If you were born in the early 1990s or prior, you probably remember one of the most frequently asked questions of the 20th century’s last decade, “What is the internet?” The then bullish “It’s the future!” reply has proved very true indeed as the internet permeates our lives, and the pre-internet era seems surreal and distant to those who never experienced that pre-connected world.
Since its beginning, countless innovative technologies and infrastructures have been designed and deployed within the brave new world of the internet. Some have proved groundbreaking and have become integral to our connected world; others failed to hit the mark and faded away.
One “new” technology that has stuck is Blockchain. Actually, it is not that new. The Blockchain concept made its first official public appearance in 2008. Nevertheless, mirroring those questions about the burgeoning internet decades ago, one of the most frequently asked IT questions of today is probably: “What is Blockchain?” So why is this question being asked so long after our first glimpse of Blockchain? Well, a key reason is that, to a certain extent at least, Blockchain is a true digital revolution. Not quite as revolutionary as the advent of the internet itself, for sure, but Blockchain certainly warrants the attention it receives. And, compared with the omnipresent, all-encompassing world wide web, which most people seem to have at least a fundamental understanding of, the general public seems to have little or no knowledge of Blockchain. It is a complex technology that operates behind the scenes.
To understand what Blockchain is, you only need to know three things. What is a block? What is a chain? What is a ledger? While reading about Blockchain, you will often find terms like “distributed ledger” or “cryptographic hash” or “smart contracts” and many other often abstruse terminologies and formulas. To simplify, Blockchain is a decentralized infrastructure, often public, that works as a ledger using a complex algorithm to gather and keep track of information in blocks, each followed and preceded by other blocks, thus forming a chain of blocks.
In a physical ledger, financial transactions – which include information like date, amount, issuer, recipient – are added one after the other on a page. As soon as a page is full, we go to the next one. When using Blockchain, a block would be the equivalent of a physical ledger’s page. A block can hold several hundred – even thousands – of transaction details. Each block is then added to the previous block. The idea of a chain of blocks is essential because the chain grows by having more blocks added in sequence. Blockchain is what we call “append only.” Blocks cannot be added in the middle of the chain, nor can they be rearranged, deleted or edited, thus allowing an unobstructed vision of the current state of things and all the history that led to it.
Blockchain is also tamper evident. The blocks and the data stored in them cannot be mingled with. What stops anyone from doing so? The answer is “cryptographic hashing.” Just like in cooking, this involves chopping and hashing, and mixing everything up to obtain a much less voluminous result which depends entirely on the original material. In this case, we have a code comprised of digits and letters. However, unlike encryption, you cannot decrypt the code and revert to the initial data. Just like no operation will ever allow you to retrieve your avocados and the other ingredients from your guacamole.
So, why all the fuss and excitement? Well, try and imagine what forgoing the services of a third-party ledger can imply for any record-keeping process such as trading and other financial transactions, or supply-chain. Blockchain is a tamper-proof infrastructure where people and businesses not only can store data but also build programs and applications. With Blockchain, the system itself becomes an absolute, unalterable and indisputable source of truth.
Although Blockchain was initially developed for the Bitcoin project and still is the underlying technology behind all cryptocurrencies and DeFi (decentralized finance), it is also far more than that.
The potential for radical change and disruption in the established financial system that Blockchain holds may in part explain its relatively long and somewhat discrete gestation period, as well as the mystery behind the original source published by the unknown Satoshi Nakamoto in 2008. One thing is certain, we may one day no longer hear about Blockchain; not because it will disappear, but because – just like the internet – it will be widely implemented and so present in our lives that we won’t even see it or think about it anymore.