3 minute read
The Future of Blockchain
LATELY, EVERYBODY IS TALKING ABOUT BITCOIN, BUT OFTEN THEY ONLY HAVE A THIN GRASP OF WHAT IT IS OR HOW IT WORKS. THE MAJORITY OF THE HYPE SURROUNDING BITCOIN CENTERS ON IT AS AN ASSET CLASS. MANY PEOPLE BELIEVE IT WILL MAKE THEM RICH BEYOND THEIR WILDEST DREAMS. IT IS TRUE THAT MANY EARLY ADOPTERS AND SAVVY INVESTORS AMASSED FORTUNES FROM THE METEORIC RISE OF BITCOIN’S PRICE; THIS IS A FACT WHICH CANNOT BE ARGUED. HOWEVER IF WE PUT THE HYPE SURROUNDING THE PRICE OF BITCOIN ASIDE, WE DISCOVER THAT WHAT IS TRULY PRICELESS ABOUT BITCOIN IS ITS UNDERLYING TECHNOLOGY, THE BLOCKCHAIN.
By Aaron Cunningham
The blockchain has the power to transform many aspects of our daily life. Imagine your car can automatically and autonomously pay for services such as parking, highway tolls, and recharging the battery and it’s all made possible through the blockchain. Imagine never having to go through another annoying online registration process again because your ID is on the blockchain. Research into these use cases is underway but this is only the beginning. It is the tip of the iceberg when it comes to what the blockchain can do to revolutionize our lives.
History of the blockchain
In order to understand how this works, it’s important to go back to the beginning of Bitcoin and the blockchain. Bitcoin was developed in 2008 by an anonymous figure called Satoshi Nakamoto during a time when a lot of cryptography experts, called Cypherpunks, were focused on creating digital cash. A major hurdle they faced was the double-spend problem: if money is digital how do you prevent it from being duplicated? Nakamoto’s solution to this problem was a blockchain database.
The blockchain is a distributed ledger that maintains a continuously growing list of records. Simply put, each computer on the network holds a copy of the same ledger. This ledger holds a record of all transactions on the network. So, if you send 1 Bitcoin to someone else, the amount is removed from your account and added to theirs.
If you thought you figured out a way to resend the same 1 Bitcoin to someone else, the other ledgers on the network would notice and your transaction would not be validated. All of this is done in real time and security is maintained through a complex process of encryption and digital signatures.
All of this means that instead of one central actor maintaining a copy of the ledger, there are thousands of copies continually being updated; this allows for greater transparency and resilience of the ledger. The blockchain creates a trustless system and completely does away with the need for third parties, like banks, to oversee transactions. Better yet, if there is no middle man, there is no need to pay the middleman a fee. The invention of the blockchain brought with it a new era that puts power back into the hands of the people.
Blockchain 2.0
Moving forward a few years to 2014, and we have the development of Ethereum, which was created in Canada by Vitalik Buterin. Ethereum is the world’s second largest cryptocurrency in overall market capitalization.
Ethereum was designed to be the Swiss army knife of blockchains. It does this through the use of smart contracts and decentralized applications (dApps), which are advanced types of transactions that can be hardcoded into the Ethereum blockchain.
A good way to understand how a dApp works is to think of your cell phone – by itself it has a fairly limited functionality. However, you can download and run apps on your phone, which gives it new functionalities. Ethereum by itself has a limited functionality but by using dApps, it’s easy to customize its functionality.
The most successful Ethereum app to date is Cryptokitties, a game where you can buy and breed digital cats. The Cryptokitties phenomenon was so popular that the number of transactions on the Ethereum network skyrocketed to a point that almost overwhelmed the entire network. The Cryptokitties phenomenon is reminiscent of the internet, where we have the collected knowledge of all of mankind at our fingertips but we mostly use it to look at cat memes.
Of course, there are many more practical things we can do with apps besides collecting digital kitties. NASA recently awarded a grant of over $400,000 CAD to a team of researchers who are developing ways to use the Ethereum network in space. The researchers hope to connect all of NASA’s space exploration vehicles, from satellites to rovers, into one large web of information via the blockchain.
Many researchers are looking to the blockchain for humanitarian purposes. The cryptocurrency Stellar Lumens’ goal is to provide a simple and inexpensive way for people to send money back to loved ones in countries without developed banking systems. Currently, two billion people worldwide do not have a bank account, according to a survey by the World Bank. A simple affordable blockchain solution like Stellar Lumens' may be a way to empower the people who live in these less developed regions.
The blockchain is also going to make our lives less complicated by taking many minor daily transactions and automating them. Some people want to see our whole lives put onto the blockchain. Imagine your refrigerator tracking what you’re low on, ordering it, paying for it, and having it shipped without you needing to keep track of anything. Or better yet, your ID is on the blockchain and also tracks your shopping habits, and an app on your phone can notify the store you’ve just entered what style of pants and size you’ll want to try on.
In some ways, it seems all a bit Orwellian, and some may not want their entire lives recorded forever onto a blockchain, just for the sake of convenience. The truth is the cryptographic technology that the blockchain is based on should allow people to opt-in for differing levels of privacy dependent on the situation.
