Understanding the ins and outs of blockchain technology can be a daunting task for those new to the world of blockchain. However, now more than ever, those interested in understanding the fundamentals of blockchain technologies can easily access resources including community forums, videos guides and online educational resources and courses. Professional certification and expertise is increasingly available for those interested in learning more about blockchain technologies.
Blockchain Defined
At its most basic, a blockchain is simply a shared ledger of transactions. The ledger is composed of blocks held together by cryptography. The cryptographic technology ensures that the ledger remains immutable, meaning that the information contained therein is secure and unalterable.
Each block within the chain is linked to the previous block and contains information of the record in the block that came before it. Each block is composed of a hash of the previous record, a timestamp, and the current transaction data. Since every block contains information related to the previous block in the chain, the accuracy of the entire ledger is verifiable. Further, because the complete ledger is shared by all members within the network, the information can be verified by all.
How it Works
As described above, blockchains are simply blocks of data contained within a secured network. Most frequently, blockchains operate within peer-to-peer networks. Information is validated by way of the shared protocols amongst users or nodes within the network. In contrast to a more traditional client-server model, peers act as both consumers and suppliers of resources and information.
The shared nature of the blockchain ledger means that the information contained therein is distributed across the nodes or users within the network. This system is known as a distributed network. Distributed networks vary from centralized networks in that they allow for enhanced security of the information as every participant retains a complete copy of all transactions. Any information added or deleted by one can be seen by all. This makes it impossible for one party or another to alter the leger without impacting the integrity of the whole.
The History of Blockchain Technologies
The fundamentals of blockchain-like technology were first proposed in the 1980s by cryptographer and scientist David Chaum. The ideas were further delineated and improved upon during the 1990s by Stuart Haber and W. Scott Stornetta. Haber and Stornetta developed a method to store several certificates into one block, thereby increasing the efficiency of the design.
The original problem to be solved included the desire to create a record of time stamped documents within a ledger that could not be tampered with by external actors. Blockchain technology was subsequently harnessed in 2008 in the creation of the cryptocurrency, Bitcoin.
An anonymous individual or group working under the name Satoshi Nakamoto utilized blockchain technology in order to create Bitcoin. This new currency allowed for the development of time stamped records without the usual requirement of third party verification. This feature was implemented as a core component of Bitcoin and became standard amongst blockchain technologies.
Why does Blockchain Matter?
As described above, blockchain technology has several advantages over traditional record systems, including the enhanced security deliverable by a decentralized and shared ledger. Unlike centralized ledgers which are prone to tampering and/or cyber-attack, blockchain technologies protect user information from outside interference. Moreover, each participant can see new additions or changes to the ledger, allowing for instantaneous access to the most up-to-date information.
Blockchain technology can be used for the tracking and management of almost any information or assets within a secure network. A wide variety of assets can be tracked through this ledger including tangible assets like houses or real estate as well as less tangible assets such as copyrights, patents and non-fungible tokens (or NFTs).
Is Blockchain Technology Revolutionary?
Increasingly, businesses are turning to blockchain technologies in order to improve both efficiency and security. The International Data Corp has estimated that investment in blockchain technologies could reach $12.4 billion by 2022, which is an 89% increase from 2019. Businesses and global corporations have increasingly come to recognize the possibilities inherent in blockchain technology in terms of speeding up processes, improving transparency and saving on costs.
Aside from the enhanced security features of blockchain technologies, there are other important components that can dramatically improve business performance. Because blockchain technologies remove the requirement for third party verification and intermediaries, businesses using this technology can count on increased speed and efficiency in their transactions. According to researchers, blockchain technologies could reduce the cost of financial transactions alone by between 15 to 20 billion by 2022.
Smart contracts, in particular, have allowed for automated transactions of goods such as shares, money or property. The conditions of the contract are outlined and agreed to at the outset by the interested parties, and as the conditions are met the contract is executed without the need for intermediaries. Because blockchain technologies have the advantages of trust, verification and transparency built in, independent third parties become largely unnecessary.
Blockchain technology has significant potential to transform business and personal transactions of all kinds. This technology is only just beginning to be recognized and utilized by the wider public. Learning about how this technology can benefit your business or career is a necessary worthwhile investment in your future.
Free Introduction to Blockchain Course developed by professor and blockchain expert Dr. Justin Goldston.