\ /

Behind the 'Blockchain' buzzword

The other day, I was speaking with a colleague and at some point he mentioned blockchain. I have to admit, I knew very little about it. And that's why he encouraged me to do some light (!) reading and sent some very interesting articles to me. This post is a brief (and humble) summary of what I've learnt from the articles and other resources on the internet, and I'm sharing it with you if you'd like to start exploring the subject as well.

Blockchain technology was invented in 1991 to address the issue of trust and security in digital transactions without the need for a trusted intermediary (such as a bank, a solicitor or a company) to ensure its correctness and authenticity. This technology boomed in 2008, when it was used to create the first digital cryptocurrency, the Bitcoin. Cryptocurrencies have been designed as “free” currencies that can be exchanged without intermediaries, but how can one ensure the validity of transactions and avoid the same digital currency being spent more than once?

The blockchain is an advanced technology that serves as a shared, secure, and decentralized digital ledger. A blockchain is literally a chain of blocks, with each block containing a piece of information and marked with a unique identifier called “hash”. Also, every block is linked to the previous block, forming a chain where data is stored in chronological order and recorded permanently and immutably. The blockchain can be programmed to execute “smart contracts”, which are self-executing codes triggered when specific conditions are met. This eliminates the need for intermediaries in transactions and processes. The fundamental characteristic of the blockchain is its decentralised nature. A blockchain can be described as a distributed database kept in sync over a network of computers. Unlike centralised systems where a single authority controls the data, the blockchain replicates digital assets over numerous devices, so that everyone in its network can consult and manage information.

Complex cryptographic mechanisms and consensus algorithms ensure the security of the blockchain. If someone were to attempt to modify the data in a block, its hash would change, indicating tampering, and all subsequent blocks in the chain would be temporarily invalidated in the blockchain copy of the attacker. Another security mechanism is that every change requires the consensus of the majority of participants to be approved and synchronised across all blockchain copies of the other participants.

In terms of advantages, by using blockchain there is:

  • Better accuracy since no humans are involved in the checking process
  • Reduced expenses by doing away with independent verification
  • Increased complexity to tamper with anything that is distributed
  • Safer, confidential and quick transactions
  • Open-source software applications
  • A different and secure way to access financial services

The following can be mentioned in terms of disadvantages:

  • High usage of energy, data storage and other constraints
  • Mining requires expensive hardware
  • Concerns of illegal usage
  • No universally accepted set of regulations

Finally, there are different variants of the blockchain, including public ones open to all and private ones limited to a selected group of participants. In summary, the blockchain is a technology that provides a secure, transparent, and reliable way to record, share and verify data through a decentralized structure, cryptographic mechanisms, and consensus algorithms.

The use of blockchain is not limited to cryptocurrencies. Vendors, clients and companies now require anytime, anywhere and instant access to applications. The migration of IT infrastructure and systems to the cloud, the widespread use of personal devices and IoT have transformed the environments of many companies, that have now adopted hybrid, highly networked and widely distributed ecosystems. This greater exposure to cyberattacks is making companies finding new approaches to secure their digital assets and ecosystems. For this reason, this innovation is now paving the way for a wide range of applications in sectors such as supply chain traceability, finance, healthcare, e-government, and more.

comments powered by Disqus