I suspect everyone has heard of Bitcoin by now.
No, I’m not going to predict whether its value is going to plunge or soar. Frankly, I don’t care. If you want to know why I don’t care, read on.
The term ‘Bitcoin' is often used as a shortcut for ‘cryptocurrency'. There are thousands of cryptocurrencies out there and I suspect some of them will be around in 10 years’ time, but certainly not all.
And although I do not want to dismiss cryptocurrencies — it is very possible they will have an important role to play some time soon — what is really exciting is the technology that has made cryptocurrencies possible and the myriad of other uses for it, from healthcare to delivery of government services and more.
Blockchain is the real hero of the story here.This blog is about programming and blockchain is one of the many success stories that come from clever programming. I say success story a bit prematurely of course as it is yet to have a significant effect on the real world, on our daily lives. But this is just a matter of time. As with all disruptive new ideas, it will take some time for a completely new way of doing things to start elbowing its way past the status quo.
I won’t give a detailed explanation of what blockchain is and how it works in this post. There are many great articles that do just that already out there on the internet. Incidentally the internet can be viewed as a precursor of blockchain; its great-grandparent if you like.
At its simplest, blockchain is a way of keeping a secure record of transactions, any kind of transaction (not just monetary as in cryptocurrencies). Let’s use money as an example though as it’s easier to understand what’s going on.
The Bank of Kate, Fred, Jane and Bob
Let’s assume Kate, Fred, Jane and Bob decide to create their own monetary system and they decide there are going to be 100 units of it. They allocate 25 to each of them. They take a sheet of paper and decide to start writing down every transaction between them.
Kate —> Bob, 2 units, 25/01/2018
Jane —> Kate, 4 units, 27/01/2018
and so on.
This ledger is sufficient to keep track of who has what and how each unit of ‘money’ has passed from person to person.
So what’s the problem?
The paper could be lost;
Someone else might catch a glimpse of the paper and find out stuff that was none of their business;
Fred might try to forge an entry on the paper to show he has more money.
Some of these problems can be resolved by having many copies of the sheet of paper, stored in different locations. And every time an entry is made it is made on each one of these copies. Of course this would be a hassle in the pen-and-paper world but if we start moving our thinking into the digital world then we can see right away that this is less of an issue. After all an email sent half way around the world reaches its recipient almost at the same time as it reaches the colleague sitting in the office next to mine. Having many copies of the ledger means it cannot be lost, and if someone wants to forge the ledger they will have to forge many copies of them; let’s say more than half of them.
The remaining problems can be solved by advanced cryptography. This ensures that only the two people involved in a transaction can see the full details of the transaction. Anyone looking at the sheet of paper might simply see that someone with an ID of 5638fbvjs38592b transferred 2 units to gfjd623959f207, with no way of knowing who those individuals are.
Blockchain is therefore bypassing the trusted central authority that manages transactions between people: the banks that manage transfer of funds, or Facebook which manages all our data so that we can communicate with each other on their platform, or the health services that keep our health data for when it is needed, or government departments who have data about our income and the taxes we pay etc… We often hear stories about data breaches or pen drives with client data on them left on trains.
Blockchain takes away the need for data to be stored centrally. Instead it is stored everywhere, on thousands of computers (nodes) worldwide but protected by the highest standards of cryptography that is virtually impossible to break.
Blockchain can therefore enable any transaction between individuals or companies without the need for a third party to act as a trusted intermediary. You can share your health data, or parts of it, with a doctor who can add to it for you to use later on; you can use government services by sharing the relevant data between government departments without too many people having access to it, and indeed with no one having access to all of your data except yourself.
My description of blockchain and its potential uses is fairly simplistic in this article, deliberately so. But my guess is that in a few years’ time, this decentralised system of doing things will have found its way and entrenched itself into our lives in the same way that the internet, a decentralised system of communication, has become indispensable today.
Disclosure: Stephen Gruppetta holds an advisory role with SeeleTech, a blockchain company