It has the power to destabilise and revolutionise the world as we know it. It's the resetting of the internet, of society.
It's just an expensive and slow database, 21st-century snake oil, a buzzword people drop-in to impress.
Just what is Blockchain?
This blog won't deal in-depth with technical jargon like nodes, hashing, and mining. Blockchain has gripped me since I stumbled across it a month ago, and this is an introductory blog about its far-reaching and potential pitfalls.
Most people know Blockchain has something to do with Bitcoin and cryptocurrency and by association, a lot to do with hackers and corruption.
One thing for sure about Blockchain is it's not just about money; it could be about how we live, how we think, and perhaps a chance to reimagine the world.
Blockchain is already changing people’s lives, and it may improve the lives of billions of people. So what might – and might not – Blockchain mean to a recalibrated 21st-century world.
Before exploring the world of Blockchain, it's worth defining our current relationships with technology.
We are in a world of centralised systems. Governments are centralised. Facebook, Google, or a bank is centralised - ultimately they control our transactions and messages on a central server. We ask and expect those banks, shops and governments to protect us via their centralised systems.
As humans, we value the trust, and these institutions offer as centralised intermediaries. We look at a website and make judgements on how trustworthy it looks. Perhaps its Visa Verified Payment system persuades you to purchase, or a verification text your bank sends to your phone.
A decade ago, people hesitated before paying online with credit cards, fearing a rogue company or hackers would steal their details and money. These centralised systems are fragile and vulnerable to cyber attacks, electricity blackouts and more as we see with repeated hacks. And yet still we trust them.
Blockchain is asking us if we want to use the internet more transparently and in the hands of the many, not the few.
To find something resembling an answer, we can't ignore a quick explanation of what a Blockchain is.
In the very barest terms is a shared database, built of connected blocks of information. Importantly, it is the opposite of a centralised system. It is decentralised, meaning a Blockchain database is stored on the computer of everyone using that Blockchain.
We are used to using Excel spreadsheets, which is a database that records information and transactions, like Blockchain. We used to save them on our own PCs, and only we could change the information, an example of a centralised system.
Then Dropbox and Google Drive came along, and lots of people can now edit and save an excel document if they have permissions. Google Drive or Dropbox hold the information, we access it, and it is still centralised. People can also edit, change and save data.
Blockchain differs. It is like Excel as a database to store information, and it is like Google Drive because many users can upload data. Crucially, Blockchain's data is held on EVERY user's computer and once uploaded, users cannot alter the information. It is decentralised.
• Blockchain is a database.
• A Blockchain database is stored on every user's computer or laptop.
• Information is stored in chunks, called blocks, with limited capacity.
• Once a block is full, all computers on the Blockchain use maths (mining) to check that all new information added is the same.
• The block is added to the Blockchain if all computers agree all new information corresponds.
• A new block is started, and the line of blocks makes a chain - hence Blockchain.
• Blockchain databases can be public and accessible by everyone, or private and shared among approved users.
A Blockchain-based database offers transparency and real-time checks of all the information stored on it.
Someone claiming their VISA had been double-charged could quickly see their claim verified or rejected. A Blockchain database could hold a nation's COVID test results. Every user's computer contains all the information.
Blockchain in Practice
Imagine a street of 50 houses, where all the neighbours get on and talk to each other. They work on an ownership system of sharing information and trust, the same as Blockchain. Everyone knows that Mr Smith owns house one, Mrs Reddy house two and so on. If Wee Jimmy tried to claim house one as his own, all the remaining neighbours would disagree, and house one would continue to be Mr Smith's. There is no single point of failure. This is how Blockchain works, except computers are doing the checking.
Imagine the same street where all the ownership information was held by Mr Smith only, and he was the only person who could manage data. He could change the deeds of house two to his own name, and the system would show house two was his. This is the weakness of a centralised system.
We can see how they work differently. While still not 100% hackproof, Blockchain database protection is incredibly strong. I will give a more detailed explanation of the inner workings of Blockchain in a later blog.
