Every revolution bought an impact on human mankind in some or other way, be it transportation or industrial, and now the world we’re living in is no less than a revolution, and the Internet revolution. This has been by far the most impactful one.
There’s no denying the fact that the internet solved many of our problems and changed the world for the better, but the internet didn’t completely solve one problem, ONE BIG Problem, that’s TRUST!
More the people involved in an activity, more the number of people you need to trust.
Even sending a single message to a person requires multiple layers of trust, till it reaches the receiver.
It goes both ways, the government trusting the piece of paper shown by a person claiming the ownership has multi-layer of trust.
Similarly, even we as an internet user has to trust layers of entities regarding our public and personal information.
SO HOW DO WE STRENGTHEN THIS TRUST??
The answer is BLOCKCHAIN!
But what exactly is Blockchain?
Let’s review the google definition of the blockchain
“Blockchain technology is most simply defined as a decentralized, distributed ledger that records the provenance of a digital asset.”
Breaking down the above sentence, it says it’s a ledger.
A ledger is just a record on the database or in simpler terms an entry book.
The next keyword is decentralized and distributed.
DECENTRALIZATION means that there is no single point where the decisions are made.
Every node makes a decision for its own behavior and the resulting system behavior is the aggregate response.
Each node has a copy of the whole record and every other node verifies and updates on a new transaction.
But how is this done?
Imagine blockchain, as below figure and each block contains user input information along with some additional information.
Additionally, a block stores a cryptographic hash of the previous block which helps them connect and maintain the integrity.
Now, if data of any of the blocks is altered, all the next blocks will get invalidated, and then the tracing back will lead to the exact point where the data is altered. but, even before this, there’s an additional layer of action that adds to the security of the blockchain.
It’s verifying the block before adding it to the chain. The term for that is “Consensus”.
Some of the consensus algorithms used are:
- Proof of Work (PoW)
- Proof of Stake (PoS)
- Delegated Proof-of-Stake (DPoS)
- … and more.
Listing some attributes of blockchain:
- Cryptographically secured
- Peer to Peer
- Immutable
Well now is an ideal time to talk about Smart Contracts and how will it help in the trust factor of blockchain
Smart contracts are a defined set of rules or code which makes a decision upon certain events on top of Blockchain.
Smart contracts are managed by a P2P network of computers for making decisions or coming to an agreement.
Let’s take an example of raising money, the scenario being that entity A wants to raise X amount of money and gets listed on a website. people who like the idea will willingly give money and if entity A fails to raise X amount of money, people will get back their share, and if entity A manages to raise the amount they will get it as their idea had the potential to attract and make people give.
In this scenario, the middle man i.e the company behind the website/app has to be trusted by both entities.
Here, the smart contract can help by gaining the trust of both parties,
- A pre-written logic where the raiser will automatically get the money once the X amount is raised in a certain period of time.
- the donators will receive back their money if the raiser fails to do so.
Here rather than trusting the people, trusting a smart contract is always a superior option.
Not every technology is perfect, even blockchain has its shortcomings
- High utility of resources.
- Mining can be costly.
- Adoption.
The third point is where I mostly want to emphasize. the adoption and the state of blockchain as of early 2021.
In a PwC surveyed executives in 2018, 84% of respondents are stated that they were actively involved with blockchain.
Gartner, one of the world’s leading research and advisory companies, forecasts that blockchain will generate an annual business value of more than USD 3 trillion by 2030.
A huge chunk of adoption is in the financial sector because of the De-Fi(Decentralized Finance) followed by Industrial products and manufacturing Energy utilities and Healthcare industries. source: PwC
And talking about regional adoption here is distribution.
US and China being the lead adopters.
Conclusion: A technology with such a huge impact still has a long way to go in terms of adoption and use case in the daily lives of the people.
