What is the reason for such a fuss if we can check and trace information today?
The word blockchain is how the market has named this set of technologies that can be programmed to record, check, and track anything with value [1], from financial transactions to medical records and property titles. However, what’s so unique about this if it is already possible to register, check, and track on centralized databases?
The way of tracking and storing data
Its architecture revolutionizes the way we interact with each other.
Blockchains store information in containers called blocks that are chronologically linked to form a continuous line, a chain of blocks. That is, for a change in the information already registered in a determined block to occur, it is not overwritten. Instead, any data alteration is stored in a new block, showing that X has changed to Y at a specific date and time.
For instance, let’s imagine that there is a dispute between Maria and her brother Andre about who is the owner of a real estate that is in the family for years. As blockchain uses an accounting method, there is a log book where it is registered that Adam was the first owner of that real estate in 1900, that Adam sold that real estate to Eva in 1930, and so on.
Therefore, each alteration in the ownership of that real estate is represented by a new record in this ledger until that, in 2007, we reach the last entry of transfer of the real estate. Maria is the current owner of that property, and we can see the records of the whole history of that real estate in the ledger. Well, this is where things get interesting.
Building trust in data
Unlike the old accounting method, the blockchain structure was designed to be decentralized and distributed through an extensive computer network. The decentralization of information reduces the possibility of data adulteration and takes us to a second factor, which turns the blockchain architecture unique, it creates confidence in the data.[2]
Before the block can be added to the chain, some things need to happen.
First, an equation, a cryptographic puzzle must be solved, thus creating a block. The result of that puzzle is shared with the other computers of the network. In the Bitcoin blockchain, the necessity of solving that equation is known as the power of work (PoW). The network will then check that proof of work (PoW) and, if correct, the block will be added to the chain.
The combination of these complex mathematic puzzles and the checking done by many computers guarantee trust in the chain of blocks. As the network itself builds trust, now we can interact directly with our data in real time. That leads us to the third reason why the blockchain infrastructure is so revolutionary.
The disintermediation (direct interaction)
Nowadays, when doing business with each other, we do not show the other person our financial or business records. Instead, we rely on brokers, trusted ratifying agents, to verify such records and keep the information confidential. Such brokers build trust between the parties and can verify, for instance, that, “yes, Maria is the legitimate owner of that real estate.” Well, this approach limits exposure and risk, and adds another step to the process. That means more time and more spending.
If information regarding ownership of Maria’s real estate were stored in the blockchain, the broker would no longer be necessary. As we now know, all blocks added to the chain have been checked to be accurate and may not be altered. Thus, Maria could just show the information of the title deed secured in the blockchain. Maria would then save considerable time and money with the straight interaction.
Reliable peer-to-peer interaction with our data may revolutionize how we access, verify and negotiate with each other.
Its nature of General-Purpose Technology
Blockchain being an essential core technology, GPT – General-Purpose Technology [3], it enhances other technologies and may be employed in manners that were not imagined yet [4]. Some blockchains may be public and open to any person to see and access, without the need for prior permission. Other blockchains may be private and closed for a selected group of authorized users – like a company, a bank, or government agencies. [5] Also, there are hybrid blockchains.
Thus, a given government could, for example, use a hybrid system to register the boundaries of Maria’s property, the fact that she is the owner, keeping her data private, or allowing everybody to see the property records, but saving the exclusive rights of updating them to themselves.
Final Remarks
The combination of all these factors:
1) distributed and transparent manner of tracking and storing data
2) Building trust
3) straight interaction in real time
4) the nature of core technology that enhances other technologies
… give the blockchain structures the potential of profoundly impacting governance relationships, ways of life, traditional corporate models, an institution in universal range and the society. [6]
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References
[1] value, here, not only in the monetary sense but also encompassing everything that can be monetized, like a person’s reputation.
[2] Centre for International Governance Innovation. In: “What is blockchain?”, CIGI on Line, 2018
[3] Lipsey, Richard; Kenneth I. Carlaw; Clifford T. Bekhar. In: “Economic Transformations: General Purpose Technologies and Long-Term Economic Growth.” Oxford University Press, pp. 131–218, 2005.
[4] Core technology, according to Richard Lipsey, is that which has the potential to affect a whole economy (usually on a worldwide level), drastically transforming societies through its impact in the existing economic and social structures. As examples of core technologies, there are the steam engines, railroads, interchangeable parts, electronic, materials handling, mechanization, control theory (automation), automobile, computer, the Internet, medicine, and Blockchain.
[5] Hileman, Garrick and Rauchs, Michel. In: 2017 Global Blockchain Benchmarking Study, September 2017
[6] Idem to reference 2.
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