One of the constants in the technology space is that there’s always something new being unveiled. And over the past few years nearly all the buzz has been about blockchain technology and the potential uses for this technology that didn’t even exist 10 years ago.
Well, actually, in theory, it did.
All the way back in 1991 the technology for blockchains was outlined by Stuart Haber and W. Scott Stornetta. They were looking to create a system that could store indelible timestamps, but never got beyond the theoretical construct.
It wasn’t until 2009 that the first real-world use case for blockchain technology hit the world. That was bitcoin, and since its release on the world blockchain has quickly become the biggest and most talked about area of technology.
Bitcoin is a decentralized digital currency that runs on a public ledger, which is built on blockchain technology. In the bitcoin whitepaper released in October 2008, bitcoin was referred to as, ‘a new electronic cash system that’s fully peer-to-peer, with no trusted third party.’
If you can understand how blockchain was used to create bitcoin, you can begin to see all the other potential real-world implementations of the blockchain that become possible.
The bitcoin Blockchain
As mentioned above, the bitcoin blockchain is a public ledger that is tamper-proof and records every transaction that has ever occurred. This is said to make bitcoin transactions safer and more secure than the current monetary and financial systems.
The blockchain that underlies bitcoin is also decentralized. That means there is no single entity that controls the blockchain or the bitcoin currency. Instead the blockchain is maintained by the group of individuals and entities known as miners.
Miners run high-powered computers that work to solve complex cryptographic problems that verify the blocks and transactions on the blockchain. They are rewarded for their efforts with newly minted or mined bitcoin. Their activity also ensures the network remains secure from tampering.
After a miner validates a block and receives their reward the block is added to the chain of previous blocks. Thus the term “blockchain” was coined to describe this creation.
How the blockchain remains tamper-proof
The blockchain has been praised because it is tamper-proof. That’s because each block added to the chain has its own cryptographic reference, or hash, that refers to the previous block. The hash is created as a part of solving the cryptographic problem to validate the block. The hash is encrypted and unique, and if a block is tampered with it also changes the hash. In order to maintain a valid blockchain it would then require the person tampering with the block to re-mine every other prior block to create the proper hashes. With current computer processing power that is impossible.
Where Is the Blockchain stored?
In the case of bitcoin, the blockchain is stored on any computer running a network node and can also be viewed by anyone who wishes to do so. If you are running a network node you get a copy of every block as it is added to the blockchain. As of November 18, 2018 the 90-day average number of full nodes is just under 10,000.
The number of nodes has continued growing, and the larger the network becomes, the harder it is to tamper with the blockchain.
Advantages of Blockchain Technology
Even though it seems very complex, the potential of the blockchain as an indelible and decentralized record-keeping system is nearly limitless. Blockchain technology presents fewer errors, lower fees, better security, greater privacy and a tamper-proof record of transactions.
Here are the known advantages of blockchain technology for businesses:
The blockchain seems complex, and while it is if you need to understand the programming, it really isn’t much more than a public database of transactions, all linked together and secured by encrypted mathematical problems. This concept, which only emerged in 2009, could very well change the way businesses, governments and every single person on the planet operates financially.
We continue to come up with new implementations for blockchain technology, and improvements are now being developed that will make the technology more secure, more private, less expensive and much faster. The coming years will almost certainly see blockchain technology being used to increase security, efficiency, accuracy and privacy in business and government dealings.
As bitcoin heads into its second decade of existence the only question is what won’t be impacted by blockchain technology.