“Blockchain: What is It, and How It Can Be Used?”
It is a widely accepted belief that computers are unreliable when it comes to storing information. Unless you put the machine away in some absolutely secluded and completely secured bunker without any Internet or human access, someone (or something) will find a way to break into it and damage your data. It has seemed for quite a long time, that this problem has no actual working solution, only the obscure “illuminati confirmed” kind. Well, while that type of problem-solving might work just fine for some, serious businesses usually require more down-to-Earth approaches.
Thankfully, there is one now. The name of it is blockchain, and the technology, while seemingly simple and transparent, is, in fact, impenetrable.
Blockchain is the imminent future of our computer networks. It’s a very cost-efficient system, in which everyone is the judge and protector of information, both theirs and someone else’s. Inside of a blockchain, there is no danger that your data will be stolen, changed or tampered with - simply because everyone is watching and keeping exact records of everything that has ever happened within the system, while the whole process is securely protected with cryptography.
In this article, we’ll explain you what blockchains are and how they operate. However, most importantly, we will present you with some ways, in which you can implement blockchains into your own business or life. In order to prove our points, we will also provide examples of some of the successful blockchain-based businesses, both in financial and non-financial sectors.
A blockchain is a system of computers, in which information is stored and shared among all participants of the network. There is probably no easy way to explain how a blockchain works, but we’ll try our best.
Imagine that you want to send your neighbor Betty a message, which contains the phrase “Hello!” Now, in the real life, you would normally walk up to Betty and tell her the message directly. But what if Betty is thousands of miles away from you? You’d most likely write a card/letter/note saying “Hello” and give it to her in some way: via mail or email, via a mutual friend of yours, etc.
Pretty much, it seems that the job is done, and there is nothing to worry about. However, there are still quite a few possible situations, where things can go wrong. In order for Betty to get your message, the mail company would have to be responsible enough not to lose the letter somewhere along the way, or the email service would have to be secure enough not get hacked all of a sudden, or your friend would have to be reliable enough not to forget about passing it over. In all three cases, you’d have to put your trust in other’s hands, and believe that they will go through with the task.
This is how all transactions work, and people have learnt to deal with it. However, what if you want to send not a message saying “Hello!”, but, let’s say, one with the list of all nuclear codes in the world? Or maybe you’d like to send Betty a billion dollars? Would you rely on your friend (or anyone else for that matter) in this case? Didn’t think so.
What a blockchain does is that it essentially takes away the need to rely on another person/service/institution in whatever it is that you do. And here is how.
It all started in 2009, when a certain someone named Satoshi Nakamoto published an article. There is no information available about the author (or maybe even authors?), but this piece of writing has changed the way we see and store data forever. Nakamoto’s revolutionary idea encompasses a type of storage, in which everyone sees what’s inside and make sure it’s real. Not a single bit can be changed - once something is on the network, it stays there forever.
This is, essentially, what a blockchain is. All data shared within a blockchain is compressed in blocks, and once a block has been added to the chain, there is nothing that can alter it. In case you need to change something, you add another block on top of the previous one, thus notifying everyone that you’ve changed something. However, it is still possible to go a block back and see how everything looked before.
Let’s go back to the example with Betty for a second now. Imagine that you and Betty had a nasty argument of a sort, and you decide to write a mean letter saying something like: “Betty is a real piece of work! You shouldn’t be friends with her ever!!!” and send it through the blockchain. Once this letter has been approved, it’s compressed into a block, and added to the chain, and everyone can see now that Betty is a meanie. However, a couple of days later you both calm down and figure everything out, and you write another letter through the blockchain, but this time it says “Betty is the best person in the world, she is my absolute BFF!!!” Whooosh, and this letter is also approved and added to the chain, and now everyone can see it.
Of course, the first thing everyone would see is this new letter, the one where Betty is great to be around. But all of the network users would still be able to go back a block or two, and see that first one, where she is a terrible person, with whom no one should be friends. See what we mean here? A blockchain is a records holder, a place where all data entered is kept safe and sound for you to read and analyse.
