The digital revolution – what is blockchain?
Blockchain is hot! It’s a term that you hear increasingly more often these days. Many times, it will be connected with other complicated terms like ‘Bitcoin’ and ‘Cryptocurrency’. In the text below we’ll clarify the terms & explain what the blockchain revolution that’s going on right now is all about.
William Mougayar, writer of ‘The Business Blockchain’, has described the impact of the blockchain revolution as follows: ‘’Online identity and reputation will be decentralized. We will own the data’’. It is very much about online privacy as you can conclude from the quote. That probably won’t surprise you since Facebook is currently under attack by the American Senate about the privacy that users have on its platform and whether their data is safe. It’s unknown who or which group of people came up with the term blockchain, but the pseudonym of the creator(s) is Satoshi Nakamoto, which sounds Japanese, but it’s never been officially confirmed.
What is blockchain technology?
‘’The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” Don & Alex Tapscott, authors Blockchain Revolution
Let’s get into the separate aspects of this definition to make it clearer. It is incorruptible, so it’s impossible to reach for hackers in any way (except if you don’t properly store your private keys to reach your Bitcoin or any other crypto-currencies obviously). It’s a digital ledger of information, it’s not comparable with a back-up of your computer though, it’s an online database somewhere in the cloud that can be accessed by anyone with an internet connection. Blockchain can take care of economic transactions and store virtually everything of value. In a way it has the potential to take over the task of banks, no wonder basically every bank is skeptic and negative about the concept of blockchain and Bitcoin. Blockchain was created initially for Bitcoin transactions, but the technology is being explored for more and more other uses, including ways that are very much applicable to the music industry.
What is Bitcoin?
Bitcoin is a digital form of currency that’s also called ‘digital gold’ and if you consider that the total value is closing in on 9 billion USD that’s no surprise. Bitcoin was invented in 2008 and there have been basically no issues with the blockchain of Bitcoin, besides issues due to hacking or human error. This goes to say that Bitcoin is here to stay and will most likely become increasingly more important in the upcoming years. There are web shops out there who already enabled payment options through Bitcoin actually.
Transparent and incorruptible
The blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens in ten-minute intervals. Each group of these transactions is referred to as a “block”. Two important properties result from this:
- Transparency: data is embedded within the network as a whole, it is public.
- It cannot be corrupted: altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network.
Blockchain = a network of nodes
‘Nodes’ make up the blockchain network. To simplify: when you connect to the blockchain with your computer or any other device with Wi-Fi-access, it triggers a node and updates what’s going on in terms of transactions to the general cloud storage. Compared to the universe; every user and what they’re doing is a small star within the entire galaxy. It’s decentralized in that sense because every node is an admin within the blockchain and their identity is kept anonymous.
You might have heard of people who ‘mine’ Bitcoin and get rich doing it. The term mining isn’t exactly what happens. People compete with each other solving puzzles. Bitcoin is currently not the only crypto-currency out there. Over 700+ other cryptocurrencies that use the block-chain technology are already out there. Not every crypto-currency is as good as the next so if you plan on investing in it, do your research!
Who will use the blockchain?
As already explained, Blockchain could take over the middleman function, on which banks currently have a somewhat monopoly position. World Bank estimated that over 430 billion USD was sent through money transfers in 2015 & the demand for blockchain developers is super high. In theory, anyone could be using blockchain in the future or at least the technology part of it. Mainly because, if there’s no human error or a major service-hack, you can transfer your Bitcoin to anyone anonymously.
The blockchain & enhanced security
You can access your Bitcoin or other cryptocurrencies with something better than login + password. It’s relying on encrypted technology. There’s a public key, a whole bunch of random numbers, the address of a user on the blockchain network and a private key, a random password basically, that gives you access to your cryptocurrencies.
To summarize: the blockchain gives the interwebs a new functionality; economical transactions. Goldman Sachs has estimated to be able to globally save up to 6 billion USD thanks to the technology. More on this subject can be found in other articles.