Blockchain or block chain, as it was initially called, can be defined as a continuous sequential chain of blocks that contains information which is cryptographically encrypted. Most often, copies of the whole system are stored on a variety of different computers independently of each other.
- The origin of Blockchain
- Blockchain structure
- Types of Blockchain
- Smart contracts
- Uses of Blockchain
- Advantages of Blockchain
The origin of Blockchain
The very first mentioning of Blockchain-like technology can be traced back to the works of Stuart Haber and W. Scott Stornetta, who introduced the idea of a system where information is cryptographically secured and can’t be altered once recorded in the database, back in 1991. First practical of implementation of Blockchain, however, was developed in 2008 by a person or a group of people known under bias Satoshi Nakamoto as a fundamental element of the Bitcoin cryptocurrency.
A Blockchain is a series of blocks connected with each other using cryptography. It acts as an economical digital ledger that stores transactions in a decentralized database, where records can’t be altered once they are registered. Computers in the Blockchain are then connected within a peer-to-peer network, each of them independently storing a whole copy of the entire Blockchain.
Types of Blockchain
There are three main types of Blockchain:
- Public Blockchains;
- Private Blockchains;
- Consortium Blockchains;
Public Blockchains are permissionless, meaning that anybody can initiate and validate transactions. Bitcoin and Ethereum are probably the most notable examples of a public Blockchain. Private Blockchains are controlled by a centralized authority, such as an administrator. Users can’t enter the network without an invitation. Lastly, Consortium Blockchains stand in between public and private Blockchains: they also implement a permissions system, but instead of a single authority, control is divided between multiple companies, every one of which operates a node. Consortium Blockchains are ofter semi-decentralized.
In essence, smart contracts are, pieces of code that are executed if a pre-programmed condition or a number of conditions are met. Smart contracts are executed without human involvement. The primary goal of smart contracts is diminishing the importance of trust in financial operations. In many cases, smart contracts also allow eliminating intermediaries.
Uses of Blockchain
The Blockchain has several applications and is being used in various fields from banking to healthcare, insurance and supply chains management. The technology is especially popular in the financial sector, where it can bring the most significant changes capable of revolutionizing the industry.
During a certain period of development of the technology in 2017 merely adding the word “Blockchain” to a company’s name was enough to significantly boost its stock value due to the sheer amount of “hype” surrounding Blockchain.
Several countries plan to keep the land registry with the help of Blockchain technology and are testing Blockchain powered identity systems: most notably, Estonia has a Blockchain-based e-citizenship program.
Advantages of Blockchain
Anytime important data is stored in a centralized database, it can be corrupted, for instance, as a result of a cyber attack or server failure or, for example, burn in a fire if the information is stored in a physical medium. With the use of decentralization Blockchain technology allows enhancing the degree of security significantly. Blockchain also introduces a factor of privacy. Even though all transaction can be traced and viewed by anybody, initiator of a transaction stays anonymous.
SWIFT pointed at the danger of unrealistic expectations evoked by the fuss surrounding the Blockchain technology and distributed ledgers in the banking environment.
American economist Nouriel Roubini criticized Blockchain, saying that in over a decade the technology did not obtain such common and universal basic protocols, which made the Internet publicly available, as TCP/IP and HTML. Also, Nouriel Roubini believes that the promise of decentralized transactions without intermediaries remains “a dubious, utopian dream”.