The speed at which the technology is advancing is fearful. It’s been a mere 60 years since the birth of internet (only 30 years, if we consider the World Wide Web), 19 years since the advent of Google in our lives and 10 some years since the hype of Artificial Intelligence started surrounding us. The rate at which we, humans, are inventing and pushing our knowledge to the edge and redefining every prospect of how to choose to live our lives is truly and simply incredible.
Now, on 1 November 2008, a research paper was posted on the cryptography mailing list under the name of one Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System, whose identity still remains questioned. But his brainchild became a growing, but the world-famous phenomenon of cryptographic currency — Bitcoin. Bitcoin is a decentralized cryptographic currency focused on eliminating the middleman(commonly known as banks). It works on an underlying principle of a Blockchain.
Blockchain — a list of ever growing virtual records called blocks. Each block comprises of a time stamp referring to the time of the transaction, a hash of the previous block in the chain and the transaction data itself. A block is designed to be an immutable piece of evidence for a particular transaction between two or more concerned authorities (can be individuals, group of people, musicians, artists, or the banks themselves). In common terms, blockchain is often referred to as a cryptographic ledger. It is a distributed digital ledger, that cannot be modified without the alteration of all the subsequent blocks and hence the collusion of the network itself.
A blockchain database typically consists of two components — transactions and blocks. A block holds groups of valid transactions, along with a hash of the previous block and a valid timestamp registering the transaction. The iterative process of linking the blocks all the way back to the genesis block develops a valid blockchain.
A typical blockchain(main branch — black, forked branches — purple), mined from the genesis block(green).
The blockchains usually exist in either a permission or permissionless version, indicating the openness towards the access of the blockchain. In a permission version of a blockchain, the access is not available to every user but is controlled and monitored and at times restricted based on the parties involved in the transaction. While on the contrary, in a permissionless version, the entire ledger is available and open for new additions by any individual or parties involved in a transaction. Bitcoins and other cryptocurrencies at present adopt the permissionless version, but they do require a proof-of-work to classify a transaction as a valid one.
Blockchains, much like the Artificial Intelligence, remains a relatively new an unmined idea, but from what we know so far, it finds its applications in rectifying a bunch of society’s most fraudulent concepts.
First and foremost of them all, remittance. People more often than not find themselves at their wit’s end, when it comes to transferring money to their friends or family (usually when different currencies or exchange rates are involved). The hassle of walking down to one of the money exchanging companies, tackling the long list of terms and conditions, paying an extravagant amount of exchange rate, waiting in despair for the money to reach its desired destination (which usually takes at least 6–7 days). There happen to be at least 11 different companies trying to adapt the blockchain technology to tackle and disrupt the dominance of companies like the Western Union and MoneyGram. Link to another post with the list of the companies.
Blockchains also seems to be a useful resource setting up contracts between two parties. Blockchain-based contracts(smart contracts) are contracts that can be partially or fully enforced without human intervention. The smart contracts introduce the concepts of automated escrows. Since the transaction is carried out via cryptocurrency and time stamped, there happens to be no room for any refusal or illegitimacy of the contract in the future, saving the involved parties from getting ripped off or bullied. Musicians, songwriters, artists, farm owners, and many others can claim their rightful ownership by merely referring to the transaction. Ethereum, an open-source, public, distributed computing platform for smart contracts is one of the companies trying to explore the idea of blockchain based contracts.
The Big Four accounting firms are not far behind and are pushing forward, trying to adopt the blockchain technology. Ernst and Young installed Bitcoin ATM in their Switzerland office and accept payments made in bitcoins for all their consulting services. PWC, Deloitte, and KPMG, on the other hand, chose to pursue a different path and explore the field of private blockchains.
The world as we know is changing yet again, a new phenomenon is gaining speed and maybe it wouldn’t be long before our local grocery vendor will start accepting bitcoins and signing a contract would be as simple as tapping on your smartphone. Now, it is up to you to decide, whether you want to be an adopter or a critic.