What is Blockchain technology?
Blockchain explained: A guide to one of the modern world’s greatest innovations
Blockchain! What comes into your mind when you hear this word? Bitcoin, Crypto-currencies etc. Indeed there has been a lot of interest in this subject from many people interested in technology and development.
An article by Michael Kern provides some background information of this technology, in this article he explains how exactly the technology came about, how does it work, and what industries is it reshaping? Below we attempt to summarize this article.
What is blockchain technology and where did it come from?
In answering this question, Michael posit that the story of blockchain and Bitcoin are one and the same. A group of individuals called cypherpunks, predicted that the current centralized system for dealing with private information would lead to an internet that was unprotected putting at risks individual data.
Cypherpunks foresaw a risk where this situation would expose this data to malicious and undesirable use by individuals, corporations and/or governments.
The cypherpunks did not believe the banking system provided the necessary protection against the concerns they raised. They also had misgivings on a centralized data storage by banks and saw risks in a central entity managing, processing and safeguarding all the data they stored.
It is from this collective concern (of cypherpunks) that Satoshi Nakamoto was born and was responsible for the original bitcoin whitepaper: Bitcoin: A Peer-to-Peer Electronic Cash System. In this paper they outlines a plan for a brand new digital currency built on a digital distributed ledger which they called blockchain.
In essence the blockchain was built on three core technologies:-
- Peer-to-peer networks, and
- A software protocol
Michael states that, “Blockchains are created as a chronological order of transactions, cryptographically secured from one block to the next, and distributed amongst nodes through a process called mining. This process is responsible for maintaining the blockchain, processing transactions, and discovering new blocks”
Types of blockchains and their use
Since the Nakamato’s first blockchain, there have arisen many different types of blockchains which operate in different ways. However the article groups these into 2 major camps – public blockchains and private or federated blockchains.
Some common examples are (i) Bitcoin launched in 2008 as the first block chain. (ii) Ethereum was created in 2013 by Vitalik Buterin.
Blockchains are used in a wide range of industries, especially in finance, retail and pharmaceutical industry. Slowly blockchain is being used in humanitarian efforts.
The challenges and the future of blockchains
Blockchain technology uses a lot of electricity, and as more and more industries flock to the tech, its carbon footprint will only grow. Additionally there has been issues with regulatory framework in some countries as the calls for accountability increase in the financial services.
As the growth of internet increases, improved abilities to create and upload content online and new services such as online banking, web streaming – data and privacy concerns increase. The balance between online data based business, need for trust and transparency and the re-decentralization of the internet transactions by blockchains premises a new future and perhaps more opportunities.
- This news piece is a contribution from Amity, and is based on an original news article published here.
- The views above do not do not necessarily represent FAO’s views, positions, strategies or opinions.