The blockchain is the technology created by Satoshi Nakamoto that underpins the cryptocurrency Bitcoin. While Bitcoin is beginning to take world by storm, blockchain applications other than cryptocurrency may just be the tip of the iceberg. Recently, numerous people and organizations, including Microsoft and a consortium of international banks, are beginning to explore and adopt blockchain technology for purposes other than Bitcoin transactions.
While future uses may well be unlimited, some projected applications include: voting, digital property registry, remittances and asset trading. For example,faster trades for assets like stocks and bonds with direct transfer of ownership would no longer require the use clearing houses, thereby cutting costs and reducing the risk of fraud.
Voter fraud has been the hobgoblin of democracy since ancient Greece. With stories of ballot box stuffing on both sides during the 2012 election, and the memory of ‘hanging chads’ not much further back in time, the politically-minded among us have even proposed incorporating blockchain technology into the democratic process. One example offered by Followmyvote.com, an organization in the midst of creating a blockchain based voting platform, will allow for greater security, accuracy, and transparency as votes are cast peer-to-peer over a secure blockchain network. This would be a way of recording the entire voting system in a trusted environment that can’t be hacked. This may ultimately prove a massive boon to democratization and a veritable end to voter fraud.
So what is the blockchain and how does it work?
The blockchain is comprised of two main components: a peer-to-peer network and the database itself. The peer-to-peer network is the mechanism by which the many computers that manage the database communicate new changes. The second main component, the database,stores the complete history of transactions and the order in which they occurred. It functions largely as a quasi-anonymous, distributed ledger that records, time stamps, and maintains for public record in perpetuity all bitcoin transaction.
Some of the major factors that make bitcoin’s blockchain technology potentially useful:
- It’s Distributed: The blockchain doesn’t exist in one large central server but instead is fully dispersed across all nodes in the network. Like the internet itself, no single entity can control or corrupt it as all nodes in the network must agree and confirm transactions before that block is added to the chain. The peer-to-peer connection allows for a decentralized network where there is no single point of failure, and no single node has the power to censor any information to the other nodes, since all nodes can simply propagate information around any potential censor.Consequently the blockchain becomes a single reliable source, making it more trustworthy and secure than current systems.
- It’s Public: Anyone can look into the blockchain and see every verified transaction taking place.Additionally, all transactions on the blockchain are recorded as a string of numbers with no personal identifying information about the participants themselves, making transaction essentially anonymous.
- Time-stamped: Any transaction or change that occurs in the blockchain is time-stamped and identified. All peers in the network must thereby agree, according to Bitcoin’s program consensus model, that a transaction did in fact occur when the time-stamp says it occurred.Bitcoin miners compete for the right to facilitate transactions essentially by maintaining an honest and accurate ‘mining’ operation. All miner’s operations are transparent and visible to all other miners. The blockchain therefore allows the transactions to be facilitated without error by employing a group of miners who are rewarded for staying honest and accurate. Finally, to protect that ledger from unauthorized black-hat access, miners seal it behind advanced cryptography, which so far has proven immune to hacking.
- It’s Persistent: As long as the miners participating in the blockchain continue in their operation of the database, recording and verifying transactions across the network,the system in theory could last forever. Of course, miners are incentivized to continue in part by their ability to earn fractions of Bitcoin through the mining process.
Why would we want this?
It’s difficult to imagine the scope of possible applications of a nascent technology. However, thinking more broadly, the blockchain’s core characteristics as a method of achieving increased cybersecurity, efficiency, accuracy and transparency may in time be applied to any situation where people may desire a verifiable public record, unfettered by the control of any singular entity.
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