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What is the Blockchain? Why does it matter for us?

By April 13, 2018 No Comments

blockchain

Blockchain may sound complicated, but it’s just another tool that allows human and eventually robots and other kinds of identities to trade at a scale and make that trade decentralized.

It will allow us to do a lot of our transactions much more peer-to-peer directly and lower our use of intermediaries.

When we were living in much smaller and compact societies, we could trade in our community easily. But as the population grew and spread, we needed institutions like Uber, Amazon, Airbnb to do it.

These are just digital marketplaces and platforms that facilitate us to exchange value. They act like intermediaries, that collect, use and store all the data that’s included in our trades and help us complete them.

Blockchain is the technology that allows us to trade 1-to-1 at a large scale, with a single app our computer to help us do it. But instead of having a company in the middle that helps you do this transaction, you have all the computers involved in the network, running the transaction.

It basically consists of a network of computers, that all have the same history of transactions. Instead of having a single company with one database that has all the information, everyone else on the network has the database and transaction history on their computer.

The network is public, transparent and append-only. What does this mean? The system allows you to add new data to it, but you can’t modify what has already been written inside of it. It does this through a mechanism for creating consensus between scattered or distributed parties that don’t need to trust each other but just need to trust the mechanism by which their trades are being completed.

How secure is the blockchain technology?

As data cannot be overwritten, modified or deleted, data manipulation is extremely impractical, thus securing the data on the blockchain and eliminating centralized points that cybercriminals often target.

In theory, the network is supposed to be secure and although it is constantly updating itself and adding new information, by using cryptography, it allows all the information inside of it to be encrypted and safe. This means that although you can’t see exactly what happens on the blockchain and the information being written on it, such as transactions, prices, info etc, you know that it happens.

What is the connection between Blockchain and Bitcoin?

A lot of people are thinking of blockchain like Bitcoin, but we’re seeing a lot of uses of Blockchain that aren’t on the currency side.

Blockchain is being connected to Bitcoin by a lot of people because Bitcoin was the first understandable and usable appliance of the Blockchain technology.

Since that point, there have been more and more real-world applications for the distributed blockchain, called dApps. You can read more about them and also see some examples here.

Electricity, transportation networks, water networks are some very important real-life uses of the Blockchain technology as well. You have numerous people in need of water, electricity or a safer and better transportation system. Blockchain applications for solving or improving these sectors have already emerged, not all of them public, but you can see proofs-of-concept for their uses. Perhaps in a couple of years, we’ll be able to see improvements and implementations of these technologies in our day to day activities.

All these problems are being solved because one of the other great advantages of blockchain technology is that no one actor on this network has an unfair advantage compared to the others. It randomizes the process, and no one can force the blockchain to accept a particular entry onto the ledger that everyone else disagrees to.

ICOs, monetizations opportunities and the excitement around it

ICOs have taken the crypto market by storm in 2017. They are a mean of crowdfunding centered around cryptocurrencies, which can be a source of capital for startup companies.

In contrast to the IPO, where investors buy shares of a company, in an ICO, they buy coins. These coins can increase their value in time if the business becomes successful.

However, Initial Coin Offerings really exemplify a problem that we are having at this very moment.

They are an idea with enormous potential significance down the road, but at this point, the promise of ICOs has been hijacked into a string of pump and dump scams or desperate gold rush schemes.

The faster that we can switch from this make-me-rich idea and being disappointed because the blockchain or Bitcoin or any other ICOs didn’t make us rich, the faster blockchain will become part of the everyday life.

This is more like a science and it will develop, it will take years and we’re not just going to see blockchain emerge, we’re going to see AI continuing to evolve, IoT devices and machinery that can do a lot more for and with us.

We tend to see novel technologies to a really high standard, rather than to compare them with the existing technologies and perhaps adopt a slight improvement that would also be a great step ahead in each domain’s evolution.