What is a Blockchain and Why is it Important?
Blockchain is the technology that underpins Bitcoin and all the other cryptocurrencies (apart from IOTA). If it wasn’t for the rapid rise of BTC, most people wouldn’t know about it, nor its potential for revolutionizing a large number of aspects of our digital world, especially pertaining to automation and Internet of Things.
This tutorial is going to explain the basis of blockchain from both technological and economic standpoints. Whilst it is open source software, the implications for business and industry are massive.
Not only does it provide a platform on top of which a myriad of decentralized (autonomous) applications can be developed, but the ability to share data has never been possible until now. This could not only herald in the new age of Industry 4.0 but will open the door to millions more opportunities for individuals to trade and transact. Unfortunately, the hype surrounding Bitcoin has left many people confused and under-informed about the potential of Blockchain technology. This tutorial aims to set the record straight.
The simple reality is that a blockchain is not a currency, it’s a means of transaction. Bitcoin gets it’s value by acting as a trusted facilitation of transactions. The same goes for any fiat currency that isn’t backed by gold or another value. In the case of the USD, it gets it’s value by the amount that are currently in circulation and the level of trust in the currency. That trust comes from the US government and economy. In the case of Bitcoin, the amount in circulation are calculated and there will be a limit to the amount created. The trust comes from the technology to securely and quickly facilitate the transaction.
What Is Blockchain?
Blockchain is a piece of software designed in 2008 by a group of open source software developers, led by Satoshi Nakamoto who created the white paper and started development for Bitcoin. Wanting to create a decentralized database infrastructure, they built a system which basically allows for digital databases to be stored & processed on 100’s or even 1,000’s of systems.
The reason why this is important is down to two reasons – firstly, the current digital landscape is highly centralized (meaning that businesses & governments essentially have a monopoly over data); and secondly, the potential for an Internet of Things has been promised for over a decade, with still no platform to manage it. Blockchain (or an equivalent) looks like it could provide a viable solution to both problems.
Essentially, the system works by taking a set of data or transactions and storing it in something called blocks. These block are linked together and forms a simple database called a ledger. A ledger is essentially just a list of transactions.
Each time you wish to change the data inside a blockchain database, the software adds a block to the chain containing all the information required to verify the changes. The block will have a unique identifier (a hash) and can be encrypted depending on the underlying software use-case for it.
Why Is It Important?
The reason why Blockchain is important is mainly due to its potential for business and industry. Most specifically autonomy. The problem with the way the digital landscape has been created today is that it’s almost entirely centralized by nature. Everything from checking your Facebook feed to using a bank’s ATM machine means you have to connect to a central service provider in order for the transaction to complete. Changing this landscape with blockchain technology will open the doors to free data from a central authority.
If Bitcoin’s price tomorrow were to go to $0, the underlying blockchain technology would still keep moving forward in other areas like supply chain or smart contracts.
What Will Blockchain Technology Change in the Future?
The most important thing to consider is how the future roadmap of the digital world is shaping up. Whilst crypto systems have certainly opened people’s eyes to the potential of decentralized technology, it will likely be the companies & systems built within the next 5 years that will define the market.
Just like how Amazon, Google, Facebook and Youtube became the real winners of the Internet boom of the 90’s and 00’s, there is likely going to be a handful of companies that emerge out of the crypto craze.
In terms of general life – there are two ways to look at the adoption of blockchain.
Firstly, it’s going to open the door to a lot of new decentralized applications – with many jobs simply being switched for autonomous computer systems (either robots or something similar).
Secondly, it’s also going to pave the way for a new wave of integrated experiences which would allow you to do things you would have never had the opportunity to before – such as being able to go to the movies and not even have to pay because you earned tokens from watching Netflix. or being able to go to any hospital in the UK/US/Canada and have your medical history instantly accessible just by scanning your fingerprint.
The role of blockchain in the future of commerce is certainly deep and there are many variables which have to be considered. One thing is for sure – everything we’ve seen with the crypto market is just the tip of the iceberg.