Most of us must have come across the word blockchain by now, either while skimming through a newspaper, surfing the net or by word of mouth. If not, you’re about to get a good grasp of the concept, which, surprisingly, has been with us for quite a few years now, but has grown steadily in recent months. Concretely, people lack an understanding of what the underlying technology is and it’s also likely that terminology such as Ethereum and crypto-currency complicated matters and have left people scratching their heads. For starters, blockchain is becoming so popular that the tropical island of Mauritius is looking to develop an “Ethereum Island” and transform it into a blockchain paradise.
So what's the hype all about and what’s the underlying principle of blockchain?
Agilis Malta, software developers dedicated to writing software for blockchain, say: “Imagine having a book and whatever gets written in that book can be seen by everyone around the world since every single person has a copy of that same book. It’s basically a distributed ledger whereby one can record financial transactions in a public ledger instead of a singular institution such as a bank. This technology enables two parties to make an exchange without the interference or oversight of any third party. Traditionally, when we write systems, we deploy them on a server and the person in charge of the system has pretty much full control over it while with blockchain technology, the user is in control of all the information exchanges and transactions directly.”
Aspects of public and private blockchain
Transactions which can be viewed publicly are the ones that concern the public aspect of blockchain whereas users who participate in private blockchain have sole access to the transactions thus, it is usually enterprises which participate in the private blockchain.
A fully private blockchain can have permissions made public, although it is unnecessary in many cases. There are however many similarities between public and private blockchain. For instance, apart from the fact that both are decentralized peer-to-peer networks, the two provide certain guarantees on the immutability of the ledger, even in the event that some participants are faulty or even worse malicious. The next question that would come to mind would be whether it is possible to identify who made the transactions and the only true answer is no, in a simple context, all transactions on blockchain are pseudo-anonymous and do not correlate to a person’s direct identity since it’s all boils down to numbers in order for the data to remain secure. “The system’s infrastructure makes it tamper-proof, transparent and whatever is written on it is permanent, hence the audit trail abilities it holds. The best thing about it is that you have peace of mind that whatever transaction is made cannot be altered which, in other words, is a piece of evidence you can use in the event you need to in future,” a representative for Agilis explains.
Blockchain is essentially a trustworthy system that has any updates made time-stamped and everybody in the system gets included in the update automatically. “In traditional software systems, one might release a system that’s not what you call perfect. You’d fix the bugs and everyone is satisfied. The blockchain concept couldn't be more different, mistakes cost big time. If a client goes unassisted and conducts transactions without professional help, like for instance writes the wrong code, it will cost that individual or company conducting that transaction more than you would imagine. “For every interaction with the blockchain, which is a transaction, you must pay for the complexity of that operation. So if someone inputs the wrong code, the client has to pay that expense per transaction,” Agilis said. “If a security breach in the system is conducted and the money disappears, it’s obviously an extremely sensitive matter. In other words nobody should play around and should seek professional advice which will cost you less in the long run."
Blockchain revolutionizing the way organisations work
The world of blockchain technology is also revolutionizing the way some organisations work. Citing an example, Agilis says that charitable organisations using blockchain make their operations more transparent for the simple reason that the transaction made towards the organisation’s virtual wallet can be viewed, including how and what it was spent on. This can happen if the organisation in question gives the client or giver the address of the organisation to view the transaction and charitable organisations should make their address known to givers and givers, in turn, should have an interest in knowing what the address is. An advantage for companies is having proof of their ‘paper trail'. Auditors tend to bank on the paper trail, making the process more efficient but this does not mean that an audit does not take place at all. So where are banks going, now that blockchain technology is the next "in" thing? Would banks no longer serve their purpose? According to Agilis, “it is highly unlikely that banks will not have a purpose any longer, but they will need to shift to blockchain or a similar technology eventually”, and while on the subject of banks, it’s also being said that central banks may adopt new technologies like digital currencies, potentially revolutionizing the global payments arena completely.
Bitcoin as an answer to the financial crisis
What is bitcoin and where did it derive from? Bitcoin came about after the 2008 financial crisis – the first implementation of blockchain. The idea behind bitcoin was to create a crypto-currency that is transparent, public and permanent and to give control to the people, as opposed to central authorities. In other words, it was the answer to the financial crisis as people were losing trust in the institutions at the time.
Bitcoin is a trading currency but has no central bank behind it. Like all other currencies, including Ether, Bitcoin is a fluctuating currency. The accelerated development of blockchain technology, combined with the fact that it is gaining world-wide interest from various sectors and industries will, eventually, influence the way enterprises work. In the same way as the internet gave us umpteenth abilities, such as sending e-mails and shopping online, blockchain can be applied to voting procedures, record keeping and financial instruments to mention but a few. It is therefore vital to turn to professional expertise, be it to develop software for blockchain, engage them for proof of content or Initial Coin Offering (ICOs) – a system which gives you the facility to get people to vote for an idea of yours and to raise money from the general public by using any digital currency, Decentralised (Distributed) Applications (DApp) – a back-end code running on a decentralized peer-to-peer network, customized e-wallets and consultancy. Remember, many of those hacked on blockchain were not, in any way, due to blockchain’s infrastructure, but because the user implemented the transaction incorrectly.
Did you know?
The US government is using blockchain to fight fraud and they have even indicted federal agents in the process. It turns out that the technology behind crypto-currencies can do far more good than bad. It can help solve crime and stop fraud. According to a federal prosecutor, who prosecuted early bitcoin criminals, she dealt with a group of criminals who tried to hide their crimes by trying to destroy transactions but could not escape the traceability of blockchain.