Nowadays, we hear the word “blockchain” frequently: tech experts at the IEEE Computer Society has revealed what they believe will be the top 10 technology trends for 2018, among which there is blockchain(source). I like to go to tech meet-ups in the Bay Area, and I find out that many of them are related to blockchain.
Do you know how “hot” the word is?
The other day, my friend in China told me, “My 55-year-old aunt, who spends her whole life selling tomatoes in the market, approached me one day and asked me how to ‘invest’ in blockchain. You know what? She wasn’t interested in technology at all before!”
It is no denying that “blockchain” is a buzzword. People working in the IT industry know about it; people reading news know about it; even the people you think won’t be interested in technology know about it. Some people view blockchain as a promising trending technology, some see it as an opportunity to become rich like stock market speculation, some take a wait-and-see attitude and doubt whether it worths putting a lot of efforts into blockchain…
So a lot of people are talking about it, but do you know what “blockchain” is?
According to Wikipedia, “A blockchain, originally block chain, is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data.” The data in question often refers to transactions made in bitcoin or some other cryptocurrencies, which are recorded publicly and chronologically.
Well, in a short sentence, a blockchain is nothing more than a digital ledger, and, a really smart one.
Let’s see how blockchain works. Suppose your friend in a country 20,000 kilometres away from you would like to send you a great deal of money because he just lost a bet with you. He requests a transaction, which is broadcast to a network consisting of computers as nodes. The network nodes then validate the transaction using algorithms, after which the transaction is combined with other transactions to form a new block of data. The block is then added to the blockchain, and the transaction is complete. Wow, you receive your money in a short time without a third-party and a high transaction fee!
There are 3 major characteristics of blockchain: decentralized, transparent, immutable.
Yo, what do they mean?
There is no agency in the middle. Your private key is all you need to get access to your asset, and no central authority is going to interfere that. Decentralized system is less likely to fail, and makes attempts to attack or manipulate harder since there is not a so-called “centre”. It works on a P2P (peer-to-peer) basis, which also eases human management.
Then what is transparent? The information on the blockchain works like a shareable database, so the transaction is publicly visible. Therefore, people can see the workflow, and also the address, but not who is behind the address(for security, it is really recommended to use an address only once). However, blockchain can also be built in a way which requires permission to access the information. For example, Ripple runs a permission blockchain, which determines specific who can transact and who can validate.
And immutable? If one wants to alter or delete the information on the blockchain, he has to use a huge amount of computing power to override the entire network — it means blockchain is incorruptible.
Since blockchain is decentralized, transparent and immutable, its benefits can already be seen — the most obvious one is for money transaction. Platforms like Coinbase are doing a good job for this. No latency for third-party process, less transaction fee, better security, and more than that!
According to Vitalik Buterin, the inventor of Ethereum, “Blockchain solves the problem of manipulation. When I speak about it in the West, people say they trust Google, Facebook, or their banks. But the rest of the world doesn’t trust organizations and corporations that much — I mean Africa, India, the Eastern Europe, or Russia. It’s not about the places where people are really rich. Blockchain’s opportunities are the highest in the countries that haven’t reached that level yet.” Blockchain can definitely help a lot for transaction in these scenarios.
But hey, the use cases for blockchain are more than transaction! Working like ledgers, blockchain can also be used for smart contracts. A smart contract enforces a relationship between parties with cryptographic code. Ethereum is a platform specific for smart contracts creation. To manage agreements between users, Ethereum allows developers to program their own smart contracts supporting a large set of computational instructions.
Apart from these, we can also use blockchain to track records in industries and healthcare. Blockchain enables data to be stored accurately and completely with encryption, and the anonymized records can be made available to researchers as well for better development and prediction.
You can even use blockchain to raise a cat! CryptoKitties is a game based on DAPP(decentralized application). As indicated on its official website, “Each cat is one-of-a-kind and 100% owned by you; it cannot be replicated, taken away, or destroyed.” I would definitely give it a try to have a lovely DAPP cat!
Yo, please do not be too excited. We do see a lot of blockchain-related startups and blockchain-related ideas popping up dramatically these days. We see mountains of posts about the benefit of blockchain, especially those which try hard to attract investment. Considering the rising rate of bitcoin price several months ago(not now haha), it’s no wonder that many people even including those who did not know about technology before would like to “invest” in blockchain.
It looks “hot”, but please see its issues and limitations before you go too crazy.
One large block is — TPS. For now, only a small number of transactions can be done per second, which you can have a look here. That said, if we would like to replace the finance ecosystem with blockchain… there is still a long way to go.
Blockchain also requires a giant network size. To build a robust network, there must be a large number of distributed nodes to consist of the network. This also needs investigating.
…and there is consideration from governments. For example, a report from the website Financial News indicating that “To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs”.
As a developer and geek myself, the question goes beyond “why blockchain and why not blockchain”. Blockchain is new, and needs more investigation as well as development, which I am really interested in. Blockchain is like a tool, we build it, with the expectation that it can make people’s life better; we learn, create and improve, without going blind.