Blockchain. The omnipresent technology has become a trendy buzzword. Many observers believe that it is a game-changer capable of disrupting multiple industries at one fell swoop. But what are its advantages really all about?
Blockchain came into the spotlight following the 2017 BTC rise. To date, many find it complex, believing that it is an intricate technology with many grueling details to understand. There is a grain of truth to that, as the technology is based on cryptographic peculiarities which are not so easy to grasp. However, the general structure of blockchain is everything but difficult. On the contrary, its beauty is encapsulated in its simplicity which explicates its numerous advantages.
Essentially, blockchain involves three key actors:
- Generator of information
- Reviewer of information
- Information itself
The first actor activates the blockchain process once s/he is ready to generate information, for example, a sum of BTC transaction, details about a certain product or else.
This information is sent out and reviewed by the second actor. In the majority of cases, nodes, i.e. network of shared computers, are the ones scrutinizing it. Naturally, the location of these computers differs. They are not gathered in one room, belong to one particular person or a company. This is why blockchain, sometimes referred to as the Distributed Ledger Technology, is a decentralized technology.
Once nodes approve the info, it becomes a block. The latter is a certain form that distinguishes it from another type of information, for example, a different sum of BTC transaction. This block links to another block. And another. And another. In the end, they form a chain. It is important to note here that each block includes, as part of its data, a hash of the previous block. Hence the name — blockchain.
This chain of blocks (verified information) has certain qualities. It is:
- speedily spread
- safe from attacks
- easily traceable
These properties lay the groundwork for grasping blockchain’s advantages.
Let’s say you have a friend — a majority of us enjoys such a relationship. You also have 1 Bitcoin (BTC) — perhaps a slightly less typical occurrence. You decide to transfer that money to your friend because s/he is awesome. And so you did. Later on, you had a quarrel with your friend. That was the moment you realized that s/he is not awesome at all (more like a b##ch). You decide to undo the operation by tampering with the information (ultimately, you aim to change the sum from 1 BTC to O BTC).
Bad news for you: it is impossible to alter the information in that block. Once the information ends up on the nodes, it becomes immutable. You cannot change the sum from 1 BTC to O BTC no matter how hard you try. The generated hash simply will not allow to do it, as you will need to literally guess it. It might be easier to just let go of that 1 BTC, even if that b##ch wins.
This particular quality has bedazzled multiple pundits from all sorts of backgrounds. Democracy advocates believe that immutability can prevent vote rigging. Medical gurus point out that nobody can tamper with your diagnosis stored on the blockchain. Food safety officers emphasize that malign suppliers can no longer claim that “it was not them” who delivered contaminated food.
IBM has also drawn attention to this fact:
In any industry where protecting sensitive data is crucial — financial services, government, healthcare — blockchain has an opportunity to really change how critical information is shared by helping to prevent fraud and unauthorized activity.
Blockchain and speed have become almost synonyms in the crypto world. It is no big of a secret that many companies, including top-tier ones, have gotten on crypto board precisely because of it. Blockchain interests corporations, banks, institutions and the like because it saves time. And time, so the mantra goes, is money.
A good example, in this case, is Ripplenet. American Express, the American banking giant, has recently praised it for ultra-speedy operations. Cryptocurrencies like Electroneum claim that an operation on the blockchain takes as little as two seconds.
The fact that blockchain’s design does not include middlemen significantly enhances the speed of information sharing. No wonder businesses are so interested in it.
Another typical pro-blockchain argument. Grasping it is easy if you think in simple terms of answering a yes or no question. So let’s say the information that needs reviewal is “can this person send 1 BTC?” If that is the case, then multiple parties need to answer “yes.” The information is not obscure, it is available to everyone who has permission. Everyone sees the same data. The whole affair is extremely transparent.
But not everyone is happy with this advantage that blockchain has to offer, as it entails exposing all of the information in detail. A so-called hybrid blockchain partially addresses the case. David Freuden, Altcoin Buzz’s guest writer, elucidated the matter extensively. Without going into detail, it is important to note that hybrid blockchain differs from a traditional one by showing solely that an operation has taken place. It does not, however, reveal what is inside the block.
So let’s say that you are still feeling benevolent toward your friend and about to transfer that 1 BTC. If you opt for hybrid blockchain, the peers will only know that you are transferring a certain sum. They will not be aware that it is 1 BTC.
Blockchain has another important, albeit a less conspicuous, feature. It concerns safety. Unlike systems which are usually referred to as monolithic, it does not have a single point of failure. Harry Potter fans probably now exactly what I am talking about. Remember how Lord Voldemort tore his soul into parts and hid the pieces all over the place? To some extent, he followed the logic of blockchain and decentralization. He wanted to ensure that he does not die from one Avada Kedavra spell, i.e. a single point of failure. Harry Potter and his friends were left with a tricky task of finding the Horcruxes all over the magical world.
A hacker who wants to meddle with blockchain would have a no less tricky task. The system is decentralized, just like the Horcruxes, and it is extremely difficult to interfere with it.
A system which contains immutable, transparent information that no one can tamper with allows tracing information easily. This is an enormous advantage of blockchain that is praised by many observers, especially in the food supply sector. For the uninitiated, the food supply chain is extremely cumbersome, opaque and involves multiple parties all of which generate information of their own e.g. type of food, temperature, expiration date.
Blockchain ensures that all this information is arranged which makes it easy to trace it. If you bought a chicken breast that smelt funny, a blockchain-based solution can help you find information in an instance and trace the black sheep in the supply chain. The IBM experiment carried out in 2017 showed that it took only 2,2 seconds for a blockchain-powered tool to track the origin of mangos. Traditional means took almost seven days to do it.
Before you get too excited
Ok, so blockchain sounds all fine and dandy. What are its downsides then? Is it really impeccable?
The answer is a clear no. Let’s go back to the food supply chain example and picture how a farmer is about to upload information about the recently-slaughtered chicken. S/he claims it is “free-range,” other parties agree to that statement. The chicken ends up in a supermarket and you buy it.
But what if that chicken was never a free-range one? That is where blockchain becomes faulty. There is no way that a system can actually prove that the chicken was “free-range.” For that, all participants need to physically arrive at that farm and watch that particular bird walking around freely before being slaughtered.
With BTC transactions this problem is largely mitigated, as the nodes check in advance whether you have the amount you want to send. And whether you have not sent it to someone else.
And yet it is still possible to tamper with Bitcoin. It is extremely-extremely difficult but still possible if 51% of the miners decide to rewrite the ledger. This is why many are concerned with the growing dominance of companies like Bitmain which controls almost 51% of hash power. And this is also why so many crypto traders fear the 51% attack which would lead to a revision of transactions. Ethereum Classic has recently faced the consequences of such an attack.
Thus we are once again facing the harsh truth that life is everything but perfect. Still, in a world plagued with all sorts of fraud, lies and unfounded claims, blockchain is a solid step toward something slightly better.