Blockchain: The Disruptive Technology of the 21st Century
Bitcoin, Dogecoin, Ether, etc. are the words thrown around a lot in media these days. They are the cryptocurrencies that can be used to pay for transactions, just like official currencies of countries such as Rupee, Dollar, Euro, Pound, etc. Another buzzword around is that of Blockchain. Although in popular media, bitcoin and blockchain are the words taken in the same breath, they are not synonyms. In fact, blockchain is the underlying technology, upon which cryptocurrencies such as bitcoin and others are based. Today we shall understand the technology and its applications.
A Chain of Blocks
As can be ascertained from the name, blockchain is a chain of blocks, at its simplest. These blocks can be used to store any information of value; for example – land records, supply chain details, financial transactions, etc. Just like accountants use physical ledger or spreadsheets to register transactions, blockchain acts as a virtual ledger that is safer, more transparent and highly efficient. Following are the two types of computerized ledger technologies –
- Centralized Ledger Technology (CLT) – In this type of ledger, all the important records are stored in a single computer or within a small number of machines. These computers are located and controlled at one central location, hence the name. In case of a cyber-attack, the records are highly vulnerable, due to the non-existent additional copies of records. In case more copies are stored in other computer, those records need to be updated or modified each time that the data values undergo a change. Also, it is almost impossible to detect an anomaly if a malicious actor modifies any data entry. Thus, due this high-risk nature, centralized ledgers are hardly preferred by businesses and corporations.
- Distributed or Decentralized Ledger Technology (DLT) – Cons of CLT are eradicated by the Distributed Ledgers. They do so by storing the same data in multiple different computers, which are located at myriad locations. This entails that each data entry has multiple copies. So, in case of a breach of system security, data is not lost in entirety and can be retrieved easily. Another advantage of using DLT is that a change in any one record at any of the locations, is reflected in the records of all other computers in the network. Thus, nobody needs to update the changes by logging into every machine that hosts the ledger. Because data updating is done automatically, it saves a lot of human efforts and time, while still maintaining data integrity and error-free records. Anybody with legal access to the blockchain can alter, add or delete the content within it, thus creating a decentralized and democratic access system for the registered users, rather than pursuing the line of dictatorial data management.
Components of Blockchain –
Because the blockchain is based on DLT, all of the advantages of the latter are enjoyed by the former too. Now let us try to understand the important components of blockchain –
1) Blocks – Quite literally, these are the founding blocks of blockchain! They are like the safety vaults that secure your valuable information. These blocks are connected to each other so as to form a blockchain. They are replicated and saved in multiple different machines in order to build a robust DLT network.
To illustrate, blocks are like the train carriages that house people (data) and are connected to each other (through a network such as internet, etc.). Each time a new data needs to be entered, a new block is created. In case the data in existing block is modified, that is also indicated by building a new block. This feature ensures that no modification in original data takes place without the intimation to other users of the blockchain. It is also possible to create a blockchain that requires its users to permit creation, modification or deletion of a block, thus effectively imparting data immutability to the system.
2) Cryptographic Hashing Algorithm (CHA) – This algorithm (meaning a computer program written to carry out a specific task) is the reason behind high-grade security of blockchain. It is also responsible for securely linking the blocks together. A hash is a string of binary code that is mined by CHA along with the creation of a new block. When someone changes the data inside a block, its hash changes. This change reflects only in that copy of the blockchain through which changes have been made. All other copies contain the original hash. Thus, a mismatch is created within the blocks. Immediately, the blockchain manager and other users are alerted to this discrepancy. The blockchain administrators can then either approve the change or revert back to original. Both these options are fairly uncomplicated to execute. Next up, it is a straightforward road to fixing accountability by identifying the perpetrator in case of an unauthorized change. If approved, the alteration is reflected in all the copies of the decentralized ledger.
3) Timestamp – It is a string of characters that show the time of the creation as well as alteration of data within a block. Additionally, it acts as a useful identity marker for every block.