What is truly fascinating about blockchain is that there is no central storage. Every single member of the blockchain has a copy of all data. You don't necessarily have to store the whole thing, but you can if you want. With that said, no one can simply walk in and, let’s say, change a coma in some sentence in your version of data, because then many other members of the network would still have the real copy, and it will simply exclude yours, deeming it incorrect. Your block will be renewed later, once it’s cleared and fixed, but, until then, it’ll be kept separate from all others. Only owners can make changes, it’s a rule.
When you become a blockchain member, you get two keys: a private one and a public one. As for the receiver’s key, it’s randomly generated for each message/file/transaction. Now, you could encrypt information so that anyone could read what your files say, but you could also make it appear as a list of files, which only the receiver can view or download. That stuff’s optional and depends solidly on the type of blockchain.
How does the system know it’s you making changes or sending messages? Well, with the help of those keys and asymmetric cryptography.
Your first key (the private one) is used to encrypt data. Remember that “Hello, Betty!” message? When you want to send it through a blockchain, the system takes it and runs it through an algorithm alongside your private key. As a result, your message is encrypted and has your signature on it (which is sort of a randomly generated footprint, unique to your private key and to every new message sent).
In order for Betty to see the message, it has to be approved, compressed into a block and added to the chain. This approval is done by other members of the blockchain (or should we say by their computers) and with the help of that public key. Basically, several users run your message and your public key though yet another algorithm, which then checks whether the signature on that message has been generated with your private key. If it has, your message is compressed into one of the blocks, and queued to be added to the chain.
Later, Betty can easily access the message using the receiver’s key, which is in turn generated somewhere along the lines of encrypting and signing your messages/transactions.
As for today, no one can hack your private key, because it would take several hundreds of years, given that keys are simply ridiculously long and complicated strings of numbers and letters. We would be lying if we told you that things cannot change in the future though, as scientists can always invent machines capable of decrypting codes of any length in a matter of seconds. However, until that happens, you can be sure that with a blockchain your data is safe no matter what.
- Blockchain is the new way of transparent data storage. There are some global blockchains, such as the bitcoin one, but a blockchain can also be created for a separate company or community.
- Many of blockchain users store the complete copy of all its data, and it’s regularly updated. Meaning that even if one particular copy is damaged, there are always hundreds of backup versions.
- Everyone can form a block of data. After the network checks its validity, the block is added to the chain. You cannot change the block, only add a new updated one on top of it. However, it would still be possible to see the previous block, and compare the two.
- All info is encrypted with mathematical cryptography, which makes any form of fraud impossible. You are the only person capable of doing anything with your own data.
- There is no need for the “middle-men”, all transactions happen from person to person. There is no central ruling power. Every member has a voice, and every voice is valid. In blockchain, the majority decides, and if someone wants to go against its decisions, they’d have to build their own blockchain.
Usually, the technology of blockchain is associated with money. It’s easy to explain: blockchain transactions are secure and free (meaning that you don’t need to pay for the transaction, like you would with a bank). However, there are many more applications for blockchains, both within and outside the area of commerce.
Money Transferring. Let’s begin from here, since we’ve already mentioned it. Money transactions in blockchains are done with the help of various cryptocurrencies, such as bitcoin, for instance. Those transactions are extremely secure and charge-free, meaning that you can send money to a remote worker on the North Pole and not be afraid that someone’s going to steal it along the way.
Smart Contracts. These are a very secure way to make sure that all terms of a certain contract are fulfilled. The result is achieved by the fact that smart contracts are unbiased and neutral towards all parties involved, they have no human emotions and no incentive to cheat. They are basically algorithms, which run only if all necessary conditions are met. Combine it with the fact that all record of activity is kept within the blockchain, and you get yourself the most transparent way of doing business that is currently known to humanity.
