The following are the chronicles of a Blockchain novice. For someone one who writes blogs on Blockchain for a living, it turns out there are many things I didn’t know. Hoping to clear the air with all the readers, in this blog I have broken down some myths and alternative facts that have plagued this technology. Hope this helps you understand more about Blockchain, decentralization and cryptocurrency. It sure did clear my doubts for me.
1. What really is a Blockchain?
- It is a digital ledger. That’s it! A ledger that keeps a record of all the data entered on it. Only, this ledger is online. Hence, a digital ledger. Ledgers are usually managed by one entity. They fill it with data of their choice and then manage how to balance it. In a Blockchain, there are many different people who verify any transactions that occurs on this public ledger. The kicker is that no one knows who they are! There are merely connected on the network. It is due to this, that it is also called a distributed ledger. These anonymous people validate (confirm) that a transaction has occurred by linking it to the previous transition. This chain of continuously linked transactions is known as a Blockchain. Those that work on the Blockchain win a small amount of fees for this service. This entire process is highly secure and tamperproof!
2. So, there is really no chance of any fraud on Blockchain?
- The best part of a Blockchain is that it is highly secure. As it is decentralized, hackers have to hack into a network with thousands of computers. Keeping in mind that these computers are spread all over the globe, so, that’ kind of impossible to do. Also, if a hacker wants to manipulate the data, they will have to do so in all the thousand computers at once. Due to this, the Blockchain is highly secure. Another factor that works in the favor of the Blockchain is that it if in the odd case any hack becomes a part of the main ecosystem, they still can’t change or manipulate the data of the Blockchain, because to do so, one needs to have a majority of 51% of the block. Only with the majority of the block validates any transaction is it approved and then validated. Since the advent of Blockchain technology there has been no such coups. Just goes to show how secure it is. But, there have been some close calls. Case in point, Mt Gox and BitFinex. They were cryptocurrency exchanges that lost Millions of dollars of their customers currency due to hackers managing to gain entry into their ecosystem. Then the Ethereum DAO (Decentralized Autonomous Organization) attack was a case of pure manipulation of the exit policy of the ecosystem. So, to think that a Blockchain is 100% fraud or risk proof is just fanciful thinking!
3. So, in all this, what’s the deal about Bitcoin?
- Riddle me this, what came first? The chicken or the egg? We may not have a definite answer to that question, but in regard to Blockchain and Bitcoin, we know who the big daddy is. It’s Blockchain. In 2009, a person named Satoshi Nakamoto, created Blockchain. This revolutionary ecosystem needed a working application. Due to which the Bitcoin was born. It is a virtual currency. Meaning, one can’t see or touch it. But it is still real. The proof of which is that this currency can be used for trading in goods and services just like normal fiat currency (government authorized money) As this technology has developed, Bitcoin has opened doors to many other cryptocurrencies. A few examples of the same are Ripple, Ethereum, LiteCoin, Tron etc. The value of Bitcoin and other such type of currencies depends on many different factors. Mainly, it depends on the mining amount and the investment ratio of the plans and partnership of the company in the market. Now, with a strong online community on the many different social media channels, FUD (Fear, Unrest and Doubt) plays a big hand in determining a cryptos market value.
4. But, isn’t Blockchain being used by criminals?
- While there have been instances of criminals using the Blockchain technology to reach their personal goals, to associate the 2 exclusively will be a disservice to the technology involved. The biggest criminal organization that used the Blockchain for shady deals was known as the Silk Road and they were caught by the FBI. Similarly, hackers who deal in ransomware, usually use cryptocurrencies to gain their monetary benefits. Labeling an entire ecosystem for its misuse by others is highly unjust. At such times, one need to focus on the good it has done in the many sectors where it has been implemented. Sectors such as travel, healthcare, gold and diamond mining are just the tip of this mahmont iceberg.
5. Can I implement a Blockchain ecosystem for my small-scale business?
- large corporations and industries. This ecosystem has a diversifying use cases in small and cottage industries. In fact, one can even use it to safely store one’s data, digital reproduction of their artworks and paintings and also individually play a key role in curbing piracy. Another small size use of Blockchain technology is in creating smart contracts which are used between 2 individuals or between one person and an organization.
6. Why have smart contracts when Legal contracts exist?
- While legal contracts exist, they involve a third party. Be it a government agency or simply a middleman that brokers a deal between any 2 individuals. With a smart contract one can delete this third party completely. The validation of the contract is done by a set of peers on the Blockchain. With this process, one can save a lot on transaction fees and even increase the overall profit. Of the many, Ethereum and Quantstamp are two of the most famous Blockchain ecosystems on which one can create a smart contract.
Must Read : LiteCoin: Little Brother, All Grown UP!
There you have it folks! I hope with this blog you have achieved a better sense of Blockchain technology and all that it entitles. If there are any questions that you want answered, do drop us a line in the comments section below. We shall feature them in the second part of this blog.