Understanding blockchain technology, block by block

 

Understanding blockchain technology, block by block
Blockchain has the power to eliminate the need for a third-party intermediary and decentralise the control of certain processes.

Dubai - One key feature? Any data that is stored on a blockchain remains there forever

By Asim Janjua
 Industry Insight

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Published: Thu 27 Jun 2019, 9:37 PM

Last updated: Thu 27 Jun 2019, 11:38 PM

Over the past 20 years, people have become used to sharing information via the Internet. We believe that blockchain technology represents the Internet of value, so that people are able to not only exchange information, but exchange any asset of value on a peer-to-peer basis, in a more transparent and secure way. With blockchain technology, it is now possible to transfer ownership of a car, buy and sell real estate, or transfer financial securities, without having to use a third party intermediary such as a bank, a government or a stockbroker.
In today's society, there are entities that not only control these transactions but own the process and insert themselves in the middle, creating an imbalance between the intermediary and the citizen and business at large. From a social-economic perspective, there has been a cause and effect. The causation is the imbalanced nature of actions of the multinationals, that fuelled a need and desire for correction - through reductionism that blockchain offers, and it's simple or fundamental constituents are giving sovereignty back to citizens with the potential to affect the imbalance.
It's important to understand that there are two main blockchains at the moment. One is the Bitcoin blockchain that enables Bitcoin transactions. The other form of blockchain is Ethereum, which is a programmable blockchain that is far more versatile than the Bitcoin blockchain. With Ethereum, we are able to build platforms and run distributed applications and smart contracts that support many diverse use cases.
Blockchain technology has the power to eliminate the need for a third-party intermediary and decentralise the control of this process. Change is often feared but is nonetheless inevitable - as learned with the adoption of the Internet.
Immutable and decentralised
One key feature in blockchain is that any data that is stored on the blockchain remains there forever - the record is, therefore immutable and cannot be erased. This means that the data stored on the blockchain offers us a level of transparency that does not exist today in the modern world. It means that if I own something, and when I transfer the ownership or value of it to you at a certain time, there will always be a record of my previous ownership on the blockchain. It also guarantees that the record cannot be manipulated, for example, that no one else can alter the record, which is why within the industry, blockchain is often described as the ultimate 'trust machine.'
Another key feature of blockchain technology is that it's decentralised. But what does that really mean? In blockchain context, decentralised means that no single person, or a company, or a government, or an entity, owns the data. Blockchain can be explained as a series of transactions that are recorded over time. Each block can be interpreted as an individual record or line in a ledger book, and the blockchain contains all of the records in the book. Each block contains a time stamp, a cryptographic hash and some accompanying information. Each block is linked to the one before it with a cryptographic hash - thus, creating a blockchain.
Once a block has been validated by the other nodes in the network, it is permanently linked to the blockchain forever. This means that the data stored on a blockchain is immutable - it cannot be corrupted or edited. Immutability has the potential to transform the auditing process into a quick, efficient, and cost-effective procedure, and can bring more transparency, trust and integrity that simply has not existed before.
Case example: Smart contracts
A big advantage of Ethereum - or the programmable blockchain - are 'smart contracts.' Smart contracts are self-executing contracts that go live when certain predetermined criteria are met. A good way to explain that is using an example of students who need a certificate to study abroad. Instead of getting a rubber stamp on a paper document, students can get a QR code in a pdf document stamped on the blockchain with embedded security that can be sent electronically. The university receiving the document can check its authenticity via a government website or QR code using a mobile application.
One key benefit of this blockchain infrastructure is the ability to manage smart contract capabilities on the Ethereum blockchain. For example, document attestation built on top of blockchain platform as a service will facilitate and automate the process of attesting any document by governmental entities. The proposed solution allows government employees to attest accredited documents and record the document on the blockchain once validated.
There are countless other applications of blockchain technology with use cases being actively developed for trade finance, real estate, supply chain management and the public sector.
The writer is director of ConsenSys Middle East and North Africa. Views expressed are his own and do not reflect the newspaper's policy.



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