Suppose you have been following the emerging technologies sector. In that case, you will have noticed that there is still much confusion surrounding blockchain’s ideology. While folks have been talking about blockchain for what seems like a long-time now, many are still unsure what blockchain is and how it works. It is worth remembering this ambiguity leaves the good ideas of blockchain open to exploitation and scams.
Before thinking about using a specific blockchain project as a solution, my suggestion is to look at the following of that project;
- The business team
- The research and development team
- How the blockchain solution achieves consensus*
- Is the white paper is peer-reviewed (not just written as a nice to have for the website)
(*consensus means a way of reaching a collective agreement. In a blockchain, this must happen before a “block” is final.)
8 tips for getting involved in blockchain — a beginner’s guide
Algorand is an excellent example of a responsible blockchain project. And as an Algorand Ambassador, the above factors were a consideration for me before joining as an Ambassador in 2017.
In this 4 minute thought-piece, I will try to simplify the basic ideas of blockchain.
The basic idea
A blockchain at a basic level is a new way of thinking about a database. What makes blockchain different from traditional databases is the security wrapper that completes the blockchain asset record, making that record unchangeable. Additionally, blockchain technology is typically decentralized; this means the asset records are spread across many computing nodes rather than centralized in one company.
These unique principles mean that blockchain can offer a new digital recording-keeping method not seen before. Blockchain is providing enhanced security and no single point of failure for potential adversaries to exploit and attack.
I think blockchain’s public nature causes many companies to worry about using it as a solution. This transparency is a new way of thinking about conducting business. But you can have a public shop front, so to speak, and keep individual records confidential. Don’t discount blockchain as a solution because of these unique features. In fact, it is the unique features that make blockchain innovative and fascinating to develop new business models for the future of commerce.
Blockchain vs. distributed ledger
You may have also heard the term distributed ledger used in blockchain conversations. Still, it is worth noting the terms distributed ledger and blockchain should not really be used interchangeably — as not all distributed ledgers are blockchains. Some folks use the terms interchangeably, which seems to be for a few reasons;
- Blockchain is an emerging technology, which leaves it open to inadequate definitions
- The negative connotations associated with blockchain and cryptocurrency scams
- Blockchain can enable a decentralized economic future
- A distributed ledger is not a blockchain, but a blockchain can form a distributed ledger
What is blockchain trying to solve?
Blockchain is not trying to solve traditional database problems. There are plenty of reasonable database solutions out there that will do the role a company needs from a centralized database. What blockchain is attempting to solve is a new solution to efficiently govern the trust between organizations or people without a middle corporation that would traditionally have guaranteed trust.
An example of a central corporation is a clearinghouse that settles financial transactions. A clearinghouse provides trust between two unknown parties. Or if you like reading books another day to day central authority is a library.
Blockchain takes people and their day to day dealings with each other and builds that trust in a digitally self-governing system by securing transactions in place by rules in a permission-less digital state.
According to a recent report, 71% of people have a mobile, but 30% of people have no bank account
Blockchain is only one part of many science and technology emerging industries that could help our world’s transformation.
Emerging technologies, growing divides, and the pandemic seem to be pushing the changes upon us rather quickly. This transformation is also a seemingly permanent evolution. To be sure, 2020 has accelerated this technology transformation.
The World Economic Forum (WEF) thinks blockchain is one technology that can help with transforming society. WEF states in their blockchain toolkit executive summary:
“Blockchain has the potential to revolutionize how companies compete, and stakeholders collaborate in the world…”
A credible blockchain should have these three vital foundational principles at its core;
- Tamperproof — every transaction stored on the blockchain is secured using a unique mathematical code (cryptography)
- Transparency — a single, public ledger that everybody can read, in which everybody can write, but nobody can alter.
- Trust — digital assets are not stored on a central database but distributed across a global ledger using the highest security. The ledger entry cannot be changed without the correct protocols, thereby creating virtual trust without a centralized platform.
Overall, blockchain’s creation and innovation and its ideas attempt to build trust in a trustless society elegantly. Upgrading the systems our society runs on for the next generation.
Thank you for reading, and if you liked this thought-piece, hit the like button and follow me here or on Twitter.
Stay safe, be well, folks!
3 basic ideas of blockchain was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.