Verification of information (identity/ownership/veracity). If something has been added to the blockchain, it stays there forever no matter what. This means that identities cannot be stolen or altered simply because there is only one identity for each person in the blockchain record. The same goes for their accomplishments: Matt will not say that he painted the picture, because thousands of ledgers say that this work belongs to Betty.
Distributed Cloud Storage. This feature would be useful to anyone in need of storing vast masses of information for a relatively cheap price. If you take all your info, encrypt it and store in tiny bits on all computers in the network, you know for a fact that it’s safe and sound. Most importantly, it will not cost you as much as normal cloud storage would, simply because there are no intermediaries - you pay directly for the service.
Proof-of-Provenance. In production of commodities, it is often a case that producers don’t create all necessary parts, but simply assemble the ones they’ve bought from elsewhere, creating a final product as a result. However, if something is wrong with one of those pieces before the assembly, the one at fault would be not the producer of that particular part, but the final product producer. Blockchains could be used in avoiding such unpleasant situations. The final producer could add logs of each step of production to the blockchain, thus granting themselves the ability to present a credible record of the whole process to investors, stockholders, or to whoever it may concern.
Networking and IOT. Blockchains can become a very useful base to provide communication within a certain company or system. For instance, IBM and Samsung have created a platform called ADEPT Autonomous Decentralized Peer-to-Peer Telemetry, which implements blockchains to form a base for cheap autonomous communication between all machines involved. In the other words, they’ve created a blockchain-based Internet of Things (a system of electronic devices, which are connected to the Internet, and interconnected among themselves).
To be frank, possibilities are limited only by imagination when it comes to blockchain. The system is so grand, promising and versatile, it could be implemented wherever you want it. We can prove this by providing examples of businesses, which are already successful in their usage of blockchains.
- Abra uses the technology of blockchain to make global bitcoin and other blockchain-based money transfers possible. You can store money in a wallet on Abra, or send it to anyone in the world, all without having a bank account, or paying for transactions.
2. Guardtime is an Estonian project, which implements blockchain technology to provide industrial cybersecurity.
3. Augur is a blockchain-based predictions market. People can place bets here on both sports and stocks, but it is also in the mind of its creators to allow betting on elections, natural disasters and pretty much anything else.
4. Ujo Music promises to rebuild the whole industry of music. Phil Barry, the man behind Ujo, created it with a desire to solve the problems of streaming music, and also make the business easier and more transparent: employ smart contracts between artists and recording studios, list all creators, ensure veracity of their ownership of music and so on.
5. Ubitquity is a platform, which makes real estate easier. Given that a house is listed in here, you can find any information about it: often stuff that owners or real estate agents might have wanted to hide, all without middle parties and additional costs.
6. We’ve mentioned this before: using blockchains to make sure that every part of the complete future commodity is traceable, documented and of good quality. This is exactly the purpose of Provenance.
7. Storj is decentralized (which means hack-resistant) cloud storage, which offers people an ability to keep their information for less money and with a higher level security. The interesting thing is that you could rent out your own additional digital storage space, which opens prospects for a whole new blockchain market.
8. It’s practically the heaven for all online retailers. OpenBazaar connects buyers and sellers directly and employs smart contracts, all to reduce the purchase cost and improve the security of transactions. All in all, blockchains are a very promising branch of IT development. Not only would they help you build a secure, trustworthy and transparent system, but they are also constantly evolving, meaning that it is quite possible that some day they’d have new features, which are even better adapted to your personal needs. Take whatever IT product you have in mind, be it a website or a mobile application, blockchains would be a wonderful addition to anything you want to do. The versatility of blockchains and the inherent security they provide make them an invaluable addition to any company that’s looking for an impenetrable way to store or share their data.
Now you know that blockchains are not just about the bitcoin, this technology has a wide variety of uses across several fields of business. If you’re interested in applying blockchain in your business, please feel free to contact us and get answers to all of the relevant questions.