In 2011, I started exploring the world of cryptocurrency. My original interest was driven by the political, social and economic implications of digital currency, operating in a world without a central authority.
However, as I explored the technology deeper, it became clear that blockchain was the real star of the show, with potential that goes beyond just cryptocurrency.
Blockchain is to Bitcoin, what the internet is to e-mail.
This simple sentence highlights the potential of blockchain when you decouple it from Bitcoin. For example, e-mail was a revolution, now the primary communication channel for businesses around the world, however the impact of the internet was far more profound.
What is Blockchain?
The blockchain is an open, decentralized ledger, which is best described as a continuously growing list of records (called blocks) that are linked and secured using cryptography.
The ledger itself is not stored on a single server or data centre. It is distributed via a network of computers (known as nodes), which means that all records are public and therefore verifiable. This model also inherently protects against malicious attack and/or corruption, as there is no central source or single point of failure.
The blockchain network lives in a state of consensus, one that automatically checks in with itself. All transactions are ordered by grouping them into blocks, each block contains a definite amount of transactions and the hash value of the previous block. Blocks are therefore organized into a time-related chain, that gives the name to the whole system: blockchain.
It is possible that different nodes on the network may have a slightly different view of the most recent block(s). A consensus protocol (like Bitcoin’s “Proof of Work” algorithm via mining) ensures that these views converge quickly. Once consensus has been reached on a block and new blocks are added, then the probability that this consensus will change reduces to zero very quickly.
As a result, by following the blockchain from the first block (genesis block) and applying all verified transactions in the correct order, you will arrive at the current state. In Bitcoin, this is what enables each digital wallet to calculate the spendable balance.
Blockchain is not an easy technology to comprehend and like all new innovations, it will take time for it to become broadly understood, accepted and adopted. If I was going to attempt to describe blockchain in a single sentence, I would state:
Blockchain can be compared to a spreadsheet that has been duplicated across a network of computers, where the network has been designed to continuously update, verify and protect the spreadsheet, without a central authority.
Even with this simplified understanding of blockchain, the potential for broad adoption becomes clear. For example, today blockchain is synonyms with Bitcoin, however I could easily see practical use cases in payments and remittances, supply chain, governance, compliance, auditing, stock trading, identity management, consent and beyond…
I personally plan to stay closely connected with the blockchain community, watching as the technology and opportunities continue to mature.