As the prices of digital currencies skyrocketed during 2017, the underlying blockchain caught many public attention and has become one of the hottest search in google. However, the fame of blockchain does not make it easy to understand for most people who aren’t familiar with this technology breakthrough. The following are some featured stories selected to help forming a better understanding of Blockchain and its various aspects.
What Is Blockchain?
by Ameer Rosic
The blockchain is an undeniably ingenious invention – the brainchild of a person or group of people known by the pseudonym, Satoshi Nakamoto. But since then, it has evolved into something greater, and the main question every single person is asking is: What is Blockchain?
By allowing digital information to be distributed but not copied, blockchain technology created the backbone of a new type of internet. Originally devised for the digital currency, Bitcoin, the tech community is now finding other potential uses for the technology.
Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.Information held on a blockchain exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.
How does it work?
To start, here’s the simplest explanation with no metaphors or hyperbole. In the language of cryptocurrency, a block is a record of new transactions (that could mean the location of cryptocurrency, or medical data, or even voting records). Once each block is completed it’s added to the chain, creating a chain of blocks: a blockchain. Because cryptocurrencies are encrypted, processing any transactions means solving complicated math problems (and these problems become more difficult over time as the blockchain grows). People who solve these equations are rewarded with cryptocurrency in a process called “mining.”
If you own any cryptocurrency, what you really have is the private key (basically just a long password) to its address on the blockchain. With this key you can withdraw currency to spend, but if you lose the key there’s no way to get your money back. Each account also has a public key, which lets other people send cryptocurrency to your account.
Information on the blockchain is also publicly available. It’s decentralized, meaning it doesn’t rely on a single computer or server to function. So any transactions are instantly visible to everyone.
Issues and Limitation
There are treacherous passes in any technological revolution.Some people in the blockchain industry have pointed out that blockchain has become overhyped, when, in reality, the technology has limitations and is inappropriate for many digital interactions.
But through research and development, success and failure, and trial and error, we've learned the current issues and limitations of blockchains.
Blockchain technology involves an entirely new vocabulary.It has made cryptography more mainstream, but the highly specialized industry is chock-full of jargon. Thankfully, there are several efforts at providing glossaries and indexes that are thorough and easy to understand.
Blockchains (like all distributed systems) are not so much resistant to bad actors as they are 'antifragile' – that is, they respond to attacks and grow stronger.This requires a large network of users, however. If a blockchain is not a robust network with a widely distributed grid of nodes, it becomes more difficult to reap the full benefit.There is some discussion and debate about whether this a fatal flaw for some permissioned blockchain projects.
Transaction costs, network speed
Bitcoin currently has notable transaction costs after being touted as ‘near free’ for the first few years of its existence.As of late 2016, it can only process about seven transactions per second, and each transaction costs about $0.20 and can only store 80 bytes of data.
There’s also the politically charged aspect of using the bitcoin blockchain, not for transactions, but as a store of information. This is the question of '‘bloating' and is often frowned upon because it forces miners to perpetually reprocess and rerecord the information.
If a blockchain is used as a database, the information going into the database needs to be of high quality. The data stored on a blockchain is not inherently trustworthy, so events need to be recorded accurately in the first place.The phrase 'garbage in, garbage out' holds true in a blockchain system of record, just as with a centralized database.
Unavoidable security flaw
There is one notable security flaw in bitcoin and other blockchains: if more than half of the computers working as nodes to service the network tell a lie, the lie will become the truth. This is called a '51% attack' and was highlighted by Satoshi Nakamoto when he launched bitcoin.For this reason, bitcoin mining pools are monitored closely by the community, ensuring no one unknowingly gains such network influence.
Because blockchain protocols offer an opportunity to digitize governance models, and because miners are essentially forming another type of incentivized governance model, there have been ample opportunities for public disagreements between different community sectors.These disagreements are a notable feature of the blockchain industry and are expressed most clearly around the question or event of 'forking' a blockchain, a process that involves updating the blockchain protocol when a majority of a blockchain's users have agreed to it.
These debates can be very technical, and sometimes heated, but are informative for those interested in the mixture of democracy, consensus and new opportunities for governance experimentation that blockchain technology is opening up.