What is Blockchain and How Does It Work?
Blockchain is a technology that was first pioneered by the creator of Bitcoin, who used it as part of the core framework that enables Bitcoin to be a decentralized, peer-to-peer digital currency that did not need a bank or any other centralized entity to work. The creator of Bitcoin, and therefore blockchain is a mysterious character who goes by the name Satoshi Nakamoto, whose real identity has yet to be verified. Some even speculate that Satoshi Nakamoto is not just one person, but a group of developers who all operated under his name.
Exactly how blockchain works is very technical, and it’s not a necessity that one fully understands it to be able to use it or see the benefits of it. However, the basics are that it allows digital information to distributed but never copied. Transactions are processed and verified by a network of ‘nodes’ (computers connected to the blockchain network) with the information stored in identical immutable ‘blocks.’ Therefore, blockchain cannot be controlled by a centralized entity or have a single point of failure. Blockchain systems can also provide privacy and freedom from censorship. For the full technical details on how blockchain works, it would be recommended to read the original Bitcoin Whitepaper.
The Evolution of Blockchain and Its Use Cases
Since the launch of Bitcoin, blockchain technology has been taken and applied to create various other cryptocurrencies and applications.
Many of these ‘other’ applications remain unknown to most people, with their only known use case for blockchain being Bitcoin. Let’s take a look at some of the other use cases for this technology that is taking off in a big way behind the scenes:
Blockchain Gaming – The gaming industry is thriving, and it is always very quick to adopt new innovative technologies. Some examples over the last decade would include VR (Virtual Reality) headsets, online gaming, and mobile gaming. Now it looks like the industry is embracing blockchain tech as it has the potential to allow gamers to own and trade their virtual in-game assets. Mythical Games, founded by former Activision Blizzard staff who have experience working on games like World of Warcraft and Call of Duty, just raised significant money to develop blockchain applications for games.
Securing Business Networks – These days large businesses and enterprises rely on a global network of partners to be successful. However, when working together, they must exchange valuable data and sensitive information which comes with inherent risks. Typically, this information would be sent via outdated systems like email and SCM (Supply Chain Management). Blockchain can revolutionize these relationships by adding increased security and trust in their interactions. Loyakk has created a blockchain platform that enables secure interactions between partners and already has some ‘blue chip’ enterprise clients, including SAP, Abbot, and Infosys.
Transforming Supply Chains – Proving the lifecycle of a product and it authenticity has been a struggle in supply chains. Counterfeit products form a huge black market leading to loss of profits and lack of trust from consumers who do not always know if what they purchase is real. Blockchain has the potential to transform supply chains by providing more transparency, end-to-end traceability, and quality assurances throughout the process. Analysis by Deloitte states that blockchain could transform the supply chain of the beef industry and other farm products.
Decentralizing the Internet – The internet in many ways is decentralized already with information flowing in multiple directions across the world. However, many centralized organizations still control large portions of the internet and are dictating what you can and cannot do, as well as threatening your right to privacy. In many countries, nation-states set up firewalls and block certain types of content that does not suit their agenda. In China, popular websites like Facebook and Instagram are banned. Blockchain has the potential to disrupt this and various projects have already gone about doing this. TRON, a popular crypto project has the slogan ‘Decentralize the Web’ and are facilitating decentralized applications (dApps) and transactions online.
Protecting anonymity – If you’ve used Bitcoin before, you know that accounts can be easily registered under a pseudonym, unlike a bank account where personal information is necessary. This works great to protect users’ anonymity as the account and its transactions are effectively dissociated from their identity. Blockchain-enabled technologies are usually used together with Tor (the Tor Browser), which is also a distributed network like the basis of Blockchain. But the Tor browser is not without weaknesses when it comes to keeping you anonymous, since the entry and exit nodes has information about your real IP address. To add an extra layer of security and privacy, many also use a VPN before opening the browser to shield their IP from the Tor network. If you are using Blockchain innovations for the sake of anonymity, a VPN would come in handy. Good VPNs don’t come cheap but do look out for VPN deals online, you might get lucky.
Final Thoughts on Blockchain
Above are just a few examples of industries and applications where the use of blockchain is being explored. There are countless other examples, and while the industry is still in its nascent stage, it is developing very rapidly, and it shouldn’t be a surprise if you find yourself a beneficiary of blockchain-based products and services in the coming years.