
What does the future of blockchain look like?
Though blockchain has already been used in the cryptocurrency market, the technology shows great promise for a wide variety of markets.
The technology has been adopted in the finance industry to help improve efficiency in digital identification, cross border payments and digital wallets.
The financial service market is projected to reach $34,631 billion by 2024, growing at a CAGR of 63%. This will open the door to a lot of opportunities within the finance industry.
A big market in the financial market that can benefit from the integration of blockchains are banks. The implementation of blockchain would greatly speed up the transaction and processing time for consumers. With blockchain, banks can exchange funds between institutions in a secure manner, eliminating the need to wait for the next business day for transactions to process. This results in a cost-effective means for banks to serve their customers while complying with government set regulations.
According to BCC analysts, the use of blockchain technology in healthcare application is forecasted to grow at the fastest rate, at a CAGR of 80.3% through 2024.
Blockchains can be leveraged by health care providers to store patients’ records securely. When a medical record is created, it can then be written into the blockchain, which gives the patient comfort in knowing that the record cannot be altered.
The blockchain can then be encoded with a private key, making it accessible only by those who have it. This means that the information is guaranteed privacy.
The music industry can be drastically changed with the implementation of blockchain. Songs could be embedded in the blockchain directly, allowing for easy access to consumers. Purchasing music directly will make a big comeback because consumers would be able to purchase any song for a fee so minimal it would make subscriptions to streaming services impractical.
Another industry that will benefit from blockchains are Ebooks. Instead of having to go through a third party, such as Amazon, the book would circulate in encoded form. When purchased, the money would go entirely to the author, and in exchange the reader would be able to unlock the book.
These are simply two of many markets that would be revolutionized by the use of blockchain technology. This brings a lot of hope to those in the artistic realm, as they would be able to receive full payment for their creations, instead of the meager royalty fees they have traditionally ended up with.
Blockchain technology is advancing, there is no doubt about it. There are plenty of markets that will see the benefits of integrating blockchains into their system. Between the heightened security, increased efficiency and reduction of cost, we’ll be seeing a lot more of blockchain technology in our daily life.