Blockchain & Humanity's Digital Evolution
I've tried to break down my own exploration of Blockchain technology for the sole purpose of being better able to explain it to others. This article is intended to be a thorough primer for those who want to understand Blockchains and the impact they are having on digital tool-building.
In its simplest form the definition a blockchain is a:
Distributed database storing an immutable chain of records
But a simplified view of a Blockchain is deceptively simple. Core concepts are easy to grasp but many ideas often lead down the 'technological rabbit hole', clouding overall comprehension and dampening an eagerness to learn more.
Their beauty in their simplicity because:
- It is a way to securely store data in a decentralized network of computers
But their importance is due to the complexity of the technology because:
- It is built off the backs of thousands of years of philosophy, mathematics, cryptography and computer science research
To fully understand why Blockchain technology is so revolutionary, first we must dive into where it came from and the influences for its creation.
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Peer-to-Peer Networks
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Cryptography
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Digital Currencies
1) Peer-to-Peer Networks
Think back to 1999, the year that Napster (the first widely known Peer to Peer (P2P) file sharing program) launched its platform. It enabled you to download mp3 files from a network of other user's computers. This was a huge departure from the newly burgeoning digital download routes and caused a huge wave of confusion, concern, and litigation from the giant firms that were challenged by such a technology.
Enter LimeWire, Kazaa, BearShare, Morpheus
The next large adoption of P2P networks followed with BitTorrent technology. Initial P2P programs simply connected 2 users to directly copy the file while BitTorrenting programs split up a media file into many parts across the entire network. You then download a .torrent file, which holds a 'manifest' of IP Addresses that points to the download location for each piece of the digital puzzle that make up the file.
Enter The Pirate Bay, Kickass, ScrapeTorrent, PopCorn Time
Torrenting enables very fast file downloads because it leverages lots of different devices processing power. This is a huge departure from modern web companies such as Netflix, where the data comes from a single source; massive data centers that Netflix rents from companies such as Amazon Web Services, Microsoft, & IBM — all in order to have the processing power needed to distribute all that video data across the globe.
2) Cryptography
Cryptography is at the core of Blockchain technology and dates back to the Ancient Greeks who used mathematics to create ciphers that decoded masked communications. Cryptography was originally created to prevent third parties or the public from reading strategic messages in times of war. Computer Science has proliferated the real world applications of cryptography and is at the heart of our worldwide communication networks today.
A crash-course list of the cryptographic terms that enable Blockchain tech
Hashing Data is encoded into a Hashed sequence of letters & numbers. This example shows how text can be converted into a hashed sequence, which then requires a key to decrypt the hash into the intended message.
Public & Private Key Documents are encrypted using one key & decrypted using the other. Users often publish public keys and keep private keys to themselves, which enables the ability to disclose different data based on the transaction you're making. Instead of having 50+ logins and passwords, you could tie each of your online interactions: public key (social media) or private key (financial).
Immutability Once a transaction is entered in the blockchain's distributed ledger and the accounts are updated, the records cannot be altered because they're intrinsically linked to every record that came before them. Various computational algorithms and approaches are deployed to ensure that the recording on the database is permanent, chronologically ordered, and available to all others on the network. [1]
What is most groundbreaking about a Blockchain is its ability to record not just financial transactions but virtually everything of value; Investments, gambling bets, land-deeds, content ownership, micro-payments, energy usage, votes, supply-chain.
3) Digital Currencies
Blockchain's first foray into the limelight (and biggest blunder) has been its infamy of the largest blockchain implementation to date name Bitcoin. Journalists & news outlets have fawned over its huge spikes in value & enablement of illicit marketplaces. Bitcoin is the first public usage of a blockchain database and due to its size of usage, the most valued market traded Coin. Each 'coin' you may hear about represents value in a transaction for each of the respective blockchains they operate within. The more people running a node of the chain, the more economic value the Blockchain stores as a whole.
Miners
Miners (or more aptly explained Maintainers) are people who use processing power from their own computational resources to run the blockchain hashing code that is needed to encrypt new data into a Blockchain. As a ledger grows, the amount of processing power it takes to add transactions grows. This is a large part of why Blockchain technology is secure. The amount of electricity & processing power (aka $$$) that it takes to take over majority control of a Blockchain is so high that it is not feasible to alter / 'Hack' a blockchain. You would need to start running over 51% of the nodes in a network, and for larger blockchains would require the computer processing power of large governments.
In the early days you could have probably put your Macbook to work, using that 2.3 GHz Intel Core i7 processor & Intel HD Graphics 4000 graphics card — but nowadays this image is what most of the large Blockchain's crypto-currency mining farms look like.
In short, a miner is rewarded with that specific blockchain's 'coin'. Each blockchain has their own community of miners / maintainers that are rewarded with a digital currency (which are becoming more directly trade-able into FIAT currencies like USD). This monetarily incentivizes the Peer-To-Peer network to maintain a Blockchain and results in a beautiful, self-sustaining organization that maintains a Blockchain over time :)
A work of art in many ways..
