A Brief Introduction To Blockchain – For Normal People

The encryption process itself is also a key factor. Blockchains like the Bitcoin one use deliberately difficult processes for their verification procedure. In the case of Bitcoin, blocks are verified by nodes performing a deliberately processor- and time-intensive series of calculations, often in the form of puzzles or complex mathematical problems, which mean that verification is neither instant nor accessible. Nodes that do commit the resource to verification of blocks are rewarded with a transaction fee and a bounty of newly-minted Bitcoins. This has the function of both incentivising people to become nodes (because processing blocks like this requires pretty powerful computers and a lot of electricity), whilst also handling the process of generating – or minting – units of the currency. This is referred to as mining stabila crypto , because it involves a considerable amount of effort (by a computer, in this case) to produce a new commodity. It also means that transactions are verified by the most independent way possible, more independent than a government-regulated organisation like the FSA.

This decentralised, democratic and highly secure nature of blockchains means that they can function without the need for regulation (they are self-regulating), government or other opaque intermediary. They work because people don’t trust each other, rather than in spite of.

Let the significance of that sink in for a while and the excitement around blockchain starts to make sense.

Smart contracts
Where things get really interesting is the applications of blockchain beyond cryptocurrencies like Bitcoin. Given that one of the underlying principles of the blockchain system is the secure, independent verification of a transaction, it’s easy to imagine other ways in which this type of process can be valuable. Unsurprisingly, many such applications are already in use or development. Some of the best ones are:

Smart contracts (Ethereum): probably the most exciting blockchain development after Bitcoin, smart contracts are blocks that contain code that must be executed in order for the contract to be fulfilled. The code can be anything, as long as a computer can execute it, but in simple terms it means that you can use blockchain technology (with its independent verification, trustless architecture and security) to create a kind of escrow system for any kind of transaction. As an example, if you’re a web designer you could create a contract that verifies if a new client’s website is launched or not, and then automatically release the funds to you once it is. No more chasing or invoicing. Smart contracts are also being used to prove ownership of an asset such as property or art. The potential for reducing fraud with this approach is enormous.

Cloud storage (Storj): cloud computing has revolutionised the web and brought about the advent of Big Data which has, in turn, kick started the new AI revolution. But most cloud-based systems are run on servers stored in single-location server farms, owned by a single entity (Amazon, Rackspace, Google etc). This presents all the same problems as the banking system, in that you data is controlled by a single, opaque organisation which represents a single point of failure. Distributing data on a blockchain removes the trust issue entirely and also promises to increase reliability as it is so much harder to take a blockchain network down.

Digital identification (ShoCard): two of the biggest issues of our time are identify theft and data protection. With vast centralised services such as Facebook holding so much data about us, and efforts by various developed-world governments to store digital information about their citizens in a central database, the potential for abuse of our personal data is terrifying. Blockchain technology offers a potential solution to this by wrapping your key data up into an encrypted block that can be verified by the blockchain network whenever you need to prove your identity. The applications of this range from the obvious replacement of passports and I.D. cards to other areas such as replacing passwords. It could be huge.

Digital voting: highly topical in the wake of the investigation into Russia’s influence on the recent U.S. election, digital voting has long been suspected of being both unreliable and highly vulnerable to tampering. Blockchain technology offers a way of verifying that a voter’s vote was successfully sent while retaining their anonymity. It promises not only to reduce fraud in elections but also to increase general voter turnout as people will be able to vote on their mobile phones.
Blockchain technology is still very much in its infancy and most of the applications are a long way from general use. Even Bitcoin, the most established blockchain platform, is subject to huge volatility indicative of its relative newcomer status. However, the potential for blockchain to solve some of the major problems we face today makes it an extraordinarily exciting and seductive technology to follow. I will certainly be keeping an eye out.

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