Hello All,
It's been a while, today I will give an introduction to Blockchain, what it is, what it can do and it's components.
It’s not always clear to everyone what blockchain is and why does it have the potential to disrupt as many markets as blockchain enthusiast claim it will. To get a clearer picture for those unfamiliar, I’ll proceed to briefly introduce blockchain, smart contract, cryptocurrencies and simple usage of the technology.
The distributed ledger technology, blockchain, has the potential of eliminating a huge amount of record-keeping, save money by eliminating intermediary third parties, and disrupt Information Technology as we know it today. Blockchain first emerged in 2008 when Satoshi Nakamoto presented Bitcoin to the world, an encrypted currency meant to serve as a peer-to-peer version of electronic cash that allows payments to be sent from one party to another without going through a financial institution. Today, blockchain technology is being used as more than just a payment gateway.
A blockchain is like a database that can be openly shared amongst users and creates an unchangeable, time-stamped and linked record of their transactions. Every transaction is called a block and each block is linked to a specific person, every time a block is completed it creates a unique secure code which ties it to the next block, creating a chain of blocks. When data enters the blockchain, it can never be erased. Every time a transaction is generated, the network must agree that the transaction is valid, once it has been validated and the sources approved, it is impossible to modify. Blockchain technology is used to securely exchange information autonomously between users without an administrator or third party.
There are many companies and organizations utilizing blockchain technology, for example, Maersk recently announced it will manage and track the paper trail of all their shipping containers by implementing blockchain in the supply chain. In this case, all the participants in the shipping supply chain can monitor the progress of goods through the blockchain ledger, they can see the status of customs documents or view bills of landing in real time and since no one party can modify or delete any of these records, they can be trusted.
Smart Contracts
Blockchain technology brought along the real use of smart contracts, otherwise known as self-executing contracts or digital contracts. Same as a traditional contract, a smart contract defines the rules and penalties around an agreement, however, unlike traditional contracts, it automatically enforces said obligations, not relying on a third party. Two parties enter into an agreement, which they plaster in a smart contract as code written into the blockchain. During this process, the individual can choose to remain anonymous. However, the contract is in the public ledger (accessible only to the intended parties). Written into the contract is a triggering event, such as an expiration date or value being blocked in this contract, which executes the contract according to the pre-established terms. Smart contracts allow for Autonomy (parties do not rely on a broker or a lawyer), Trust (documents are encrypted, shared, stored and secured in a blockchain), Backup (documents are duplicated many times over), Safety (the documents are encrypted), Speed (automated range of tasks), Savings (no intermediary fee) and Accuracy (avoids any human errors).
An example of a smart contract can be the relationship between a landlord and a tenant. The landlord rents a specific location to a tenant who in exchange pays an agreed fee. For the smart contract to be effective, everything in the transaction must be digitalized, in this case, access to the property is digital and payment is digital. Once both landlord and tenant agree to each other’s conditions and enter them in a smart contract, it is then put in the blockchain, meaning this agreement cannot be altered. When the tenant pays the rent, the smart contract releases a digital code for them to access the property. If the code is incorrect or does not arrive in a timely matter, the funds are then re-funded to the tenant. Likewise, if the tenant is late on their payment, the contract will not release that month’s access code to the property.
Cryptocurrencies
A cryptocurrency, as the name suggests, is an encrypted currency. It is a currency, and, the same way any other currency we hold in our pockets, it represents something of value, a deed, that we exchange for goods and services. Cryptocurrencies are just a version of the above but updated to allow for the use of the internet. Cryptocurrencies are coded to represent something of value and vary from one blockchain to another. They are used to interact with the blockchain, every project uses cryptocurrencies in a different way, for example, bitcoin can be used to record a transaction, a payment, where as Ether, the cryptocurrency of the Ethereum network, can be used to activate a smart contract.
The use of Blockchain
Today, the main industries using blockchain technology are Fintech, Shipping, Big data, Healthcare and Energy. To utilize the technology, most companies base their projects on larger existing blockchains that offer development platforms for these companies to create their own applications. Companies or groups of people can also build a decentralized autonomous organization, a fully autonomous, decentralized organization without a single leader. These organizations are run by programmed codes and a collection of smart contracts, designed to replace the rules and structure of a traditional organization, eliminating the need for governance and control in a fully transparent network. A decentralized autonomous organization is owned by everyone who holds its tokens, giving them voting rights. These organizations will stay on the network as long as they cover their survival costs and are useful to its customers, i.e., they serve a purpose.
In this manner, the platforms that allow for applications and decentralized autonomous organizations to flourish are the pillars for a disruptive, new, smart economy.
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