The crazy world of Blockchain and Bitcoin is heating up technology and with it the economy.
I am guessing that by now, unless you have been enjoying a long vacation in the Grand Canyon without reception, you have heard of Blockchain technology. If you haven’t, then you almost certainly will have heard of Bitcoin. Bitcoin is the first real-world use of Blockchain technology and has surprisingly been around for almost 10 years.
Bitcoin was originally invented because of a mistrust in the financial systems that was popularized in during and after the financial market crash of 2008. It was designed to be a direct to seller currency that avoided financial institutions or regulators and was, and still is considered, a safe financial trust transaction mechanism.
In the last few years, Bitcoin’s use has accelerated as more people are jumping in to embrace Bitcoin. Few people have a real understanding of either the fundamentals of the pseudo currency, or its much more interesting underlying technology – The Blockchain.
In order to understand some of the future uses and excitement around the Blockchain, it is helpful to understand in layman’s terms what Blockchain is, and how it works. You can think of Blockchain as a digital ledger, like a huge Excel spreadsheet. Anyone with a registered Blockchain ID is authorized to post digital transactions into the Blockchain.
When a transaction (or block) gets posted to the Blockchain, each additional block that is entered has a cryptographic hash of the previous block, along with the Blockchain ID of the originator, a timestamp, and the transactional data, which can be any format of digital data, including text or images.
Because each added new block also contains a valid digital fingerprint from the previous block (the hash), this inherently validates the information within the chain.
The term “immutable” is appropriate to the Blockchain, as information on the chain in a strong theory cannot be modified, it is written permanently and will live within the Blockchain forever.
Because the information within the chain is stored in a distributed fashion among many thousands of computers, any attempt to modify the Blockchain would be overwritten by the mechanism that is inherent to the Block, which is a consensus mechanism, where multiple computers would reject the modified block within any single rogue system.
For this reason, Blockchain is considered unbreakable and immutable, once a transaction has been written, it cannot be modified, not even by the owner. Only time will tell if this theory holds true.
So what do we have so far?
Well, we know that we can place a digital transaction onto an unchangeable ledger and that we can, as part of that digital transaction, send a digital record to another known Blockchain ID, someone that we owe money to or want to buy goods from – that is essentially what Bitcoin is.
I am sure that some of us have seen those long ID’s that people have started posting on their blogs and streaming sites, these are typically between 26 to 35 characters, with only numbers and characters being allowed.
These are Bitcoin ID’s. If you wanted to donate bitcoin to one of these sites, you would create a transaction within the blockchain that sends a coin or a fraction of a coin to the person you are donating to. Sometimes there is a more friendly QR code that we are also used to, that represents the underlying Bitcoin or Blockchain ID.
One of the interesting things I feel that I should explain, is that the current size of the Blockchain is around 10Gb. This data is stored on many thousands of computers. One of the problems associated with storing that amount of data, is that processing that much data, along with the complex mathematical algorithms used to compute the ciphers, requires an enormous amount of computer processing power.
It has been stated that the amount of electricity currently being used to maintain the Block is more than the entire country of Norway’s electricity consumption.
We are also seeing new companies setting up huge computer server farms in obscure areas like Iceland and Quebec, Canada. Iceland has a huge, almost unlimited supply, of geothermal energy which enables them to provide electricity at a fraction of the cost of what we are used to in North America, and Quebec achieves its advantageous position for Bitcoin. For Hydro, in Quebec, the bitcoin boom may be too much of a good thing.
Canada’s largest electric utility has been inundated with requests to supply electricity to cryptocurrency miners eager to set up shop in Quebec — more than it can deliver. Chief Executive Officer Eric Martel has “received hundreds of applications” from such ventures in the past few weeks, which would need more than 9,000 megawatts of energy– about one-quarter of the utility’s total generating capacity of 37,000 megawatts.
As with every fledgling technology, it has attracted many different types of companies, all evolving around the crypto currency use case, where at least 40 competitors to Bitcoin have sprung up. Many of these currencies are launching what is a new term for an initial public offering – termed an “ICO” or initial coin offering.
Most of these 40 currencies have market caps exceeding a billion dollars, so there is a lot of speculative interest in crypto currency trading and additional derivative uses have also grown because of the massive demand for privacy and secure transactions, (unfortunately, not all legal).
Cryptocurrencies are just scratching the surface of what Blockchain technology is capable of advancing.
It was recently reported that the Cosmetics and Apparel company Chanel took in several handbags as exchange items toward the purchase of a new handbag, some were for prices as much as three or four thousand dollars. The bags were evaluated by Chanel’s own experts, and found to be authentic Chanel products, only to be later revealed as very high quality forgeries.
A Blockchain tag, sewn into the lining of the bag would offer complete protection against duplication, as the digital fingerprint embedded on an RFID chip could not be replicated.
Blockchain technology could replace traditional money transfers like Western Union and PayPal, with direct party to party transactions that remove the middle man, (and therefore their fees), from the transaction – all at the speed of light. Blockchain technology has the ability to provide an un-hackable electronic vote-counting system. This system can secure an election during voter registration, and can account for the voter’s identification and insure votes cannot be tampered with at a later date.
In the same way Blockchain acts as a public ledger for cryptocurrencies, it can also create a permanent and public ledger for votes as tallied—promising a future of truly democratic elections around world.
The archaic technology in hospitals creates unnecessary issues for medical patients and their records. MedRec is a perfect example of what blockchain is looking to improve within healthcare. According to MIT Media Lab, MedRec is, “a novel, decentralized record management system for EMRs that uses blockchain technology to manage authentication, confidentiality, accountability, and data sharing.”
I foresee the day when a Public Health Records System could be stored for every man woman and child in the world in one incorruptible database using the Blockchain technology – and when you want to share your medical records, you would simple send a trusted one-time use public key to the doctor, lab, or pharmacy that you wanted to provide access to your records.
For now, some of us will be checking our Bitcoin values daily (not me), but there seems to be a true consensus forming that Blockchain technology is not just here to stay, but will be responsible for a digital transformation that, when combined with Cloud computing, – can only be imagined – until the day it becomes a reality.
During the course of my research for this article, I came across a very easy to understand description of how The Blockchain technology works, for non-technically minded people.