B for Blockchain ??

Imagine you are working from a Cafe and a few hours into the hustle, you feel like ordering coffee. So you go ahead and place an order. As you chit-chat with the barista, Rs. 299 have been deducted from your bank account.?

However, there’s no receipt generated at the Cafe’s end. The money got deducted from your account but hasn’t been added to theirs.

Who is at fault? Bank.

The bank is a third party that you and the Cafe have trusted to make this money exchange. But this third party can fail, have network issues and even get hacked sometimes. What if we could make transactions without depending on a third party?

What if we could make transactions without depending on a bank?

Blockchain gives us a way to do this. It creates a network of people who want to stop trusting a third party and enables them to maintain a shared register of transactions. In contrast to banks maintaining a centralised register of transactions.

Coming back to the cafe, if both you and the cafe are on the same blockchain network. You can mark the fund transfer from your account to the cafe in your register and tell all the people in your blockchain network about it.?

All these people check whether you had enough balance to make this transaction. If yes, they also add this exchange to their registers and the transaction gets completed.

Time to drink that coffee you just bought!

What is a blockchain?

Now that we have covered why we need blockchain. Let’s talk about what is a blockchain and how is it able to exclude third parties like a bank.

Blockchain is a shared register between a network of computers. What makes blockchain innovative is the way it stores information.

Blockchain stores information in a data structure called a block, which does not allow any changes or deletions.

A block also comes with limited storage space, post which it is sealed and added to a chain of other filled blocks.

Each block is sealed by generating a unique alphanumeric string corresponding to the information stored inside it. This string changes if the information is altered, helping the blockchain network to identify hacking attempts.

All sealed blocks are also given a timestamp while being added to the chain. This timestamp and process of sealing blocks help make blockchains theoretically tamper-proof.

While storing digital transactions is the most popular use-case of blockchain, it can be used to store any type of information.

Blockchain beyond crypto

Globally, there are also tons of startups building for a blockchain-based internet (Web3). From fintech to gaming, to cab-hailing, to e-governance, blockchain start-ups have found a use-case in almost all sectors.

In India, the Maharashtra government issued 65,000 caste certificates through blockchain in the Gadchiroli district. Here, the use of blockchain will help prevent bad actors from creating fake certificates. A Bengaluru-based startup Zupple Labs is powering the project.

Maharashtra govt issues 65,000 caste certificates through blockchain

Other state governments including Andhra Pradesh and Telangana have also run blockchain pilots to prevent land records tampering.?

On the other hand, DRIFE is building the Uber of blockchain, where 100 per cent of the ride fee will go to the driver. Also, both customer and the driver have the option to quote their price and choose the ride based on their preferred price and driver ratings.

How did it all start?

Blockchain technology was first conceptualized by two mathematicians Stuart Haber and W. Scott Stornetta in 1991. They wanted to build a system where time stamps on a document can be made tamperproof. Later in 1998, Nick Szabo came up with the proposal to use blockchain for securing digital payments, called bit gold. However, the proposal was never implemented.?

The idea of blockchain was fully developed in 2008 when a research paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was published under the pseudonym, Satoshi Nakamoto. Nakamoto built upon Hal Finney’s reusable proof-of-work system to give birth to bitcoin and blockchain technology which forms the backbone of all cryptocurrencies and much more.

Blockchain Risks

Just because something is tough to do, it does not mean that it cannot be done. Even though it is expensive and requires a lot of resources, Blockchain hacking attempts are a reality.?

Hacking a blockchain typically requires the hacker to control and edit at least 51% of copies on the blockchain network. This will make the new altered copy the majority copy, making it hard for the chain to identify the hacker.??

In 2019, an attacker was able to gain control of more than 50% network of a cryptocurrency Ethereum Classic. The attacker was able to use her cryptocurrency more than once, resulting in a loss of $200,000 for the crypto exchange (Gate.io). Interestingly, the hacker returned half of the stolen amount, a few days later.

The attacker was able to use her cryptocurrency more than once, resulting in loss of $200,000 for a crypto exchange

Then in March 2022, Hackers got access to the blockchain platform Ronin Network and stole cryptocurrencies worth about $600 million. According to the company, two fake withdrawals were forged by the hackers with the help of hacked private keys.

As blockchain gets more popular, we will get to hear more about both the good and bad of it. Like any technology, it also comes with its own set of vulnerabilities. The best shield against bad actors is to stay informed. I hope this newsletter will be able to play a role in your learning journey.

That’s all from the B for Blockchain edition. If you can think of any other Web3 terms starting from the letter B, please leave a comment and I will include it in later editions.?

See you in the next edition. Until then please like, comment and share this post.