Blockchain

Immutable, Decentralized Public Ledger for everything digital

The blockchain is a distributed ledger platform with a high fault tolerance, which enables achieving consensus in a large decentralized network of parties who do not trust each other to effectively store and distribute content of both financial and non-financial nature effectively without relying on a third party centralized platform. A paramount feature of blockchain is the accountability and transparency of transactions, which makes it attractive for a wide range of applications from smart contracts and finance to manufacturing and healthcare and so on. One of the most prominent and initial applications of blockchains are cryptocurrencies, such as Bitcoin. It is predicted that about ten percent of global GDP will be stored on blockchains or blockchain related technology by 2025. [Source: World Economic Forum]

But how does it work?

The regular internet allows anyone to read, post information or data to anywhere in the world. A blockchain (and there are – both public and private, just as with websites) enables anyone to send value around the world where the blockchain file can be accessed or retrieved.

Each chain is essentially just an online database, stored in a distributed, peer-to-peer fashion among its users. Cryptography ensures that users can only edit the parts of the blockchain that they “own” – by having access to their the private keys necessary to write to the file.

 It also ensures that everyone’s copy of the distributed blockchain is kept in sync and whoever is not in sync is simply kicked out of the network until they oblige. By giving private keys [which you own] to someone else, you effectively transfer the value of whatever is stored in that section of the blockchain, to the next user.

In a modern blockchain network, any member with the software can introduce a record (transaction) to the ledger. Every transaction must be signed by its initiator’s digital signature; this rule enables, for example, exchange of digital assets between parties. The transactions are stored on each member’s computer (node) as a sequence of groups known as blocks. All transactions that have been introduced over a period of time are compiled in a block that is linked to the previous one.

This fills the first of three important roles – recording of transfers of rights.

It also fills the second biggest role – establishing trust and identity. No one can edit or modify a blockchain without owning the corresponding keys. Cryptographic checks are carried out whenever anyone tries, and edits which are not verified across the network are simply not accepted. Of course, the keys – just like physical assets, or cash - can theoretically be stolen.

However, a few bytes of this code can usually be kept secure at relatively little expense. For those who are unfamiliar with the term, this is what a private key looks like:

"L22WoZufnj2CPXm4Hot5DUYnAqXBWbYj6UiV22UjuuVL5jzia8Ph"

Essentially this means that the work carried out by hundreds of staff in branches of banks, to record transactions, verify identities and prevent fraud and theft, can now be carried out far more quickly and accurately by pure mathematics. Human fallibility is taken out of the equation.

The Risk

Any technology however game changing must have some strings attached. There's always the catch. It's not possible to skip over it. While the security features inherent in blockchains make Distributed Ledgers resistant to attack. However, they do not make it immune.

Public and Private Key Security

Access to a blockchain requires both a public and a private key. Keys are cryptographic strings of characters of sufficient length designed to make the odds of guessing them truly astronomical. Since it is practically impossible to access data within a blockchain without the right combination of public and private keys, this highlights the strength — and the weakness — of this distributed ledger. Without the right keys, no intruder will be able to access your data ever. On the other hand, all an unauthorized individual need is the right keys to access your data and manipulate it to their liking. In the world of the blockchain, possession of keys and ownership of content are totally synonymous.

Since intruders know there is no possibility in trying to guess anyone’s keys, they focus a great deal of their time trying to steal them. The best chance of obtaining keys is to attack the weakest point in the entire system, the personal computer or mobile phone.

Lck of Standards and Regulatory Issues

The mere mention of either regulations or standards brings blockchain enthusiast to their knees.

The lack of standard industry protocols means blockchain developers cannot easily take advantage from the mistakes of others. With each company, each consortium, and each product operate by a different set of rules, the risks that come from nonstandard technology of any sort are present without doubt.

Further, at some point, chains may need to be integrated. Lack of standardization can open up new loop holes as diverse technologies are merged.

The solution to the question of standards and regulations is more complex than most people think.

The Future : Smart Contracts

This, in my opinion is the third important role – the establishing of contracts – where blockchain offers the most exciting possibilities and opportunities. And it’s also where the value of this type of technology becomes apparent outside of financial services.

The ability to securely read and write to a distributed ledger, governed by mathematics and consensus rather than putting the trust to a centralized third party, has a whole new heap of potential in just about every industry.

Conclusion

To summarize, blockchain technology looks ready to be one of the most impact developments of the millennia. If it all works out in the end, we're looking at the most prominent gifts given by technology to protect and preserve our history and to build a better future.