We all have heard about Blockchain Technology. And we do know that it has been creating a huge impact recently in various sectors including finance as well as education. But what exactly is this Blockchain, and how does it work? How did it emerge to be a game-changer? Let’s understand in detail.
Understanding Blockchain Technology
Blockchain Technology was first outlined by two mathematicians Stuart Haber and W. Scott Stornetta in 1991. They worked on a cryptographically secured chain of blocks where no one could tamper with the timestamps of the documents. However, it was in 2008 that this technology gained its relevance when Satoshi Nakamoto, a pseudonymous name for the brain behind this technology, invented the ‘bitcoin’.
In simple terms, Blockchain or Distributed Ledger Technology (DLT) is a platform where people are allowed to carry out their transactions without the intervention of a third party. A database is created and shared among the participants in the network. Each participant in the network is allowed to access the contents. For example, if you have sent a certain amount of money to another person in the network, the transaction details get stored in the records of every other person in the network. Once the transaction has been recorded, no one would be able to tamper with the details. This security is achieved by the use of a hash function which is a cryptographically secured code. Each block contains the transaction details of the person along with the hash function that contains the information from the previous block. In this manner, each block is connected to the very next block thus forming a chain. Hence this technology is named the Blockchain.
Blockchain 1.0: The Emergence of Bitcoin
As mentioned earlier, Bitcoin came into existence in the year 2008. Satoshi Nakamoto in his whitepaper presented the bitcoin as an electronic peer-to-peer system meaning that online payments are done between any two people without the involvement of a financial institution/central authority. You can keep the bitcoins in a digital wallet just like you keep the traditional coins in your physical wallet.
Basically, the bitcoin you see in the image is imaginative. Each bitcoin is a computer file that is stored in a ‘digital wallet’ which is an app on your phone or computer. Anyone can create a bitcoin wallet just by downloading the bitcoin program. Each wallet contains a private key and a public key. The public key is just like an address or an account number through which the person can receive the bitcoins. Meanwhile, the private key is like the digital signature through which the person can send the bitcoins. As the name suggests, the private key is known only to the owner and the public key can be shared with anyone in the network for receiving the bitcoins.
Bitcoins can be subdivided into 7 decimal places, a thousandth of a bitcoin is known as a ‘milli’ and a hundred millionth of it is known as a ‘satoshi’. Though a large number of people are now investing in bitcoins, it has its own disadvantages. As no government regulations can be imposed, there is a higher risk of illegal activities being carried out using bitcoins. Also, since the transactions carried out here are irreversible, nothing can be done if you have sent the amount to the wrong recipient.
Blockchain 2.0: The Advent of Ethereum
Ethereum was invented in late 2013 and was brought into effect in the year 2014 by Vitalik Buterin who at the time was the co-founder of Bitcoin Magazine. Ethereum(ETH) is the second most popular cryptocurrency after bitcoin. Unlike Bitcoin, Ethereum is much more than just a medium of exchange or store of value. It is the DIY platform for decentralized programs, also known as Dapps(Decentralized Applications). You can find thousands of gaming and financial apps running on the Ethereum network. It is said to be the next level of the internet.
If you want to create your own decentralized app, meaning that no single person can control the application not even you once it has been created, all you have to do is learn Solidity, the Ethereum programming language, and start coding in it. Once the program has been deployed, it makes sure that it is carried out strictly according to the instructions written. Now, Ethereum is just a platform for running decentralized apps and Ether is the currency used to carry out the transactions in the Ethereum network.
Ethereum’s programming language, solidity, is used to write ‘Smart Contracts’. Now, what is a Smart Contract?
Well, in simple words, it is a program with a collection of conditions and actions. For example, You rent an apartment using Ether and as long as pay your rent to its owner, you can access the key to the apartment and stay there. In case you miss your payment on a certain month, you’ll be locked out of the apartment. It is named the smart contract as it deals with every aspect of a traditional contract through programming.
Like Bitcoin, even Ethereum has certain drawbacks. Once the program is deployed on the network, the program cannot be edited not even by the one who had written the program. Also, it works on the principle that ‘code is law’ which makes it less user-friendly.
Blockchain 3.0: The Future of Blockchain
Well, most people tend to believe that Bitcoin and Ethereum are the only uses of Blockchain technology. But it’s just like saying that sending email is the only purpose of the Internet. There is much more to be explored with this technology.
Researchers have identified that Blockchain can play a major role in attaining the Sustainable Development Goals (SDGs) proposed by the United Nations. The SDGs are a set of 17 global objectives focusing on sustainable development issues ranging from poverty, education, climate change, clean water, and land. These objectives were included in the so-called 2030 Agenda, which intends to take the required actions to fulfill the objectives before the year 2030. Blockchain technology can be used as a tool to achieve the target along with other existing systems as it has an inbuilt trust and transparency in its design.
One of the SDGs is poverty, but how can blockchain help in eradicating poverty?
Let’s create a hypothetical situation to get a better understanding of this. Imagine that you are a farmer and you hardly have any knowledge of the international markets. So eventually you are forced to take the price that a local wholesaler offers you. Now, how can blockchain help you here to earn more profit? Well, with blockchain, you can bring your harvest for sale, the quality of your harvest will be assessed using the image recognition technology and a fair price will be assigned. This information is then provided to the buyers in the chain. Thus earning more profit. Similarly, blockchain can play an important role in achieving other SDGs as well.
To put it short, blockchain technology sure is empowering people and is immensely contributing to the era of digital transformation, but the technology is still in its early stages and there are a lot more possibilities yet to be explored with this technology.
Also learn about: “Quadruped Robotics: The Evolution of four-legged Robots“
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