A note on 'Hacking'
Blockchain enables a dataset to have no central storage. It is encrypted & replicated across every computer in the network so that each computer running a blockchain 'node' has a complete copy of the ledger. This is a fundamental piece of why a blockchain database is supremely harder to hack than a single data source. The word 'Hacked' usually refers to a SQL database hosted on a server being access by a bad actor. This has become mainstream news from company breaches such as Sony, Target, & HomeDepot. There is danger in having a single-point of failure in any system. Blockchains attempt to mitigate this single-point security risk by encrypting & distributing data across a massive networks of computers. In order to alter a blockchain ledger you would not need to access & alter 1 database on 1 server, you would need to control over 51% of the nodes running a network — A much more complicated & costly task.
That being said. Anything is possible. There have been numerous breaches & hacks that have rocked the crypto/blockchain communities to their core. Cryptographic science represents the best technology to mitigate digital maliciousness right now. Improving security is a massive discussion happening in every technology community.
Lets re-group..
Cryptocurrencies are a way of recording transactions between two parties efficiently and in a verifiable and permanent way within a blockchain. [1] 'Crypto-Currencies' do not need backing from a government or institution, because everyone involved in participating on the blockchain where that transaction takes place, has a copy of their own ledger. Blockchain technology enables complete, conclusive verification without a trusted 3rd party [2]
Now that we know where Blockchain technology came from and why it was created, why is it important? To see where blockchains are able take us we can look at the existing models & theories on which our society is built.
Philosophy & Economic Theory "Your scientists were so preoccupied with whether or not they could, they didn't stop to think if they should."
Jurassic park made famous this scientific quandary that brings up a very important point. Would the founding minds of social & economic theory be rolling in their graves over recent Blockchain craze & theory re-invention?
Do we really need blockchain technology?
Image Source: http://dilbert.com/ Economic models developed over the past century have enabled immense expansion of our strategic management ability. However, the internet was designed to move information — not value — from person to person.
Academic & Economic theories empowered corporations to evolve; hierarchical, insular, and vertically integrated. Blockchain technology will have profound effects on the nature of companies; how they are funded and managed, how they create value, and how they perform basic functions such as marketing, accounting, and incentivizing people. Software in general will continue to eliminate the need for many management functions. [1]
It is thrilling to think about how blockchain fueled models will start to poke & prod into our standard economic theories and their globally established business models.
Ethereum
My introduction to Ethereum is really the spark for my deep interest in Blockchain technology. The forerunner for mass adoption in Blockchain usage & currently boasting the 2nd most 'market valued' Cryptocurrency — the Ethereum Blockchain hopes to be the open-source framework to implement Blockchain technology into businesses at scale.
A Programmable, Open-Source, Blockchain
Smart Contracts
Ethereum is a decentralized ledger that runs smart contracts; applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
Smart Contracts are blocks of code that are run on a Blockchain. This is the biggest departure from Bitcoin, as it is the first programmable Blockchain. With API access to protocol methods (sending tokens, creating transactions, etc..), a growing developer community, and most importantly a formative scripting language called Solidity — the doors are slowly opening for software developers of all kinds to build amazing new economic & social-centric business models within the Ethereum ecosystem.
Brooklyn based ConsenSys is leading the charge in Ethereum dApps (Decentralized Applications) development working to create simplified and automated applications to facilitate peer-to-peer transactions and exchanges.
Human's digital tool-building evolution
Humans create tools to solve problems in our cultural processes
As knowledge builds — our species creates tools to solve common problems. Stone tools helped us evolve less dominant jaw muscles. The wheel helped proliferate the transportation of agricultural yields. Combustion engines enabled the mass production & transportation of goods. While it may seem irrelevant to compare Blockchain technology to the advent of the wheel, I find it quite appropriate. The Internet, P2P networks, and cloud computing have all been digital tools that solve the problems we face in our digital lives.
- Fire → Agriculture → The Wheel
- Metallurgy → Printing Press → Paper currency
- Medicine / Motors → Electricity
- Computing → The Internet → Blockchain Decentralization
Blockchains are exciting, but certainly not imminent. The immense potential to upend our comfortable communication pathways can even be unnerving at times. There is a lot of research, experimentation, and implementation needed to take this technology towards a mass public adoption. P2P computing will likely never completely replace the server based model, but will surely find its way into our tools and systems as we face more challenging digital problems as humanity scales and more of our cultural & economic borders dissolve.
Thanks for reading! Below are some additional sources to continue your adventure into the world of Blockchain, and humanity's digital evolution.
Real World Applications using Blockchain Technology
Influential People in my research:
- Satoshi Nakamoto: Bitcoin's Anonymous creator → Whitepaper
- Vitalik Buterin: Founder of Ethereum.org and Blockchain visionary
- Charlie Lee: Founder of Litecoin and Ex-Director of Engineering at Coinbase
- Laura Shin: Forbes senior editor // Podcast host of 'Unchained'
- Joseph Lubin: Founder of Consensys.net & Blockchain Advocate
Sources
[1] The Truth About Blockchain, Harvard Business Review
[2] Deloitte, A game-changer in accounting?