How Blockchain can just make society more convenient
Around 2009, a currency named Bitcoin came into existence under the name of Satoshi Nakamoto. The Bitcoin is a type of cryptocurrency; a digital asset that is very similar to that of a real life bank account.
Although at the time of creation the society did not notice the Bitcoin, we soon realized the blockchain structure used in the Bitcoin cryptocurrency can be used in other ways in society.
What is a Blockchain?
It very much does mean what the name suggests : multiple blocks strung together on a chain
However on a deeper level, the word “blockchain” really is talking about data (blocks) being recorded in an accessible manner (the chain). And these data chains are a list of transactions or records.
In Bitcoin’s case, a “Block” of the blockchain stores different transactions’ data which include:
- Participants of the transaction: Sender, Receiver
- Data of transaction: Time, Amount transferred
- Blocks store a unique identification sequence called “hashes”, in order for them to be identified from other blocks. The hash sequence is created by special algorithms such as SHA-256.
- Blocks also store the hash sequence of the previous block forming a growing list / “chain” of blocks.
And one block does not only store only one transaction, it stores many more. A single block on the Bitcoin network can store around 1MB of data which is enough to store thousands of transactions
The Peer-to-Peer System in Blockchain
One of the key features of the blockchain is the P2P network structure.
Currently, the most used type of network model is the client -> server model, where individuals all connect to one server entity (ex. Facebook) who stores and manages the information of its users.
However with the Peer to Peer network, there is not central point of storage of data, individuals (Nodes) all store copies of the information, and data is constantly being recorded and transferred around the network via the individuals.
In any Blockchain, when a new block needs to be added to the Blockchain, there needs to be an agreement that is established among the majority of the nodes of the network for that the record or transactions in the new block is valid. In order for the new block to be added to the chain.
In Short: Blockchain is an distributed database that everyone can get a copy of. Everyone with a copy are able to add new records to the database, but no one can change any records in it.
Possibilities with Blockchain
Blockchains where the F.I.T.S. principle applies:
- Fraud : Environment with a likelihood of fraud
- Intermediaries : Middle figures in transactions such as middle man
- Throughput : Amount of transactions is limited
- Stability of Data : When you don’t want the data to be volatile/changed (ex. Personal info, Transaction Records)
Elimination of Fraud
Using this shared digital record is able to greatly reduce fraud in transaction in an economic context. Through the distribution of the data via the P2P network, everyone can clearly what records or transactions are made. Therefore, transactions that are not intended and are fraudulent can be identified.
One example of the implementation to prevent fraud is a Blockchain odometer for cars :
Tampered Odometers in cars has been an problem in society for a long time now. When people sell their used cars, they would tamper with their odometers to show a lesser mileage than actual mileage to get more cash for the car.
However, by using a blockchain network to continuously update the car’s mileage information, we are able to prevent the tampering of mileage that is recorded to the network. (Bosch IoT Lab’s project)
Same function as contracts in real life, however it is digitized and stored in the blockchain network. It can be a computer program that is stored inside a block of the blockchain.
These digital contracts can be applied almost anywhere in which real contracts are used, and can automatically enforce conditions to deal with different situations considered in the program.
For Example: I am renting an apartment from John using a blockchain
John would first put a computational program onto the blockchain which is designed to distribute the password of the apartment to me (The Customer)
There would first be a rent date / deadline where the contract will check if it holds the key from John and the payment in cryptocurrency from Me. And if so, the contract would send the apartment key to me and the amount of cryptocurrency to John (Transaction Success!)
If One Side does not deliver: But if I put money onto the contract but John does not put the key on before the “rent date”, the contract sends my money back. And vice versa.
Benefits over the real life contract:
- Elimination for intermediaries : Everything is already done in the computer program and will automatically enforce whats there, Saving you money
- Elimination for fraud (lying/scams) : As Blockchain records everything, and is shared to everyone, other people can’t make up human errors as excuse to take your stake
- Elimination for potential losing of info : Banks have the possibility to lose your accounts and contracts because of human factors (ex. accidental deletion). Blockchain’s decentralized form allows you to have other copies of your documents all over the network’s nodes.
- Speed in process of contracts and transaction : Code automates the process, allowing transactions to be much faster and less “running around” is needed.
Cons of Blockchain usage
Through Cryptocurrency implementation, we can bypass certain transaction laws that enforce the transportation of money and tax. The blockchain also can’t detect money laundering and other fraudulent activities. In short: No government regulation.
What if you had made a mistake in your smart contract and needed to change it? Because a blockchain network and its records cannot be modified, once you add something its forever. Bugs in the contract are also possibilities.
Non-Maturity of Blockchain
There are a lot of different cons that are not yet thought about in the implementation of blockchain yet: Inefficiency & power consumption in world, Higher cost in its implementation in world and integration with older systems.
To Sum it up
- Blockchains is a big list of records that is distributed among individuals on a blockchain network
- Blockchains can eliminate fraud & make transactions a lot easier
- Blockchains is currently not ready for implementation and has flaws that are not yet realized
As an ending note, despite Blockchain technologies’ uncertainties and non-maturity, I believe that its benefits to the society will trigger greater development in the present & future to serve as a better alternative to present methods.
Through time, everything changes.
Thanks for Reading my first article!
I’m Jerry, A 15 Year old that is passionate about Biotechnology, Computer science, blockchain, and using these new technologies to solve local-global problems in the world. Here’s my Linkedin if you would like to further connect.