4) Header – It is an appendage to the valuable data within a block. It contains information about the previous and the next block. Header is significant as it allows formation of a chain out of individual blocks.
Applications of Blockchain –
Blockchain is said to be conceptualized in 2008 by an unidentified person (or persons) by the name Satoshi Nakamoto. In 2009 Nakamoto implemented the bitcoin using blockchain, thus applying the technology in a practical application. Let us briefly look at two of the most discussed applications of Blockchain –
1) Cryptocurrency – As mentioned before, blockchain acts as the foundation of cryptocurrencies. Like their parent, cryptos are a decentralized currency, meaning that no central bank of any nation has any control over its supply, creation or transactions. Due to this reason, cryptocurrencies are said to be a threat to the financial stability and security of nations, as they can be easily used in terror financing and money laundering. Hence, governments and central banks all over the globe have proposed regulations or even a blanket ban over blockchain currencies.
2) Non-Fungible Tokens (NFTs) – They are one-of-a-kind digital asset that is identified with unique qualities. Hence, NFTs are highly valued as a proof of creation and/or ownership for creative endeavors like music, paintings, memes, etc. Once a transaction involving NFTs has been completed, it is available on the public blockchain for anyone to see. So, if someone tries to sell you a NFT of an exquisite recipe saying that they are its creator, you can verify whether they are its legal owners. An interesting NFT sale was completed by Twitter founder Jack Dorsey, when he sold his first-ever tweet. NFT transactions usually take place using cryptocurrencies. All in the family, eh!?
The Upward Curve But At What Cost?
In recent times, blockchain is not confined merely to cryptocurrencies or NFTs. It has a wide range of applications in diverse fields such as sports, medicine and inventory management. Within a little over decade of existence, the tech has crossed 6 billion USD spending in 2021. These whopping figures are despite the regulatory hurdles. In case cryptos receive wider acceptance as official currencies, like El Salvador did, this number will see a steep rise. Hence, it is a no-brainer that blockchain and cryptocurrencies will acquire a more important role in economies of the near-future.
But all is not as fine as it seems. The tremendous environmental impact of blockchain in terms of energy consumption is worrisome. Cryptocurrencies that hold a lion’s share within blockchain applications, consume the world’s highest amount of electricity per transaction. Analysis by researchers from University of Cambridge reports that just Bitcoin uses 121.36 terawatt-hours of electricity per year. That is more than the annual consumption of whole of Argentina and Netherlands! Moreover, energy required to run the computer systems involved in blockchain processing and cryptocurrency mining is also a major source of carbon dioxide generation and the resultant global warming. Bill Gates, Founder of Microsoft and Philanthropist, also warns against blockchain crowding out other consumers of electricity. The impact of this energy-shortage shall be felt more by the developing nations and the underprivileged sections of the society. Hence, overconsumption of energy threatens to create yet another form of inequality and deprivation, in turn widening the gap between the richest and the poorest populations of the world.
Despite the environmental concerns, blockchain tech is steadily marching forward. Some of its applications such as supply chain management of perishable foodstuffs, have the potential to reduce carbon footprint and thus compensate for the environmental damage it causes. But in order to find a lasting solution, it is imperative to use clean technology for energy generation. Efficient and impactful carbon sequestration techniques can also work to reduce the ill-effects of blockchain-use on Gaia. Thus, the trail to find answers to questions created by one technology, pass through the front yard of another technology!
Vishvali Deo is an E&TC (Electronics and Telecommunication) Engineer by education and Software Engineer by Profession. She believes that 'Technology is a Great Democratising and Equalising Force' and hence is on a mission to make the general public understand seemingly complex technologies in a simple manner.
She is convinced that the root of today's world problems lie in the past, hence she has also pursued post-graduation in History. She has a keen interest and a good grip over Economics, Political Science and Environmental Engineering. She has a penchant for working with Women and spreading Digital Literacy amongst them, with the aim of their empowerment. She also strives to provide Free Quality Education to children and counsels young adults. Besides, she is also skilled at Public Speaking, having won many awards in Elocution & Debate Competitions and Technical Paper Presentations.