Think about a blockchain as a distributed database that maintains a shared list of records. These records are called blocks, and each encrypted block of code contains the history of every block that came before it with timestamped transaction data down to the second. In effect, you know, chaining those blocks together. Hence blockchain.
A blockchain is made up of two primary components: a decentralized network facilitating and verifying transactions, and the immutable ledger that network maintains. Everyone in the network can see this shared transaction ledger, but there is no single point of failure from which records or digital assets can be hacked or corrupted. Because of that decentralized trust, there’s also no one organization controlling that data, be it a big bank or a tech giant like Facebook or Google. No third-parties serving as the gatekeepers of the internet. The power of blockchain’s distributed ledger technology has applications across every kind of digital record and transaction, and we’re already beginning to see major industries leaning into the shift. (1)
With blockchain, we can imagine a future in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision. In this world every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared. Intermediaries like lawyers, brokers, and bankers might no longer be necessary. Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction. This is the immense potential of blockchain. (2)
South Korean cryptocurrency exchange Coinrail reported a hack on its website during the early morning hours of June 10, 2018. The thieves allegedly made off with over $40 million worth of altcoins and assorted tokens.
The Coinrail hack is the fifth major theft this year. Trouble began in January after nearly half-a-billion in cryptocurrency was stolen from popular Japanese exchange Coincheck. BitGrail in Italy was hit in February, which resulted in over $200 million worth of cryptocurrency disappearing in just a matter of minutes. Coinsecure was the third victim, and saw over $3 million worth of bitcoin stolen from its wallet last April.
“Investors have been increasingly worried about cybersecurity issues,” says Adrian Lai, founding partner at Hong Kong-based investment firm Orichal Partners. “At this stage, obviously, the standard is not high enough.” (3)
Impact and Applications
Despite the blockchain hype—and many experiments—there’s still no “killer app” for the technology beyond currency speculation. And while auditors might like the idea of immutable records, as a society we don’t always want records to be permanent.
Blockchain proponents admit that it could take a while for the technology to catch on. After all, the internet’s foundational technologies were created in the 1960s, but it took decades for the internet to become ubiquitous.
That said, the idea could eventually show up in lots of places. For example, your digital identity could be tied to a token on a blockchain. You could then use that token to log in to apps, open bank accounts, apply for jobs, or prove that your emails or social-media messages are really from you. Future social networks might be built on connected smart contracts that show your posts only to certain people or enable people who create popular content to be paid in cryptocurrencies. Perhaps the most radical idea is using blockchains to handle voting. The team behind the open source project Sovereign built a platform that organizations, companies, and even governments can already use to gather votes on a blockchain.
Advocates believe blockchains can help automate many tasks now handled by lawyers or other professionals. For example, your will might be stored in a blockchain. Or perhaps your will could be a smart contract that will automatically dole out your money to your heirs. Or maybe blockchains will replace notaries.
Bitcoin proved that it’s possible to build an online service that operates outside the control of any one company or organization. The task for blockchain advocates now is proving that’s actually a good thing. (4)
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