Invention
The idea of blockchain was first presented by the cryptography researcher Stuart Haber and the Physicist W. Scott Stornetta in 1991. They wanted to create a system through which they could timestamp digital documents so that tampering could be prevented.
The first real-world implementation of blockchain technology came with the creation of the world’s first cryptocurrency Bitcoin. Bitcoin was created by a person or a group of people, anonymously called Satoshi Nakamoto in 2009.
Almost all cryptocurrencies today use blockchain technology to function. It is the next revolution in the world of finance and economics. It also takes record-keeping to the next level.
Definition & Explanation
As the name indicates, a blockchain is a series of blocks connected in a chain. Each block in a chain contains information. A blockchain is programmed.
It is essentially an incorruptible mechanism of keeping records. A blockchain is a digital hierarchy system or a distributed append-only only ledger. The main function of blockchain technology is decentralization, it eliminates the use of any intermediary in processes like transactions. Blockchain technology is a revolution in the world of finance and economics. A blockchain is spread all over a network. Many computers or nodes make up a blockchain.
For example, for a blockchain used in transactions, each block contains the information necessary for transactions, like the identity information of sender & receiver and the amount. If any change is made to some piece of information in a block, it gets picked out by checking the blockchain on other nodes.
Working
A blockchain is distributed over a network of computers. Blockchain is a digital ledger, and each computer receives a copy of that ledger.
You might have heard of cryptocurrency mining. Mining is a computer set up by someone that checks through all the transactions made on that blockchain. And in exchange, the miner gets some percentage of the cryptocurrency they are mining.
Each block in a blockchain is a receipt. Once information is stored on a block, it cannot be changed. Each block contains the following three things:
- Data
- Hash number
- Hash number of the previous block
The data in the blocks depends on where the blockchain is used. In a bitcoin transaction, for example, the information will be like the one mentioned before. The hash number of a block can be thought of as a fingerprint, each block has a unique one. The hash of a block is recorded as information is put into the block.
If the information in a block is changed, its hash number also changes. So changes in the data can be checked easily through hash numbers. Each block also contains the hash of the previous block, so each block points to the previous block as well. The first block is unique it cannot point to any block, it is called the Genesis Block.
Hash numbers are not enough to make blockchains incorruptible. Blockchains use another mechanism called proof-of-work. Proof-of-work ensures the miners calculate the hashes to verify transactions and such.
In addition to hashing and proof-of-work, another thing that contributes to the security of a blockchain is distribution. Blockchain technology uses peer-to-peer or P2P networks. Anyone can join the network. A blockchain is distributed over a P2P network, where everyone in the network gets a copy of the blockchain.
You can see the working of blockchain technology visually here.
Applications
The most famous and perhaps the most useful application of blockchain technology has been in cryptocurrencies. But the use of blockchain technology is not limited to cryptocurrencies. Blockchain technology is essentially a record-keeping mechanism, and so it can be used to keep a secure record of anything!
Here we explain some of the areas other than cryptocurrencies where blockchain technology may be useful.
• NFTs
There is a lot of hype around NFTs right now. But what exactly are they? NFT stands for Non-fungible token. An NFT is a digital asset stored on a blockchain. NFTs are not interchangeable. We go into depth about NFTs here, but right now we are going to explain how NFTs make use of blockchain technology.
An NFT creates a blockchain-based digital certificate for your digital item so that it is secure and authentic. For example, if you make a digital artwork and create an NFT of it, that NFT will contain some unique information about the artwork on a blockchain. The information could be the hash number, token name, and token symbol. The token can then be bought or sold through transactions on the blockchain. Blockchain technology, in this way, ensures that the information is secure. An NFT only represents ownership of the artwork, which is stored on a blockchain so it cannot be tampered with.
• Medical Records
Blockchain technology can also be used in healthcare. Using blockchains, the patient data and medical records can be secured. As the number of patients increases, or as the visits of a patient to the doctor increase, the medical records also increase. This poses the difficulty of keeping the numerous records safe.
Blockchain technology can also give the patients full authority over their medical data. And that the doctors can only access them if the patient allows it via a digital signature. Blockchain technology can prevent miscommunications between doctors and patients as well due to decentralization.
• Electricity
In the energy sector, blockchain technology can also bring a revolution. Blockchain technology can be used to create a distributed smart grid system that will enable people to buy electricity directly from the grid rather than retailers.
Blockchain technology can also provide proof-of-authority to customers who want to use renewable energy. Customers can easily trach the energy they purchase. Thus excess energy or energy loss can easily be tracked through blockchain technology. Blockchain technology can also improve the efficiency and speed of energy transactions. Rather than power being distributed everywhere, it can be used where it is needed the most. Blockchain is vital to Peer-to-peer energy markets, where people can trade energy with each other according to their needs.
• Voting
Today, voting in elections or wherever is done on either paper or electronically. Both of these ways have some issues.
Voting on paper requires a lot of management and inconvenience. And paper requires cutting down of trees as well. Many countries have adopted digital voting. It has been successful in most cases but there is always a fear around it. Devices could be hacked, so the results of voting could be altered.
Blockchain technology takes electronic voting to the next level. Data of voting can be stored on blockchains, and that blockchain is distributed over a network. Everyone in the network holds a copy of the voting records, and that makes the whole system transparent and incorruptible. To protect the identity of the voters, the data is encrypted.
Read about another game-changing technology: Quantum Computers.
