What is a Blockchain?
Blockchain, otherwise called Distributed Ledger Technology (DTL), is a decentralized, distributed and usually public virtual record of information housed in “blocks”. No single owner of information exists in a blockchain meaning that everyone has access to verify and audit transactions from the comfort of their home. Importantly, alterations to the information stored in a blockchain cannot be made discreetly.
How Does a Blockchain Work?
Every block in a blockchain is made up of a cryptographic hash of the preceding block, a timestamp, and the transaction data. A hash is a mathematical function that converts or maps a defined set of data into a “hash value” i.e. a bit string with a defined size. A cryptographic hash is basically a hash function with added security detail that protects the content of the information being passed along the chain.
Each block in the chain has a limited amount of data it can hold. As a result, new blocks are constantly created along the chain to preserve the information. Each newly created block is closed when it reaches its memory capacity and is added to the chain in a repetitive linear process. The timestamp is evidence of the block’s transaction data existence at the time of the publication.
The continued linkage of blocks and dissemination of information along the chain makes the alteration of an independent block without changing the preceding blocks impossible.
Importance of Blockchain Technology
Blockchain technology is highly regarded for its security and transparency. With blockchain, 3rd party interventions are eliminated and cost-reduction of transactions can be ensured. The absence of human element serves to improve the accuracy of the chain.
These advantages explain why blockchain is central to bitcoin operations and other related digital currencies.
Economic Significance of Blockchain
The World Economic Forum projects that an estimated 10% of the world’s Gross Domestic Product (GDP) will originate from blockchain-based systems by 2025.
According to a PwC report, blockchain could add $1.76 trillion to the global economy by 2030 and improve 40 million jobs worldwide within the same time frame.
The report identifies 5 primary use cases across which this economic impact is set to be spread:
i. Product tracking: This is expected to contribute $926bn to the overall market share
ii. Payments and financial services (including digital currencies) which is projected to yield $433bn
iii. Identity management (personal IDs, certificates) with an expected input of $224bn
iv. Dispute resolution and contracts which will provide $73bn
v. Customer engagement ($54bn)
How Blockchain can Improve Security
As outlined in the preceding section, blockchain use cases are spread across 5 main areas. These areas are all possible fields for transforming security. Some of the ways blockchain can enhance the security sector are outlined below:
Smart Contracts: Blockchain can usher in a new era of employer/employee agreements through smart contracts. A smart contract is a self-executing contract written in code that encompasses the terms of the agreement between two parties. On blockchain, this agreement is immutable and trackable. Once the terms of the agreement are fulfilled, the smart contract executes the agreed terms. This can be used to facilitate contracts between transacting parties ensuring that both ends of the terms are fulfilled thus protecting both parties from fraud.
Record Verification: Traditional record keeping processes are fraught with many imperfections. Records - of any kind - can be housed in a blockchain and linked to verifiable sources. For example, blockchain can be used to set-up a Criminal Database that is immune to external alterations. Data on any persons of interest can be accessed with ease from anywhere in the world. This system ensures that wanted persons can be found easily and put behind bars, away from harming others.
Payments: Blockchain can be used to make the world an even more pronounced global village. Already, international transactions can be made with the use of digital currencies operation on blockchain. The more widespread adoption of blockchain for financial transactions is another means to prompte security.
It is noteworthy that AI can be used in conjunction with blockchain. The synergistic action of both technologies can drive immense value. AI techniques such as machine learning and reinforcement learning can be used to extract valuable insights from the validated records stored on blockchain. The findings of this analysis can be used to solve innumerable security challenges.