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Powering the Next Technological Revolution: Cryptocurrency & Blockchain
Witnessing a technology that has the capacity to change the world and disrupt traditional systems is a rare occurrence in any lifetime. Revolution is a strong word that has been widely overused. However, most would agree that major technological revolutions that occurred over the last few centuries include the Industrial Revolution of the 18th-19th centuries, as well as the advent of the Internet in the 1990s.
Yet, this is exactly what we’re witnessing, as we continue to unravel the technological impact of blockchain technology and cryptocurrencies that were born almost a decade ago. What was once a concept behind the first decentralised cryptocurrency, Bitcoin, has now evolved into a groundbreaking technology that has the potential to change the way data and information are shared in today’s world.
The History of Cryptocurrency & Blockchain
The birth of cryptocurrency and blockchain occurred in 2008, when an anonymous individual — with the nickname ‘Satoshi Nakamoto’ — wrote a nine-page whitepaper, introducing the concept of Bitcoin, a decentralised peer-to-peer digital currency. This was an instant hit in the computing community as the inception of Bitcoin solved several fundamental issues in the field of distributed computing and cryptography. Digital currencies existed before Bitcoin was centralised, yet they were unable to solve the issues of double-spending and generating a unified consensus within a distributed system. By integrating computer, science and cryptography advancements, Satoshi sparked a revolution that would disrupt the world’s financial systems.
Timeline: History of Blockchain Technology
(Source: 101 Blockchains)
What is Blockchain Technology?
Blockchain is an ever-growing, distributed, public database of transactions. Unlike traditional databases that are controlled by a single, powerful entity that has the power to manipulate or edit the data, blockchains are controlled and maintained by thousands of participants in the network. Each one possesses a copy of the distributed ledger that is constantly updated in real-time. The decentralised architecture of the blockchain network, therefore, makes it extremely secure, tamper-resistant and above all, transparent. All transactions in the network are sequentially categorised into blocks, which are then connected to older blocks and verified using cryptographic functions.
Why is Blockchain Revolutionary?
The birth of a new ecosystem with thousands of different coins and numerous use cases has justified the case for blockchain as a revolutionary technology. In order to appreciate the merits of the technology, let’s take a look at some of blockchain’s features.
The distributed nature of blockchain technology ensures that no single authority is in charge; all participants in the network play a part in managing and maintaining the distributed ledger across the globe. This ensures that the entire network is fault-tolerant, collusion- and attack-resistant. The consensus mechanisms that facilitate coordination within the decentralised network ensure the full functioning of the robust system that is incorruptible and secure.
At its core, blockchain technology is open-sourced. This means that the underlying codes of the technology and all transactions on the ledger are transparent and publicly verifiable for everyone to observe and assess. This empowers the masses with unadulterated access to all transactions and their supporting data that have occurred on the network from the beginning of their existence to the present moment. The full transparency of the network facilitates accountability in a trustless environment.
Since most participants in the network possess a copy of the distributed ledger, it is almost impossible for data transactions to be manipulated, changed or edited in any way. Once a transaction has been validated and stored on the blockchain, it is permanently secured in history. In a traditional system, where a single entity controls the network, manipulation is a major risk given the potential for data to be altered internally or through external interference (hacks).
It is no surprise that a distributed architecture of blockchain technology makes it extremely secure and resistant to attacks. The rationale is simple; it is much easier to hack a single computer than to hack thousands of computers. A traditional system with a central server has a single-point-of-attack and can be easily compromised by hackers looking to extract or manipulate information. Blockchain’s ledger is distributed to thousands of globally-connected computers that maintain the exact copy of records, making it extremely unlikely for any attacker to be successful in compromising the network. In addition, the cryptographic functions inherent in blockchain technology further enhance the security of its transactions.
These features of blockchain have propelled its status as the technology of the future, with great potential to disrupt current systems and provide vital functions of transparency, security and accountability.
Applications of Blockchain Technology
The first application of blockchain technology was Bitcoin, which functions as peer-to-peer virtual cash that is free of third-party interference. Given the successful implementation of Bitcoin, there have been various industries and use cases that blockchain technology is looking to disrupt.
The legacy and manual nature of public sector operations reek of inefficiency. More importantly, the opaque nature of government operations creates a trust vacuum that can foster corruption. Blockchain technology can spearhead the digitisation of data and facilitate new mechanisms for voting, record storage, social service distribution and tax processes. This will undoubtedly usher in higher levels of efficiency, accountability and trust towards the government. Many governments are exploring the integration of blockchain technology into their services, most notable Dubai, which has positioned itself to be “the first city fully powered by Blockchain by 2020.”
The healthcare industry is still dependent on inefficient legacy systems, lacks a universal standardisation of practices and consumes tremendous costs. Blockchain technology can aid this industry in numerous ways, namely, decentralising patient history for greater data interoperability across the network, tracking pharmaceutical provenance, cyber security and the Internet of Medical-Things (IOMT). These opportunities are actively being explored by major pharmaceutical and medical companies globally.
The real estate industry is considered a “pen and pencil” business filled with numerous inefficiency pits such as siloed databases and a huge intermediary ecosystem. The blockchain technology can streamline the process in various ways, including amalgamating the property search process, using digital identities and smart contracts to facilitate the due diligence and evaluation processes, disrupt the property management process and digitise the title management procedure.
Blockchain can facilitate traceability across the supply chain, allowing different stakeholders in the network — manufacturers, transporters, shippers and customers — to aggregate product data, analyse trends and engage in predictive monitoring. Using blockchain can also reduce counterfeiting activities and ensure that the products are not compromised on the journey from their creation until they reach the end customer.
Blockchain technology is currently being explored in many other use cases across a wide variety of industries. In conjunction with blockchain technology, a cutting-edge innovation called “smart contracts” has the potential to automate and streamline real-world processes.
Smart Contracts: Exciting Technological Innovation
A groundbreaking functionality of blockchain technology that has generated a lot of excitement is the advent of smart contracts, a pre-programmed set of self-executing codes on the blockchain. Smart contracts have the potential to remove third-party intermediaries out of the equation, thereby improving the cost-efficiency of business operations. Smart contracts allow businesses to eliminate the middleman — such as brokers, lawyers and administrators — and facilitate interaction between two parties, contingent on mutually accepted terms. Once agreed upon and ‘codified’, each step of the contract is automated and triggered to be completed when a specific event occurs. This will, therefore, streamline the entire operation, resulting in accurate, fast and safe transactions that save time and reduce expenses.
An example of a smart contract in action is in the context of engagement contracts, where a service provider and service recipient mutually agree to a set of rules and terms expected of each party. The smart contract will be embedded with various key information such as the amount due, the exact services to be provided and the time frame for executing these services. For an even greater level of execution, the arrangement can be further divided into tranches that will automatically release the payments after a certain level of service is completed. This automation would streamline the process and save tremendous costs, time and effort for both parties.
Not all blockchains allow for smart contract functionality. There are several blockchain protocols that are built specifically to support smart contracts, in a bid to increase the number of applications of blockchain technology beyond financial payments (as with the case of Bitcoin). The current blockchain protocols that support smart contract functionalities are Ethereum, NEO, EOS, Stellar and Cardano.
Cryptocurrencies and blockchain technology are an exciting new innovation that can be used for a variety of applications in numerous industries. A distributed technological system that has the ability to enhance transparency, security and accountability represents a huge leap above our current system that could largely benefit from blockchain. As we speak, governments and corporations are actively exploring the potential of integrating blockchain technology into their services, further substantiating the appeal of blockchain as a much needed solution.