Demystifying Blockchain

The United Nations Technology and Innovation Report 2021 covered 11 technologies, including Blockchain, which were already worth a $350 billion market and expected to grow to a $3.2 trillion market by 2025. Blockchain is a bit of a notorious and misunderstood term by a lot of people. Majority of the people equate it to cryptocurrency, particularly Bitcoin which had the world fascinated with its mysterious ability to reach new heights each day until the recent crypto winter we are facing globally.

It is important that the ordinary person has an understanding of what blockchain is, and that is because it is one of the building blocks of Web 3.0. I will cover Web 3.0 in detail in another article, but briefly Web 3.0 is the future of the internet as we now know it, and it will be more decentralized, transparent, open and gives people greater power over their own data.

KNOWLEDGE FOR MORE DIVERSITY AND INCLUSION

I have been fortunate to attend blockchain conferences for quite a few years now, and I recall the shock in the lack of women and diversity, particularly when I attended the first blockchain conferences few years back when they first started to emerge, in 2018. It is heartening to see more women and diversity in the space now, but we still have a long way to go. I have realized now that the main thing keeping people away from the blockchain and Web 3.0 space in general is the 'Tech barrier', or a lack of understanding of the fundamentals. I have talked to so many smart people who are doing so well in their careers, but who do not understand this space and neither do they have the time to study more on these subjects whilst walking on the tricky tightrope of work/family balance.

This has let me to the decision to do my humble bit to help mainstream understanding of Web 3.0 and the underlying technologies such as blockchain, DeFi, DAOs, Metaverse and NFTs. I have decided to embark on this journey to share the basics and foundations of Web 3.0 in a simplified manner because in doing so, I know it will help others join the Web 3.0 movement, and only then can we have a strong foundation of diverse and inclusive people building an equal world of Web 3.0 together.

Education is the first step towards a more inclusive and diverse future for us all.

BLOCKCHAIN SIMPLIFIED

Let's start with the basics of blockchain. Contrary to popular belief, blockchain is much more than cryptocurrency. Then what is it exactly??Assume?that?I am in a network with access to a ledger, whose exact copy is available to all the computers in that network. Any change in the ledger made by anyone in the network is automatically updated in each ledger of the network almost?instantaneously, depending on the network’s speed. This is called a Distributed Ledger.?

Blockchain is a special distributed ledger which started as a foundational element for Bitcoin.?It chronologically stores information of all the transactions carried out in ‘blocks’, which are linked together to form a chain, hence the name ‘Blockchain’.?Security of the data in the blocks is upheld by using cryptography to link them together in the chain and by having a decentralized store of information.?

It is important to realize that while digital innovation is encouraged, not every problem has a solution to implement blockchain. Each case should be properly evaluated and then seeing all the different aspects pertaining to the matter, blockchain solutions applied if needed.

ADVANTAGES OF BLOCKCHAIN

Blockchain offers a variety of advantages that include:

• Transparency: The data on public blockchains is available for publicly and anyone can see it.
• Decentralization: There is no central authority controlling blockchains.
• Increased efficiency: Blockchain can offer increased efficiency, for example in the supply chain industry through better traceability and faster financial transactions.
• Power to the People: It gives power to the people as they have more control over their data, which they can now monetize. In the past, personal data was collected and sold by their parties such as in the case of Facebook a few years ago.
• Removes the Middleman: Blockchain removes the middleman, such as financial institutions and banks, and people can directly interact peer to peer, using smart programs (set of computer codes) and also makes processes faster by removing bureaucratic bottlenecks.
• Security: It is nearly impossible to change or delete a block because each new block in the blockchain connects to the next using hash functions and cryptography, thus offering enhanced security.
• Immutability: Records on the blockchain are permanent and are unable to be changed.

THE BLOCKCHAIN TRILEMMA

The oldest blockchain is Bitcoin, which was launched in 2009 by a mysterious person called Satoshi Nakamoto. Next to follow was Ethereum, launched in July 2015 by Vitalik Buterin. In todays world, there are many blockchains, such as Solana, Cardano, Ripple and Hyperledger Fabric to name a few. More blockchains will continue to be launched and the ones we have will continue to be improved to solve the 'Blockchain Trilemma'.

To make up the ideal blockchain, we need three main components:

1. Decentralization: The more distributed the network, the better the decentralization and lack of control by a central authority.
2. Scalability: How fast the blockchain can grow without negatively effecting transaction speed.
3. Security: Blockchains are in general very secure, but if someone gets control of more than 50% of the network, they can compromise on security.

The 'Blockchain Trilemma' is a term coined by the founder of Ethereum, Vitalik Buterin and generally accepted because it implies that from these three components of decentralization, scalability and security, it is very difficult (so far) to reach an improvement on all three aspects. Usually one has to sacrifice one of these components to advance the other two components.

I have realized there is much more to talk about so I will continue this blockchain discussion in another future article, as I understand a too long article might discourage people to dive in. Hope this has been worth your time :)

Disclaimer: This article is intended for educational purposes only and is not financial advice.