Is Blockchain Technology Revolutionary?
You may have heard about blockchain technology in the context of cryptocurrencies like BitCoin or data encryption. We hear all the time that this is a new and revolutionary technology that is going to break limits and make certain people very rich. Is it true, though?
What Is a Blockchain?
Before we begin analyzing whether this is a new idea that could lead you to your first million, let’s see what blockchain technology really is. Despite it being mentioned together with some things, blockchain is neither a cryptocurrency, a programming language, a programming library, nor technology behind AI.
Blockchain is a sequence of blocks of data or transactions that are linked together and don’t require external validation. The reason it is getting so much attention is the fact that it is a nearly incorruptible ledger of transactions, which means that it can be used to keep a record of financial transactions and statements, but also many other things and there isn’t going to be any tampering with the data. There are 5 basic ideas that need to be implemented for something to be considered blockchain tech.
A cryptographic hash function, or CHF, is a function that transforms any data you put in into a bit string, often referred to as hash value. It’s frequently used in cryptography, which is why it’s a great tool for secure communication and data transfer. Now, remember how we’ve said that blockchain is a sequence of blocks of data? Well, each block contains the hash value of the previous one. Furthermore, you cannot use the hash value to reverse engineer the original input.
Here’s the thing – each block has the hash value of the previous one and directly affects the production and hash value of the next one. That’s why it is impossible to tamper with the data. If you change a block, any block, the whole chain changes, thereby making the transaction and the entire chain after the offending block invalid.
If you’ve used torrents to download files, you are already familiar with the concept of a peer-to-peer network. Unlike bank statements, credit card information, or other forms of data, the information stored inside the blockchain is not contained in any one place. It is public and any new transaction is displayed to the entire network. Imagine being unable to tamper with data because everyone can read it. It is decentralized, which means it cannot be abused or held hostage by a person or organization.
Whenever any new block of data is created, its information needs to be validated by all users. The nodes check whether the new transaction is valid by checking all the previous transactions. Essentially, these nodes are there to make sure the next link in the chain is valid.
Currently, mining is used with cryptocurrencies like BitCoin. Mining is the action of verifying the previous blocks in the blockchain. If done properly and with a little bit of luck, the user is rewarded with some of the cryptocurrency in question. There is no guarantee, however, which is why it is called mining. You need to be correct and you need to be the first to present your Proof of Work. Mining serves as motivation to keep the system in check.
Is It Revolutionary?
In a way, yes. In theory, it can be used in voting systems, financial transactions, supply chain management, and many other things without the abuse of power of the privileged few. That means that a corrupt politician or an unscrupulous businessperson cannot deny the validity of transactions or fabricate their own reports. However, as far as implementation is concerned, blockchain tech is still in its infancy for the most part.