What is Blockchain Technology? How will this technology change our lives in the future?
What is Blockchain Technology? How will this technology change our lives in the future?
Experts describe it as “ the backbone of the digital economy,” and researchers believe that it may contribute to a major economic revolution, and may even change the global financial system forever. What is Blockchain Technology?
It is not entirely known who invented this technology, and perhaps they were a group of people, but what we do know is that an account called (Satoshi Nakamoto) is responsible for it, and he is the one who launched the first copy of Bitcoin in 2008, the first decentralized digital currency that is not under the control and supervision of governments.
Away from technical terms, we will give you a brief and simple overview of how this corrosive chain works, the areas that this technology may change forever, and its impact on our lives:
***** What is Blockchain?
Blockchain means “blockchain”, and it is a distributed database, regardless of the quality of that data (i.e. not limited to financial data only). This data is recorded in blocks or blocks.
The interesting thing is that these databases are decentralized, unlike traditional databases. That is, there is no single place to store them, and their monitoring is not supervised by a central administration. Rather, these multiple copies - and identical - exist in many computers connected on the network, and these computers are referred to as “nodes”. Any computer can become a node in the network after installing certain software.
****** OK, but how does blockchain work?
Suppose someone wanted to make a financial transaction, i.e. a money transfer. The person enters the financial transaction via blockchain technology, through the peer-to-peer system, and a block is created containing all the data related to that transaction, then the blocks are sent to the nodes or computers connected to the network.
A string can be thought of as a distributed ledger, similar to a merchant's ledger, containing a set of data, the blocks. So when new data is added to the network, a new 'block' is added to the 'chain', and those transactions or data are validated by thousands of computers located in different parts of the world.
These transactions are secured by encryption, and here comes the role of the computer's “contracts” in securing these transactions, as computers work on solving very complex mathematical equations to conduct and complete transactions, and ensuring their validity and reliability, and this is what is known as mining.
In return for the effort that computers make to verify the validity of the encrypted data and the changes that occur to the data, the computers are rewarded with a certain amount of encrypted currencies, such as Bitcoin, for example, and thus the coins are mined.
For this reason, the blockchain is highly secure: thousands of decentralized computer “nodes” check the legitimacy of new data and validate it before it is added to the chain. Thus, all blocks connected are secure, and all transactions are encrypted, which contributes to the formation of a secure digital chain containing an enormous number of data, linked together through highly secure encryption algorithms.
The transactions are indeed encrypted, but they are completely transparent on the network, and they are verified using computers as we explained earlier, so anyone can view them, but he will not be able to modify or change them, given that those nodes are not subject to central authority or supervision.
There is a type of blockchain, the private type, that is controlled by a company, group, or organization. Thus, that organization decides who has access to the system and has the authority to modify the blockchain.
**** So, we can say that the advantages of the Blockchain are:
** Decentralization: there is no single authority that supervises and monitors these data and transactions
** Transparency: Anyone on the network can see and track the data
** Unmodifiable: No one can modify, alter or tamper with the data
Let's say you want to transfer money to someone else who lives in a foreign country. You will then go to the bank to transfer the money or use other agencies or intermediaries, such as PayPal, Western Union, or any other money transfer company. Through this traditional method, which has been followed by humans for more than a century, banks or transfer companies and brokers will take a commission for transferring money globally, and then deduct a certain amount from the amount you want to transfer.
Here comes the role of the blockchain, or one of its roles, to be frank: it allows you to transfer that money to the other person in a secure way, there is no third party (money transfer companies) that may see the personal information of both parties, and there is no need to pay a commission to the third party for their transfer money.
**** What are the uses of blockchain? How will you change our lives?
Blockchain technology may contribute to getting rid of centralization and bureaucracy in some aspects of life, and many experts expect that technology will contribute to the performance of the role of governments.
On April 20, 2021, the United Arab Emirates adopted blockchain technology in the service of attestations issued by the Ministry of Justice, such as documenting contracts and assets, which means providing its services faster and easier, in addition to maintaining the confidentiality and privacy of data.
Blockchain technology is currently used in many areas, and it is expected that in the future it will include other areas:
Cryptocurrencies, such as Bitcoin, are perhaps the most popular area in which blockchain technology is used. Bitcoin is a digital and financial revolution created by (Satoshi Nakamoto), and it is more like an open-source crypto payment network.
