Daisy chains are familiar to us all from our childhood days. Blockchain technology is something that is certainly a lot newer, but surprisingly bears a vague similarity in the way in which its elements hang together.
From governments to networking, decentralization is a concept gaining momentum both in its appeal and its actual utilisation. While governments across Europe are giving increased power to regional bodies to make local decisions, blockchain technology is threatening to disrupt the basis on which many transactions, particularly financial ones, are organized. Interestingly, it also goes against the trend for centralizing data in cloud-based servers, even if those servers’ locations are unknown and widely distributed.
Blockchain was launched back in 2008 by Satoshi Nakamoto to serve as the backbone technology for the digital currency Bitcoin. It has been immensely successful for supporting that currency, which last year was worth around $9 million. This year, the ‘cryptocurrency’ market as a whole, including Bitcoin, is expected to be worth over $50 billion, according to the Financial Times. This value may, of course, seem somewhat bizarre when you consider that Bitcoin is a virtual currency with no physical manifestation.
Even more bizarrely, Bitcoin is often used as the currency underpinning what can only be judged as decidedly dodgy deals. The ransomware demands sent out to the unfortunate sufferers of the recent massive WannaCry computer attack were in Bitcoin format. A survey commissioned in 2016 by secure connection specialist, Citrix Systems, from One Poll, asked British businesses how they were preparing themselves against ransomware attacks. The answer was that more than a third (35%) of the large companies surveyed were stockpiling digital currency (i.e. Bitcoins) against this eventuality, and that they would be prepared to pay sums of over £50,000 to regain access to business-critical data or important intellectual property (IP).
One year on, that figure has risen massively. Those same firms are now prepared to pay an average of £136,235. Many of them are buying and stockpiling digital currency ahead of time. As the WannaCry attack demonstrated, time is of the essence once a computer system has been compromised, and time is precisely what any firm affected won’t have if they’re not prepared. It can take up to a month to be vetted and approved as a would-be purchaser of Bitcoins - a security measure put in place to limit fraud and identity theft.
Bitcoin is the most widely publicized user of blockchain technology. But how does blockchain’s backbone technology differ from that supporting more conventional online financial transactions? Rather than having a central lending authority to validate a transaction, blockchain uses a distributed and decentralized peer-to-peer network of nodes. Each node sees the request for a transaction (which might revolve around cryptocurrency, records or contracts, or some other kind of content). The request and the user’s approved status is then validated using known algorithms. After verification, the data is combined with other transactions to form a new block of data, which joins the end of a chain of previously approved transactions—hence the term blockchain.
The blockchain has been likened to a regularly updated database of which there is no sole copy. There is an automatic check conducted by the network every ten minutes, so entries are effectively reconciled on a constant basis. All information is shared, not stored in a single location. It is hosted by millions of computers worldwide, making it almost impossible to hack. This means that no one entity can control information and that there is no single point of failure. Every new node that joins the network automatically gets sent a copy of the blockchain.
Being so public, the network is both highly transparent and virtually incorruptible. An unbelievably massive amount of computing power would be required to override the network to alter any one data block in the chain. Not impossible, but certainly implausible.
Effectively, the nodes that join the blockchain form a second layer of network. Their affiliation to the blockchain is in addition to any other network function that is practiced by that particular node. Each node joining the blockchain will always compete with other nodes to gain Bitcoins (or some other cryptocurrency), giving them heightened status. This is sometimes—rather confusingly—referred to as ‘mining’ for cryptocurrency.
Disruptive technology is indisputably the domain of the entrepreneur. While the automotive sector is one of the technology focus areas leading the way, blockchain promises to have the same impact on the business and financial sectors. Imagine using blockchain technology to verify transfers on the stock exchange, or to send international payments. While financial transfers are most likely to benefit from employing blockchain technology, it could equally well be used to make voting in elections or other polls fully transparent. Even auditing supply chains could benefit from using blockchain.
Encryption is one of the strengths of blockchain technology, taking us away from the convention of a username and password with which we are all familiar. What a relief it would be to have services secured automatically without having to recall a growing number of passwords and usernames!
So for all the budding entrepreneurs out there, what applications can you think of that would benefit from employing blockchain? It has been said that 2017 will be a pivotal year for blockchain technology. Will you be one of the pioneers to help make this come true?
Mirko Bernacchi joined the Italian branch of Mouser Electronics in Assago in 2012 as a Technical Support Specialist. With more than 25 years of experience in electronics, Mirko provides expert technical assistance and support as well as customer service for our Italian office. He worked as a test development engineer at Celestica and Service for Electronic Manufacturing. At IBM he was a Burn-in memory modules test engineer and an Optical transceiver card test engineer, responsible for the installation of new test equipment, production test problem management and supplier interface as well as the introduction of new test routines.
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