The first mention of Blockchain technology dates back to the end of 2008 when the unknown individual Satoshi Nakamoto published the paper ‘Bitcoin: A Peer-to-Peer Electronic Cash System’. A few months later, in January 2009, he released the Bitcoin software to the public. But what is this chain of blocks, how does Bitcoin fit in and what are smart contracts? Read on!
What is Blockchain technology?
There are a number of definitions of Blockchain, depending on who you’re talking to. But at its core, it’s a digital file that lists accounts and transactions like a ledger. Copies of this file are replicated on every computer in the Blockchain network. Every time a transaction takes place, it is added to a new block together with other transactions. That new block is then added to the chain that continuously grows in size. A block cannot be altered once added, making the record of transactions permanent.
It’s often easier (and quicker) to watch explanatory videos about difficult subjects, so here’s a video by Future Finance explaining the general concept behind Blockchain by means of cake transfers. And for possibly the best short (6 min!) explanation of Blockchain and its applications we recommend this Blockchain explanimation.
What is Bitcoin?
When the technology first came around, Blockchain was primarily introduced as a decentralized monetary system, better known as the Bitcoin Blockchain. In this first Blockchain people are able to transfer cryptocurrency (Bitcoins) to other accounts. This digital currency was the first to solve the double-spending problem – which relates to digital files being duplicated – as it is not possible to send a Bitcoin twice.
Besides Bitcoin, there are many other Blockchain platforms (incl. cryptocurrency):
- Ethereum / Ether
- NXT Coin
- Coinye West
Continue with this video by Westpac Bank, that explains the idea behind a decentralized ledger system, vital to Blockchain technology, in a simple and clear animation about the inhabitants of Yap Island. After that continue with this video and look at how Blockchain expert Andreas Antonopoulos explains the differences between Bitcoin and Blockchain.
Some Blockchain-based platforms, such as Ethereum, go far beyond the monetary aspect of Blockchain software. They include the so-called ‘smart contracts’ which are programmed agreements that are formalized without the need for a third-party intervention (notary). Smart contracts are programmed to execute autonomously and cannot be tempered with. Deal = deal, without any exceptions.
Smart contracts can be programmed to contain crypto-equity, which are digital assets such as stock options and shares, coupons and licenses. Examples of smart contracts are testaments, inheritances, but also no-risk transactions (e.g. international trade deals) as the parties will receive the digital assets at the same time. Or think about donations to a humanitarian cause that can only be spent on what you want: electricity, housing or education. Watch Matt Lucas explain more about the reason behind and possible applications for smart contracts.
One of the companies dealing with smart contracts is Attores, here’s founder David Moskowitz talking to BTC Sessions about some actual applications of smart contracts.
Applications of Blockchain technology
There are many cool things that can be done with Blockchain technology, some disrupting the whole industry, some just really interesting concepts:
- Blockchain can give refugees – without homes, birth certificates or bank accounts – an online identity;
- Blockchain can result in transparent donations to a good cause: a sponsor will be able to track what his money is spent on;
- Blockchain can be used to donate in other items than money. Just donate in whatever’s needed: gas, water, shovels, seeds, etc.;
Take a look at these videos about actual Blockchain services and platforms:
- Slock.It provides an Ethereum-based solution to enable the ‘Sharing Economy of Things’. It allows for the secure sharing, renting or sale of any material object. Listen to Stephen Tual explaining their first application: a digital lock.
- Ascribe.io helps modern artists protect their digital work. Artists can manage and trace their artwork on the Blockchain, avoiding copyright infringements.
- Bitnation is an Ethereum-based platform for decentralized, borderless and collaborative governance. Services included range from registering marriages to real estate titles.
- Steem is a social network on the Blockchain that stimulates its users to create their own content by rewarding crypto-tokens.
- Everledger uses a digital global ledger to protect the diamond trade from fraud. In her keynote, CEO Leanne Kemp, discusses how the platform disrupts the diamond industry.
Trust and transparency
Its distributed database makes Blockchain technology very secure and hard to temper with. After all, there’s no central server that can be hacked, and it would mean that every single computer in the network has to be hacked.
On a final note, Blockchain signifies a fundamental change in our understanding of trust, as it moves away from authority & hierarchical systems to a network-centric flag system. A system in which all data can be verified by other users simultaneously, introducing greater transparency and a shared reality across non-trusting entities. And rather than a few centralized entities controlling vast resources, it’s democratic control among many more. We can’t wait to see the state of cryptocurrency in five years…
Besides the videos mentioned above, there are many other great Blockchain videos out there. Here’s a selection of must-watch Blockchain videos: