The Perfect Blend
Blockchain technology represents the perfect blending of ancient discoveries melded to the age of the computer. Blockchains are based on the secret code system developed by the Greeks. To secure communications, they created ciphers – which are a pair of algorithms needed to encrypt, then reverse (decode) the message. There is more to it than that of course, but it comes down to two parties having the secret key to send and receive – then decode the message.
Data Data and More Data
In our modern world, we store a lot of data on computers, and in many cases, the same data on many computers. Therefore, we need to access that data, secure it, validate it, store it, control access it and so on. The data can be anything from personal information to contracts, to access codes to get in your front door. Even a code to turn on your air conditioner using your smartphone before you get home.
We go to great lengths – and expense that you pay for every day – to keep these databases safe, and the data unaltered by anyone. You don't want anyone to access your bank account – or turn on your air conditioner. But hacks do get in regularly – and can do both, if they want.
In our current world of data management, there can be hundreds – if not thousands – of people who have access to ALL your personal information with a few strokes of a key. And they're authorized to do so – by you. Or by the company or government they work for. A teller at your bank knows an awful lot about you – probably more than you realize. Facebook tracks 240,000 data points about what you do and say, while on their platform.
Data Stored in a Centralized System is Not Secure
The core problem is that when you have hundreds and thousands of human beings accessing, protecting and transmitting YOUR information without you knowing about it… well, it's not that safe is it? Human nature creeps in. A lazy programmer leaves a loophole and a hacker sneaks in. Happens every day. A dishonest employee sells your information for cash – and you never know.
The point is, the more humans involved with the control, management and storage of information – the LESS secure it is. And consequently, you pay the bill for all that storage and safekeeping every time you do a transaction like take money out of the bank or register your vehicle. So the current system of data collection and management is both fundamentally unsafe and unsecure. But we didn't have anything better until now.
For companies and governments, the tracking of inventory, transactions, payments, utilities, vehicles, people, identification, and the list goes on forever, the same problems creep in, since information is very valuable.
- Data security
- Data integrity
- Data access
- The human element – error, fatigue, greed and corruption
We need to store records. Everything is stored in records. On paper in filing cabinets, in spreadsheets, in databanks, databases, and so on.
What Can Blockchain Do?
Blockchain technology solves all these problems, with one ancient and one modern, swoop.
Split the word blockchain into two words. “Block” and “Chain”. Each block is a record. Your driver's licence number. Your name is another record. Your address is another. Your birth date is yet again, another block or record.
Right now, all of this information is stored on THOUSANDS of computers. Mostly on unrelated computers – government and business. You've given, one or more parties, the same information several times. At the bank, to pay your taxes, to register your car, to register for your retirement, and so on. Over and over again, you keep disseminating your information. The risk and exposure is enormous.
Now comes the “Chain” part. Each piece, or “Block” needs only to be recorded ONCE. Each block of information ( a record) is encrypted in the ledger, using virtually unbreakable cryptographic keys. With blockchain technology, only you have the ability to grant access to that information. So no one cannot change your information or even access it. Since each block is independently encrypted, even if they managed to break into one block – like your birthdate – your name or any other information is not associated with it. Each block is isolated, and you control all the information there, as the owner of that block or group of blocks. Each block is independently secured.
Every time you change or communicate information, which is data, a new record is created as a block. These blocks are all linked up in a chain with a hash pointer, acting as a link to the previous block. This means that such a chain is not only a time stamped record of activity, and cannot be changed retroactively without every part of the chain agreeing to it – authorizing it. It's tamper proof. The likelihood of fraud or tampering drops by 1,000,000%.
The best part? It's fundamentally a simple system and it doesn't reside on any one, single computer. No one individual can take charge over any block.
All changes to the chain of blocks are individually verified by unrelated and unknown computers – in triplicate! Their only job is to validate ownership of the key, without knowing what the underlying block contains, or controls. This is called decentralized consensus.
The #1 problem with monetary transactions today, is the potential for double spending. It's why we have armies of accountants, central monetary authorities and centralized servers to manage – oversee, scrutinize – and approve/decline transactions. Third parties control your money – not you, no matter what, you have very little control over it. See Andreas Antonopoulos on Money As a System of Control.
The Bitcoin application solved the double spending problem and is set to change the world of money – and has resulted in the impending avalanche of innovation using blockchain technology for not just financial but for industrial, government and personal applications.
Origin of Concept
So how about money and blockchain? Blockchain was originally conceptualized – and invented – by a (potentially anonymous) person or group in 2008 called Satoshi Nakamoto. In Japan, the name is as common as John Smith. We know very little about him or them. We do know, however, that this has become a fundamental shift in how we consider money, handle money and transact using money. Now Blockchain is permeating record keeping. Bring it on!