Decentralisation and the Truth
Blockchain systems lack a central policy or decision-maker, and that makes it a decentralised system. Decentralisation is a significant theme in Blockchain. All users agree to additions to a Blockchain, just as they can confirm what information already stored there. There are no middlemen like your bank, no top administrators who can edit and delete data, and no way to alter the chain.
We live in a human-made swamp of fake news, fake facts and fake videos, where the essence of what truth is, is debatable. Blockchain has arrived at a ripe time; people are looking to technology to solve these problems and help us understand what is really happening in the world. Fake news videos could be flagged and tagged as such and not spread misinformation around the globe's social media channels.
Multiple users cement trust, information and transactions do not need to pass through centralised banks or governments. Transaction fees are small on Blockchain. Imagine the global savings on bureaucratic fees. Also imagine the transfer of power from enormous, centralised institutions into the hands of a decentralised populace. The ability to destabilise global systems through decentralised networks is one of Blockchain's most appealing and repeated claims.
Just some of what Blockchain could do:
Among the claims are:
• Help 1.7 billion people locked out of the banking system
• Relaunch the internet and society with transparent systems
• Streamline services
• Create trust through sharing information
• Create immutable online, digital IDs
• Save money on transaction fees by cutting out middlemen (banks etc.)
Let's see how it's already working.
Blockchain helping Syrian Refugees
The World Food Programme (WFP) has used private Blockchain technology since January 2018 to deliver food assistance more effectively to 110,000 Syrian refugees in camps in Jordan.
Its Building Blocks initiative links an individual's iris scan and identity to a Blockchain database. WFP-contracted stores scan a shopper's eyes, the immutable Blockchain checks the shopper's ID and funds. If the eye, funds and purchase tally, Blockchain authenticates and records the purchase, and updates any balances attached to that person's ID, effectively eradicating any payment fraud. The system is quick to set up in emergency zones, with Bangladesh earmarked as the WFP's next possible rollout destination.
Dara ElMasri, communications officer at the WFP in Jordan, said: "To date, over US$ 100 million worth of entitlements has been transferred to refugees through more than 720,000 Blockchain-supported transactions.
"Transaction costs have been almost eliminated, with monthly savings that represent 98% reduction in banking fees, offering donors distinctly better value for money.
"A Blockchain collaboration platform could benefit the entire humanitarian community and has the potential to improve various aspects of humanitarian aid."
Helping the Unbanked
The current financial system of trust and middlemen (banks) has left 1.7 billion adults without a bank account (unbanked) in 2017, some 56% of whom are women. Most unbanked adults have primary education or less (62%). Imagine the power of a tool that can guarantee these people a secure banking or payment system, people the current system neglects or takes advantage of.
They won't be ripped off by banks, by salespeople or lose out to high transaction fees such as with Paypal.
Good scenario: An unbanked person uses Blockchain-based cryptocurrency via a phone-based app to pay for goods and services, with secure identification, transparent transactions and a fraction of the running costs. People gain access to many previously unavailable services.
Bad scenario: Unscrupulous cryptocurrency intermediaries sign up the unbanked and use the technology to take the unbanked person's money.
The Elephant in the Room – Cryptocurrencies
Many cryptocurrencies run on Blockchain have evolved to deliver a way that people can trade and pay each other without a bank or a government-based currency, bank or middleman.
That sounds ideal; everyone has a story about exorbitant bank fees or being incorrectly double-charged. Bankers are hardly popular post-2008 financial crash, and yet they are still trusted more than crypto.
When I explained to my friends and family that I was reading a lot about cryptocurrency, almost everyone warned me: "Be careful, lots of scams out there."
And in many regards, it's true. I started watching Blockchain courses and videos on LinkedIn. A swathe of crypto investors and analysts have since asked to connect with me, promising riches for just a few hundred of my USD or GBP pounds. It's all so easy, they say. Bitcoin is currently experiencing a boom (and bust) in value.
There are examples of mass rip-offs. Onecoin is a famous example of successfully mixing the jargon of Blockchain and cryptocurrencies to fool people into handing over savings. Listen to this excellent BBC podcast series about Onecoin, called Cryptoqueen.
