Blockchain: The Futuristic Digital Trust Network

The buzz words of this decade “blockchain” & “cryptocurrency” are often used interchangeably. Both of these words are misused & often confusing as they are poorly explained elsewhere. Therefore, the scope of this article is to understand the difference between them and discuss future possibilities for Blockchain.

So, What is Blockchain?

It all started in 1982, when a Cryptographer named David Chaum proposed a blockchain-like protocol in his dissertation but it only gained traction in 2008, when a single/group of Developer(s) under the pseudonym Satoshi Nakamoto released a white paper and thus established the blockchain.

The simplest dictionary definition we can say is “A blockchain is a digital ledger of transactions that’s duplicated and distributed across the entire network of computer systems on the blockchain. Each block within the chain contains a cryptographic hash (Hashing is method to map arbitrary data into a bit array of fixed size) of previous block (to form a chain. With this, you can trace back it back to the very first block, which is also often referred as genesis block), a trusted timestamp & batch of verified transaction which are hashed & encoded into a Hash/Merkle tree. Each time a brand-new transaction occurs on the blockchain, a record of that transaction is added to each participant’s ledger. This enables the Blockchain Technology to be used for fund transfers, settling trades, voting & many other”

An Example of Blocks in Blockchain. Credits: Blockchain Technology in Healthcare: A Systematic Review by Cornelius C. Agbo, Qusay H. Mahmoud & J. Mikael Eklund

In simpler words, think Blockchain as a register where you note down transactions but with permanent ink. The new transactions are recorded immediately and they cannot be changed. This register is accessible to all. People can also register themselves as Accountants (think Miners) who can verify the transactions added on the register(mining). This technology is termed as Blockchain.

This blockchain network is decentralized, such that, all those who want to use blockchain network run it instead of some central entity. This doesn’t allow any misuse & nobody can change value in the register to give themselves a X amount, increasing overall trust in the network.

An Example of Merkle tree. Credits: MOF-BC: A Memory Optimized and Flexible BlockChain for Large Scale Networks by Ali Dorri, Raja Jurdak & Salil S. Kanhere

The Proof War: Proof Of Work VS Proof Of Stake

How do we verify the transactions without any third party? Meaning, we can be 100% sure that no one is double spending or doing some mischievous work. Well, Proof of Work (PoW) & Proof of Stake (PoS) are the answer. PoS is older than PoW and works on basis of Advanced Mathematics called “cryptography”. Cryptography refers use of very difficult mathematical equations that only powerful computers can solve them. Drawbacks of PoW are that it requires significant amount of electricity & it can only process a limited set of transactions in a limited time given the complexity to solve the problem. Example: In Bitcoin, every 10 Minutes a new block(think a page in register) is created & as we learned that each block contains multiple transaction, therefore each block that is created comes with its own set of unique transaction which are to then be independently verified. To tackle these issues, PoS was created in 2012 by Scott Nadal and Sunny King. In PoS, participants will stake their own assets and may get selected randomly or by using predefined algorithm. The system purely works on economic incentives & punish the participants who try to add false transaction by taking away their part/full of their stake & rewarding them with transaction fees.

Ok, I somewhat understand Blockchain, then What is Cryptocurrency?

Simply stating, Cryptocurrency is a use case of Blockchain Technology. It refers to digital currency which uses strong cryptography to make it almost impossible to counterfeit & double spend. Most Widely used Cryptocurrencies are Bitcoin, Ethereum, Litecoin and many more. Each of these currency employs their own version of Proof Of Work (PoW) or Proof Of Stake (PoS) system to verify the validity of blocks/transaction thus in the end giving some value to miners/stakers. The value of these currency depends on Supply/Demand as each currency is limited in the amount at the time of creation. The post-pandemic has definitely given cryptocurrency a huge surge causing the current market cap for crypto (As of April, 2021) to be whopping $2+ Trillion. To give some perspective, India’s stock market is $2.7 Trillion.

The Future Of Blockchain:

I always like to think that the past decade was only the testing ground for this game changing tech. The most successful use was obviously in CryptoCurrency, where “Bitcoin” its oldest Player was in headlines at various points throughout the decade. At the start of the decade, Bitcoin had just reached parity with Dollar and by the end of that decade it was more than $30,000, it all-time high throughout that decade. In this Year (2021) alone it reached it’s all-time High Value in Mid May 2021 at $61,000+ & is currently (As of April 10, 2021) sitting at the price of ~$60,000 and have the market cap of $1.1+ Trillion.

Some of the Emerging use of Blockchain Technology:

Now, that we understood about fundamental of Blockchain, let’s take a look at what the future may hold for Blockchain as Technology. Below listed are some of the best use cases that we should definitely keep an eye on.

1. Smart Contracts: It is probably one the most promising use case outside cryptocurrency. A Smart Contract is program that automatically enforces a contract once a predetermined condition is met & verified. The program is stored on blockchain & works on conditional statements that are written in the code. Therefore, it cannot be changed once deployed. Let’s take an automobile as an example. So we start by defining a smart contract for every automobile, and then we record every transaction (sale, service, etc.) on the blockchain. This gives buyers/sellers the ability to easily inspect and trust the history of every car before someone buys.
2. Financial Services: A research by reason revealed that many Banks in the US has shown interest in moving away from their existing systems to create private blockchain and implementing distributed ledgers for use in banking
3. Supply Chain: Walmart is already using Blockchain in their Supply chain monitoring system in partnership with IBM & other players. It will allow for tracing of the products very easily & will be very helpful in finding out problematic suppliers or finding the source of contamination in a product. More companies are expected to introduce similar system in their supply chains as fear of COVID-19 like Virus will persist throughout the decade. This will be key technology to keep track of any contamination thus avoiding risk of shutdown for those corporations.
4. Domain Name: With Blockchain-based domain names, the domain names would be entirely be the assets of the owner of the domain and can only be controlled by his private key. This will allow more freedom & resist censorship as no third party could hijack the domain and take it under their control. This is also a very emerging use case which can cause rippling effects throughout the web.
5. Identity Management: Personal ID has always been targeted by malicious people to gain access either to your bank accounts or profit from your data. With the help of blockchain, storing digital information will be a lot easier & safer and importantly unalterable. They will use Public & private Keys to verify ownerships & gain trust. The Identity is to be self-sovereign, meaning the Owner could update their data (verification by third party in case required), Hide particular information & etc. A more standardized ID could be could be made that can be accepted globally & be trusted could arrive in this decade.
6. Data Storage: One potential use is decentralizing cloud data storage. This will improve reliance & will allow the data to be accessible in case one node is disturbed. Further trusted timestamp will allow people to know who changed the data & when.

All Big & Small Enterprise have also started developing & testing products based around blockchain technology. We should expect a lot more real world use case Blockchain based Technology in this coming decade as more people fiddle around the tech & build more reliable & successful product. The coming decade is full of promise considering the wide commercial success it had in the previous one.

Disclaimer: At the time of Writing, I own various cryptocurrencies including Bitcoin.

(This was an article I have written for college magazine. You can check out other articles here: https://www.tcetmumbai.in/COMP/E-magazine/NIMBUS%202021.pdf)