- Part 1 – Blockchains – First Steps
Simply put, blockchain is a distributed & accountability compliant digital ledger of any transaction that has a value attached to it. It has a duplication factor which is incorruptible. Each duplication is associated with a different computing object in the communication network e.g. computers, mobiles, wearables, etc. This ledger has an inherent property of having a synchronized updates. This also makes it a shared resource, and openness handles attached to it. Since it is shared, it has a benefit of eliminating the single point of failure. In this series, we will be examining different aspects of the blockchain. In this part, you will get a primer on its basics.
Disrupting the Centralization
Since the blockchain database is shared among the network entities, it works just like a Distributed Update Control System (DUCS). I think this is the first time, the DUCS is being introduced as a term. Each new update is automatically available to each entity on the information highway. If we take the economic use case of blockchain, we can take the traditional example of a bank. Each bank maintains a transaction log in a centralized manner. The blockchain gets rid of this and opens up the silo to create an easily accessible resource, through the decentralization machinery. This creates a disruption in the centralization markets which banks have been using since their inception.
Continuing with our bank analogy, if a bank wants to share this central information with another bank or a regulatory authority, there are management constraints through which each entity has to go. And during this time, the updates are restrictive in nature. The blockchains get rid of this management layer.
If we only take into the account the aspect of sharing and availability, we can get multiple flavors of any technology which satisfies this approach. That is why we are getting tons of instances of blockchain similar technologies e.g. etherium.
The banks monopolize on the notion of lack of durability if the transactions are shared. This inherent fallacy has been looming around since the design of a banking system. The question is whether the same durability can be provided with blockchain or not. And it does. How? If it can be controlled by any entity in the system, and each update goes through the voting and consensus, then we get the durability. This vetting is what we get as a built in feature in a blockchain type technology. The durability is actually a human error problem, and not the technological problem. So if we take out the human element out of the blockchain, we would have a perfect durability. And this is the perfection which has been sought after by many new flavors.
Degree of Accountability
Since the ledger is shared, and the votting mechanism is there, every entity gets responsible for the accountability of its updates to the ledger. A bad behaving entity knocks out since the bar of accountability is set by the network itself. An exchange is so open, that without the consensus transaction is worthless. So inherent value of a transaction is streamed throughout the network, and the validation makes it durable and robust. It is one of the mechanisms to provide the highest form of accountability to the lowest forms of attachment points within the network. Decisions flow horizontally while transactions can occur vertically.
Manipulation has been the ultimate tool for a fraudulent behavior or the corruption. Blockchains provide a zero manipulation mechanism, so nuances of fraudulent behavior are in check. Companies throughout the traditional transaction ecosystem have many expensive controls in place in order to curb fraud, and they spend billions of fiat currency to make sure things go smooth. But still, we here the fraud instances on almost daily basis. If some technology can save us those investments in fraud control, then I believe it is not a bad idea to look into it.
Since the network or the information super-highway is sort of compliant with net neutrality, once blockchain is in action it breaks the barriers of geography. Zero manipulation across the board!
The Internet as a network of networks of computing nodes plays a role of the underlying architecture of the blockchain. If they are collaborating, we have an overlay on the internet itself. This is that collaboration and voting which makes this overlay a powerful fabric for transaction super-highway. Since each node acts as a controller as well, so we can say that this overlay is actually a network of controllers with checks and balances of blockchain mechanisms. Pretty neat!
This overlay is actually a peer to peer protocol compliant communication factory. Each peer to peer communication instance is backed through the collaborative nature of blockchain similar technology.
Blochchains can be used in all sort of societal settings. Banking is one such instance. Since transactions can be of any sort, it has can cover more markets. E.g. it can be used in voting, music distribution, ownership value distribution, money transaction distribution, acknowledgment management, etc. We have covered some of the diverse markets in which blockchains can be used in a separate article which can be accessed here.
Blockchains have certainly inherent power to provide benefits to the society. It is on us to make it more robust by eliminating the human element and provided further openness through regulation. Currently, its usability is mostly tested in banking systems, but I suppose it should be tested in other settings as well e.g. music ownership distribution etc. The mass acceptance is always a matter of time, but the basic analysis of why it can be successful is now out of the laboratory.