a system in which a record of transactions
made in bitcoin or another cryptocurrency
are maintained across several computers
that are linked in a peer-to-peer network.
Blockchain: the unhackable
ledger transforming transactions
Blockchain first attracted attention almost ten years ago when bitcoin was first released. The relationship that started in 2009 has grown exponentially as cryptocurrencies like bitcoin and others have flourished. What’s the connection between bitcoin, the cryptocurrency, and blockchain technology? The simplest explanation is that blockchain is the technology underpinning a unique international electronic cash system (whose creator, Satoshi Nakamoto, still remains unknown). Also think of blockchain as a completely decentralized electronic ledger in which entries cannot be changed or altered in any way.
Blockchain isn’t just a single technology. Rather it’s an architecture—a radical, decentralized departure from business and financial systems of all kinds. It creates an unchangeable record of transactions that can only be updated by consensus between participants in the system. New data entered can never be erased. It is an unprecedented peer-to-peer network operated on servers that can be managed autonomously to exchange information between parties—with no need for an administrator. Blockchain as a network constitutes the “administrator.”
This game-changing electronic ledger and transactional tool is at once both disruptive and immensely valuable for managing contracts, transactions and records across national boundaries, political, economic, legal, and currency systems. Blockchain provides the antithesis of control by any central organization. Bitcoin’s blockchain transactions, for example, are not controlled by any central bank. Instead, in a complex, almost sci-fi scenario, bitcoin-blockchain is maintained (rather than “controlled”) by a network of individuals that, adding to its mystique, are called “miners” or “nodes.”
Continued from the emailed newsletter
Blockchain technology can handle any data that can be digitized. It will change the way that the world handles Big Data. Decentralized blockchain can process a virtually unlimited variety of financial and other transactions and data management tasks. Bitcoin and any cryptocurrency transactions made anywhere around the world are only one kind.
Transactions of any kind are grouped by the blockchain system into “blocks.” “Blocks” are transferred to a bitcoin network that consists of powerful computers and software that validate the transactions within the “blocks.” “Blocks” are connected to other “blocks” in chains of “blocks.” These blockchains are tamperproof. Thus blockchains qualify as “unhackable.” Code and passwords cannot simply be entered to invade and loot the system of assets. Success for hackers would require hacking every computer in a blockchain network.
The size and complexity of computer systems required to operate blockchains consume vast and very costly amounts of computing power and energy, dwarfing Google’s server farms. That’s the price of running industries, and soon the world, using blockchain’s peer-to-peer network that provides self-policing security and cybersecurity.
It is not an exaggeration at all to talk about the largest companies in the world, even whole industries or governments, using blockchain to manage themselves using the next generation of cloud-based services. In this future world every agreement, every process, every task, and every payment would have an inviolate digital record that can be identified, validated, stored and shared, without the need for intermediaries like lawyers, brokers, and bankers.
In this “brave new world,” machines and algorithms will transact and interact with one another without risk, with hardly any friction and without human intervention. But before we get carried away by this vision (and inevitable hype), realization of the “blockchain revolution” or “transformation” will require overcoming many barriers—technological, governance, organizational, and even political. Some have speculated that it will take decades for blockchain to work its way into the U.S. economic and social infrastructure and those of other countries.
The financial savings from adoption of blockchain technology are proving too big and attractive for companies of every description to bypass. In the financial services industry, for example, respected analysts tell us that most of world’s largest investment banks can save as much as 30% by using blockchain, which translates into many billions saved annually.
Blockchain technology unquestionably has a lot of exciting potential, but there are some serious issues that will have to be addressed for quite some time before it earns the full laurels of being the “technology of the future.” For example, blockchain’s vast need for computing power and electricity consumption are only one especially problematic consideration in the context of concerns about climate change. But just the potential of blockchain technology being used around the world to help ensure data privacy for citizens make it worthy of continuing public support and trust.
Let us know your thoughts and ideas.
—The Rev. Canon Cindy Evans Voorhees
and the Faith Lab Team