Blockchain in a nutshell
Throughout the past few years, Blockchain became a recurrent word in the vocabulary of anyone minimally into technology, independently of how familiarized one is with its technicalities. The concept behind Blockchain was outlined by Stuart Haber and Scott Stornetta as a research project back in 1991, almost three decades before it boomed through Bitcoin. The project’s initial idea was to create a system where document timestamps could not be tampered with, but its benefits proved to be much wider than first thought.
To understand how Blockchain works, imagine a chain where every link is printed with a unique identity number. In Blockchain, instead of links, the chain comprises of blocks of data strung to each other linearly. When a new block is created and filled with data, it is given a randomly generated 32-bit number called a nonce, which generates another 256-bit number called hash, wedded to the first. These two numbers are the identity of that block and are tied to the data stored in it in such a way that it is impossible to change the data without changing the numbers and vice-versa. When this block is added to the very end of the string of blocks, it receives a third identity number: the hash of the block it was just attached to. Every new block added to that chain will receive its unique nonce and hash and carry the hash of the block it was just linked to. With that, changing the information contained in a block already put in place is virtually impossible, given that it would require an almost endless string of other blocks to be changed as well.
Unlike databases, which most of the time store data in tables that can be changed by anyone who has access to it, Blockchain allows users to add information to it but not to remove it. In other words, the string of blocks will always get longer, and all the information added so far will be easily trackable. Also, data in Blockchain is kept by every user in a network of peer-to-peer computers spread around the world that constantly and automatically cross-check every information added to assure no block is altered. With that, Blockchain proved not only a safer way to store data but also very efficient in terms of information trackability.
Given how popular Blockchain has become after Bitcoin’s boom last decade, such technology also started to be used for many other applications. In fact, Research and Markets pointed out that the Blockchain market size reached USD 4.9 billion in 2021 and should grow to USD 67.4 billion by 2026, equivalent to a compound annual growth rate of 68.4%.
Why is Blockchain important?
In essence, technology is all about storage, exchange, and usage of information, and the way it happens has a considerable impact on what can be achieved. Not long ago, floppy disks were still a reality, and transferring significant amounts of information from one computer to the other without any physical component was almost unthinkable. And while more recently we would have to spend several minutes (to say the least) downloading a video to watch it in low resolution, 4k streaming is already part of our lives.
The impact of how information is stored, transferred, and used is also present in more tangible applications. Without quickly and properly organizing information, machine learning, for example, would be totally useless, making it impossible for autonomous vehicles (among many other simpler things) to exist. Also, we would be living years behind modern machine automation, and devices such as drones, sophisticated satellites, or even smartphones would probably not be part of our lives.
In this context, Blockchain opens an enormous scope of opportunities for us due to how disruptively it stores data. Among the several benefits it generates, IBM highlights five of them:
1: Enhanced security
The information in Blockchain is encrypted end-to-end and once added to the chain cannot be altered. Also, data is stored in a network of computers and not in a single server.
2: Greater transparency
Transactions in Blockchain are recorded in multiple locations. Permissioned members can see any information in the string, which are time- and date-stamped.
3: Instant traceability
Data added to the Blockchain are traceable from the moment they are strung, which has applications for a range of use-cases, from logistics operations to financial transactions.
4: Increased efficiency and speed
Paper-heavy processes are totally streamlined with Blockchain, so clearing and settlement are also much faster, given there’s no need for reconciliation.
Smart contracts can be created, and once certain conditions are met, the next step in a process is automatically triggered.
We have just started using Blockchain in use cases other than the one it was first widely used for (the exchange of Bitcoins). Yet, the number of possibilities it has already opened to us is a clear proof of the potential that it has to revolutionize technology. Many organizations have already started using Blockchain for applications that would hardly be created otherwise, such as:
Nebula Genomics: Its DNA sequencing decodes 100% of an individual’s DNA. The information gathered are anonymous and kept private through a Blockchain-based encryption.
State of Delaware: Uses Blockchain to ar-chive documents and safely secure private records. It will begin implementing smart contracts between go-vernment and corpo-rations.
Civic: Uses Blockchain to give individuals insights into who has their information. Through smart contracts, users decide who can share their personal informa-tion and how much.
Candy: Allows fans and collec-tors to interact with sports, art, music, and cultural icons through licensed digital collec-tibles, opening doors to an NFT marketplace.
HYPR: Uses Blockchain to protect IoT devices from cyberattacks with decentralized creden-tial solutions that take passwords off a cen-tralized server.
Spotify: Acquired Mediachain Labs (a Blockchain startup) to develop solutions to better connect artists and licensing agreements with the tracks on its service.
DHL: Uses Blockchain to keep a ledger of shipments and main-tain the integrity of transactions.
Circle: Uses Blockchain for transactions of crypto-currency and exchan-ges between friends.
BurstIQ: Its Blockchain con-tracts help patients and doctors securely transfer sensitive me-dical information.
What may it be used for in the future?
Even though we have just started using Blockchain more frequently, the sky is the limit when it comes to how different industries can use it for their benefit. CB Insights enumerates a long list of segments that may adopt Blockchain in the near future. The list includes:
Using Blockchain for banking has already become a trend, and organizations such as JP Morgan, Goldman Sachs, and Citigroup are experimenting with it. Blockchain can be used in banking for adding accuracy, speed, and automation to transfers, payments, and other types of transactions.
Automakers could use Blockchain to properly track auto parts, eliminate the counterfeit ones and reduce the incidence of recalls. Also, automakers can keep track of every single car they produced, tracing maintenance history and registration for each vehicle.
By using Blockchain to help cities understand how their residents use public transportation, transportation systems may adapt better to their usage and become more efficient.
Genomics researchers depend on massive centralized repositories to store data. A single point of failure may drastically jeopardize their work, and Blockchain comes as the perfect solution for such an issue.
Blockchain has the potential to reduce or eliminate resellers in the energy industry, decentralizing access to energy contracts. Also, it may help consumers track whether the energy comes from clean sources.
Blockchain could be used for ensuring construction materials are of the appropriate quality and sourced from the right suppliers, as well as managing smart contracts with stakeholders to simplify and automate payments associated to the construction milestones.
In addition to being used to improve capabilities in segments that already exist, Blockchain has also opened doors to possibilities never thought of before that would not emerge without Blockchain’s structure, such as the DAOs (Decentralized Autonomous Organizations). DAOs have a pre-programmed set of rules, operate autonomously, and are guided by participants who democratically use tokens to vote on everything that must be decided for the organization.
All in all, Blockchain is still in its early years, but we already have clear signs that it will grow at such a fast pace that, sooner or later, it should become the new standard for structuring data. Nowadays, who doesn’t turn up the nose at those old-fashioned floppy disks? Shortly, when most of the data becomes structured in the Blockchain, we may do the same when remembering how we currently store our information.