Blockchain Technologies

What is Blockchain Technology?

You may have heard that blockchain technology has the ability to revolutionize the way be bank, track assets, verify ownership, transact business in the absence of absolute and/or reliable information on our counter-party/trading partner. What you will notice is that all of these things boil down to this: Trust. Blockchain is the digital manifestation of trust of the digital economy. This trust is built on the basis that blockchain technologies are immutable cryptographic ledgers which will record a vast array of information for the benefit of everyone.

So how does blockchain technology accomplish this? It comes down to a few simple things that I will go over here and then give you some real world examples of how blockchain technology works other than Bitcoin and other crypto currencies.

First, let's address Bitcoin. 

  1. Bitcoin is a crypto currency 
  2. All crypto currencies are blockchains 
  3. All blockchains are not crypto currencies 

This is an important concept to understand when learning about blockchain and what it can be. Often times people become fixated on thinking about blackchain as purely a crypto currency or Bitcoin which it isn't. Blockchains were first invented to operate the Bitcoin currency but the applications of blockchains are much broader than just digital money such as:

Additional Applications of Blockchain Technology Outside Crypto Currencies

  • Asset Tracking 
  • Ownership Verification 
  • Property Rights 
  • Transaction Streamlining 
  • Peer-to-Peer  Transactions, Lending, Agreements etc. 
  • Smart Contracts
  • Limit Counterfeit Goods
  • Digital Personal Identification (Global or National ID Systems) 
  • Music Copyrights

What are the Key Characteristics of Blackchain Technology:

  • Distributed Systems with information stored on thousands if not millions of computers. This makes hacking or corrupting the information exceptionally difficult as every system storing the information would need to be attacked and altered simultaneously to have a chance of being successful.
  • Operates as a ledger system recording information in an immutable way
  • Very secure and difficult to hack, corrupt or otherwise take advantage of the system
  • Automated. They blockchain technology automatically updates and secures itself without the need for a middle man, supervisor or other individual to assist in the process.
  • Instant Validation of transactions, assets, etc.
  • One Copy/Single Piece of Data. I'm going to use a simple photo example here to explain how we do something today and how it would be different if it were to be done with blockchain technology.
    • Current System of Sharing/Transferring Data: If take a photo and want to share it someone you will do the following:
      • Take a photo and save it to your phone storage.
        • If you have a iCloud, Dropbox, Google Photo or any other backup service there will also be another copy of the same photo stored on your backup service.
      • Send photo to your desired recipient. This results in the following:
        • Copy of the photo is made on your end in your messaging application or email service.
        • Recipient Receives a copy of the same photo and if they save the photo will have another copy of the same photo on their phones storage.
      • Recipient receives their copy of the photo and can now store it on their phone, hard drive and backup service in the same way as you do.
      • Numerous copies are made in the process. What you will notice though this description is that every photo (or piece of data) is sent via a copy and duplicated with every system it interacts with. In some cases you might not care if there are multiple copies of a photo or data but there are times where you want to ensure that you indeed have the only copy of a photo. For example in the example we just had there were 6 copies made of the photo made when a photo was sent from one person to another. All you need to do is to replicate the math for every time a photo is shared and you can see how quickly you can lose control over the data.
      • Limited Control of Data. You will also notice the severe limits you have when sending/transferring/controlling the use and distribution of your data. You are generating copies every time you send someone something electronically. Each copy has no limits on the number of times it can be copied and more importantly if the information is sensitive/valuable you have no control over the original or the future copies.
    • Blockchain System of Sharing/Transferring Data: If you send a photo using a blockchain the photo (or any data) is transferred not copied. The numerous copies that were created in the last example using the traditional model are non-existent as only one copy exists of the photo (or piece of data.) This also provides greater control over the data you send as only copies you create can be transferred and there will be a record of where the it ended up.

How Blockchain Ledgers Work

For any blockchain system to be developed for any asset the system needs to be able to:

  • Collect all relevant data
  • Place the data into blocks
  • Connect, sequence and encrypt the blocks

This basic process is the underlying system that is needed to deploy a blockchain. Blockchains systems can be deployed to govern physical assets by digitizing property or other ownership records.

Is Blockchain Technology Impossible to Corrupt, Hack or Alter

The main selling point surrounding blockchain technology is it's un-hackable, un-corruptable, and immutable method of storing sensitive information. I do believe blockchain is very secure and likely one of the most secure methods of storing and verifying information, however, I do not believe that it will remain unhackable in the future.

Blockchain technologies are so new to the market I think it would be wise to wait before any company (or individual) should consider transferring core data, functions or other uses until criminals, hacktivists and other less than trust worthy segments have had their shot at it. Yes, I've heard that hackers around the world say blockchain is impossible to hack given it's distributed nature and cryptography, however, I'm not even remotely convinced. The ones who lack the skill will of course say that it's impossible while the ones who can would be very unlikely to give an interview and/or admit to being able to crack the technology.

I'm not saying I don't believe blockchain technology or that is shouldn't be used. I'm simply saying that people should not fall prey to the clever marketing they read online about a technology that really hasn't been put through the paces in terms of reliability and security long term. Considering the significant and important uses individuals, companies and governments are planning I think it's critical to know more before we all agree to become the guinea pigs of the blockchain experiment.