If the internet was the breakout consumer technology of the first decade of the new millennium, the second decade arguably belongs to blockchain technology. It’s been just over a decade since Satoshi Nakamoto, who can be considered as the father of blockchain, introduced us to Bitcoin through his eponymous whitepaper. And while Bitcoin grew mainstream, thousands of other cryptocurrencies popped up all around the world, each having their own niche use cases.
So much so that we needed to create a dedicated crypto exchange to buy, sell, or trade-in crypto currencies. But cryptocurrency is just one of the applications of comprehensive blockchain technology, a mere tip of the iceberg. Over time, as adoption grew and people began to see blockchain as a trusted approach, more and more avenues opened up. Blockchain technology was used in implementing smart contracts, supply chain and logistics, IoT, cross-border payments, fraud detection, securing medical records, and more.
How did this nascent technology get such widespread adoption and acceptance so quickly? But, before we dive into how to let us first try to understand what.
What is Blockchain?
At its heart, a blockchain is a distributed, digital ledger, a laundry list of transactions, if you will. The beauty of this is that these transactions can take on any form, they need not be monetary transactions that you would come to expect in a normal ledger. Any kind of digital asset can be securely stored in this ledger, be it a will, stock certificates, personal identities, original content, the list is endless.
It can be used as a book-keeping mechanism to execute smart contracts, a set of instructions that get triggered when a condition becomes true, e.g., to implement ‘Stop Loss’ in trading parlance, i.e., to sell a stock if its price goes below a certain threshold value.
What Makes Blockchain Special?
Perhaps the most salient feature of a blockchain is that it is truly decentralised. In other words, instead of being managed by a centralised entity like a bank or a financial institution, multiple copies of the same ledger are stored in different computers called nodes, within the blockchain network.
Any change in the ledger has to be approved by a majority of the nodes under a consensus protocol. Thus, no single entity controls the ledger, eliminating the risk of fraud and corruption, that inadvertently creeps in when solitary middlemen or intermediaries are involved.
Since it’s extremely difficult to grease the palms of hundreds of co-conspirators as opposed to a single deviant element, blockchains integrate trust and also reduce the cost of that trust (transaction fees) considerably.
Typically, transactions are processed and validated in batches or ‘blocks’, that are chained together, which is how the term originated. Once a transaction is approved by the consensus algorithm, the corresponding change is updated in all the ledger copies of the nodes involved in the network, simultaneously. This preserves the integrity of the ledger and results in a shared, immutable record of truth. It is encrypted by cryptographic locks, ensuring no foul play can happen without tipping off the other ‘gatekeepers’ of the ledger.
How Blockchains Elevate the Level of Trust in the System?
It wouldn’t be wrong to say that mankind’s biggest invention ever is coming up with the concept of credit. This single human construct has accelerated innovation and expedited our transformation from clueless cavemen to world-conquering humans. And credit, or any other human interaction for that matter, is based on the concept of trust.
What makes the emergence of blockchain a watershed moment for us is that it showed the world that unbreakable, mathematical algorithms are more trustworthy at keeping records than error-prone humans or morally sketchy institutions. Look no further than the myriad multi-crore banking scams that have eroded the trust in centralised institutions.
Ask the shareholders of Lehman Brothers, Goldman Sachs, Enron, Punjab National Bank if they can ever trust these legacy intermediaries again with their money. The answer would be a resounding no.
But by decentralising the power of these once-mighty middlemen and distributing ownership and accountability to tens, thousands, or millions of smaller, impartial entities, we have finally found a system that can prevent the occurrence of monopolies. A system that just works.
A system that any human being on earth can be a part of (banks are notorious for excluding the poor who have dubious identities and assets). And most importantly, a system that everyone can trust.
We are merely scratching the surface as far as the potential of blockchain technology is concerned.
As widely known, Blockchain is an emerging technology and will find its applications in almost all industries in the future. If you understand the blockchain basics and wish to become a blockchain developer or want to learn more about blockchain to make a career in this field, upGrad, in association with IIITB and IMT, provides several courses on Blockchain for working professionals to learn and upgrade their career. If you are interested in blockchain, you can visit these courses:
- Executive Program for Blockchain Technology Management (upGrad and IMT)
- PG Diploma in Software Development with Specialisation in Blockchain (upGrad and IIITB)
- PG Certification in Blockchain Technology (upGrad and IIITB)