Intro to Blockchain: How does it work, and how can it work for us?
Updated: Sep 6
Blockchain is a new data architecture that has been on the rise since 2012, when it was first introduced in the form of the "Bitcoin" whitepaper, submitted under the pseudonym Satoshi Nakamoto, which uses basic blockchain architecture to create a Peer-to-Peer cashless currency. But what does blockchain do? Why are we hearing so much about it? Does it really have the potential to change the way things function in society today? Well, we are going to discuss this and more here today.
Blockchain, primarily is a system that records transactions in a peer-to-peer, decentralized manner, where everyone holds a list of all the past transactions in the network. These lists are known as ledgers, and the architecture is known as "Distributed Ledger Technology". Everyone having access to all transactions makes the network fully transparent, anonymous, and secure! There are many protocols in place to ensure its security, but blockchain, conceptually, is one of the safest network architectures there is, as you would need over 50% of the world's computing power to be able to break it. Beyond this, details get quite complicated, so we will focus on what this new architecture represents for us in the bigger picture.
(You can still find Satoshi Nakamura's whitepaper for free online if you want to know more! )
The world, as it is today with minimal blockchain systems, looks like the image below, a system with a central middle man (centralized network), where each individual relies on the middle man to provide reliable, identical information to everyone in the network. This has many disadvantages, including large inefficiencies, low levels of redundancy leading to singular points of failure for the network, big opportunities for abuse of power, and a smaller affinity for scalability.
These centralized networks exist because we have never had a way to communicate information safely between individual users in a trustless manner. We have always needed an individual entity to secure and congregate the information. Now this is no longer the case! With blockchain architecture, you can send data in any form, text, currency, information, & more to people around the world without a central entity that governs the information you try to send. Although this may seems complicated at first, the main things to know about the technology are quite simple to grasp:
With this network, members communicate "peer-to-peer", (individual <> individual instead of individual <> central figure <> individual), which allows for the following advantages: No central authority in control of the flow of information, no power abuse due to distribution of power amongst individuals, high-scalability due to the ease of access to the network, and high-levels or redundancy given that each individual in the network has a full record of all the transactions occurring in the blockchain. Beyond those capacities, we can also mint tokens, which are tickets that represent information on the blockchain. These can be many identical units which can be transferred like coins representing money, these are referred to as Fungible Tokens, or individually unique tokens that can only have one copy in the network, identifiable & traceable, transparent and secure. These individual, unique tokens are known as Non-Fungible Tokens: NFTs It is these advantages that have properly started to drive adoption of blockchain technology in various industries. Firstly because of all the traceability and ledger of transactions it naturally provides, and secondly because these NFTs have a tremendous amount of tangible use cases that many sectors can profit from, as these tokens can represent virtually anything. For example, NFTs can represent digital drawings, such as BAYC (Bored Ape Yacht Club) and other digital art dealers that sell these drawings as tokens on the ethereum blockchain.
This version of NFTs (which rose to popularity around 2019) tainted public perception as to what the potential of the technology is capable of. Today, there are use cases that hold significantly more value, such as using NFTs to replace tickets for event access, concert tickets, travel tickets, using NFTs to replace certificates and accreditations given by schools and universities, intellectual property certification, and so much more! Experts consider that we are in the first of 10-15 years of blockchain development and application, who knows what blockchain solutions will allow us to do in just 5 years time.