When people exchange cryptocurrencies, for example through purchases, those transactions are recorded in the blockchain. In conjunction with the growth of cryptocurrencies and the possibility of their use in various fields, and the possibility of payment through them as well, blockchain technology has become an indispensable necessity.
**** Make financial transactions without the need for banks:
By creating an electronic wallet, people can transfer money after knowing the other person's wallet address. With this easy and secure method, the transaction is recorded in the blockchain after it is documented via computer calculations.
The interesting thing is that this transaction is saved on the network, and you can enter the transaction number and know all the details related to it, and this is what gives the blockchain the advantage of complete transparency. Add to that eliminating the need for a broker, thus avoiding paying an extra commission.
**** Irreplaceable tokens and intellectual property protection:
Irreplaceable tokens are works of art or music that can be encrypted and linked to a unique number via blockchain technology. This method preserves the creator's intellectual property, even after the artwork has been purchased, as those tokens are considered non-transferable assets or collectibles.
Technology also preserves the originality and individuality of the work, as it cannot be counterfeited or copied. The field appears to be in vogue today, as the number of buyers of digital businesses based on non-fungible tokens increased by 66% in 2020 alone.
**** Smart Contracts:
Suppose you are doing a business that requires its registration through a legal contract, you will have to visit a lot of agencies and get a lot of documents and papers, not to mention the money you will pay in the form of commission to brokers or brokers.
Smart contracts are computer protocol or software coding that simplifies and maintains contract-making mechanisms on the blockchain. Smart contracts are not limited to large commercial transactions but can be applied to the simplest types of transactions: automatically paying the postman's fare, or buying a house, for example.
These contracts are based on a set of codes, and of course, the contracts are transparent and secure, and they also solve the problem of trust by ensuring that the transaction runs without errors or scams. The Ethereum platform is the most popular platform for smart contracts, and it is also based on blockchain technology.
**** vote in elections:
History is full of elections that were rigged, and despite the advances in technology, the integrity of some of them remains, and the recent US presidential election is the biggest proof of that.
This is where the blockchain comes in: voter information and votes cast via a mobile phone or other means can be safely and transparently recorded, also helping to avoid missed or missed votes, and we may not even need to manually recount votes as long as computers do this.
Since the technology eliminates the possibility of information being tampered with or modified, it can therefore be considered a reliable and transparent record. The World Food Program experimented with Pakistan delivering cash directly to beneficiaries, ie without the intervention of local banks, and this also worked in refugee camps in Jordan.
In countries with high levels of corruption, blockchain may be the answer. In economically struggling countries within Latin America, the popularity of virtual currencies has skyrocketed as a result of hyperinflation or government oversight.
***** What are the disadvantages of blockchain technology:
Blockchain technology is not without some disadvantages, although some of those disadvantages are relative:
**** Legal Problems
We cannot admire this technology without asking ourselves what will happen to the central institutions in the countries, such as banks, governments, and other parties responsible for concluding and documenting contracts?
Another thing that is both an advantage and a disadvantage is the complete confidentiality of people. Thus, it is theoretically possible for criminals to conduct illegal business transactions without being prosecuted, using browsers that prevent user tracking such as Tor Browser.
**** Excessive energy consumption:
You may have heard of this problem, where miners and mining farms consume unreasonable amounts of electrical energy, which computers require to solve these very complex mathematical equations to create a new mass.
According to a report by Ars Technica, the energy used by millions of computers to mine Bitcoin equals the annual energy consumption of the whole of Denmark.
The problem is not with Bitcoin mining itself, but with the huge number of computers, or people, for example, that are doing this mining.
And if we consider that millions of computers, or nodes, on the network check the same contracts and transactions, in the same way, that is, they do the same work that can be done by a much smaller number of computers. Therefore, these computers do not work in an integrated manner, and the efficiency of work is almost non-existent.
**** Too much storage space:
Storage space can exceed 100 GB, and 100 GB is a bit big, but imagine that certain 100 GB of information is stored on a huge number of computers, isn't that a huge waste?
On the other hand, this method is indispensable, otherwise, the blockchain becomes the enemy itself: it is not possible to allocate certain computers to store certain data. Anyway, many experts claim that blockchain is evolving with time, and we may find a solution to this problem with time.
This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.
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