Return of the Middleman
Cryptocurrencies are notoriously complex and fraught with usability issues for the average internet user. I include myself in this number. They are abstract to many of us, too, albeit you can no sooner eat a USD than you can a Bitcoin. Value comes from what people decide is valuable, and more and more people think cryptocurrency is worth something. Again, I'll cover more on cryptocurrency in later blogs.
Just as in traditional banking, Crypto apps, or wallets, have sprung up to act as the middleman to guide people through the complex crypto exchange world. They make many people and investors feel safer in those choppy online waters. Governments are legislating and incorporating cryptocurrency into their thinking.
Exchanges - Coinpass is one such exchange site that wants to bring cryptocurrencies into the mainstream. It aims to become a global leader in digital finance, bridging the gap between traditional finance, banking, trading and digital assets.
Jeff Hancock, CEO at coinpass, said: "Coinpass aims to represent crypto in its highest light, as we believe immensely in this profound technology. We are pro-regulation and understand the importance of regulated endpoints between traditional finance and crypto.
"Coinpass was created for anyone who needs a reliable, easy to use, and fast way to buy crypto instantly, confidently and without any hassle. We work hard in ensuring our platform is secure, and we leave no stone unturned when it comes to fraudulent activity."
The company aims to ease people's worries about dealing with cryptocurrencies. I will be putting my money where my mouth is and taking part in a cryptocurrency experiment with coinpass in the coming weeks.
Jeff continued: "Everyone should at least try and purchase some crypto - it's a great place to start when learning about digital assets. You'll quickly grasp the basics, such as what a wallet is and how to use your wallet address. You'll never truly understand how to use crypto until you give it a try.
"Without intermediaries doing what coinpass does in a safe, secure way, there is no future for crypto."
"We see the lines being blurred between traditional finance and crypto into a single digital layer. We all must take a step forward in educating ourselves about cryptocurrency."
"It's the future of finance, there's no doubt about it."
It's starting to sound like crypto, to go mainstream, is mimicking an all too familiar system of consumer and intermediary. The finance sector is very interested in Blockchain. It will be fascinating to see if Blockchain technology blooms thanks to the middlemen it was designed to circumvent.
What Blockchain isn't (yet)
It's a little, erm, 'blocky', especially in its functions, and it's not always user friendly. You can't reset it, it is slow, and it's not a malleable as current, more nimble centralised databases.
There are numerous, 56-digit, randomly generated passwords and keys, which need to be stored offline. You have to hand over card details to set up and, to the uninitiated like me, it takes a lot of trust and confidence to send that information. I felt I was leaping into the dark, and anything could have happened to my money. So far, nothing bad has happened.
Programmers are working on making Blockhain more flexible. Smart contracts are pieces of code that can be added to a Blockchain and aim to make it user-friendly. Smart contracts trigger transactions when a particular set of variables is fulfilled.
Smart contracts and a change of heart
For example, you are writing your will and use a Blockchain-based database to store it securely.
You have two grandkids, and you want to give them each USD 10,000 from your estate after your passing, on condition they are over 19 and enrolled into a University. The grandkids upload a University entry certificate, and the funds are released, with ages tracked from the dates of birth.
Grandkid 1 goes to University to study law, whereas Grandkid 2 (Grandad's favourite) decides to become an artist. Grandkid 1 fulfils the smart contract’s criteria, uploads their documents, and they receive their inheritance. Grandkid number 2, who was saving up to buy an art studio, misses out because they don't meet the criteria.
A few months later, Grandkid 1 drops out of University and buys himself an art studio with his 'study' money while Grandkid two watches on, agog. Life ain't fair, and seemingly, Blockchain's 'truth' isn't always, either.
Keeping up with the human element of transactions is a massive challenge for Blockchain. It's great for systems, e.g. tracking, supply chains and so on, but it can't it keep up with changes in people's mood, behaviour and displays no empathy. It is judge and jury based on a set of conditions from a specific time, and it cannot be crossed.
The New Puppy
Blockchain adopters are an enthusiastic, fervent and dynamic group. Almost everyone wants to see it succeed, imagining a better world for all through overhauls of anachronistic health systems and government procedures.
Elections and referendums could be meddle-proof, cheap to run and be held more often if an entire electorate had a verified online presence. People may see a more transparent democracy and less voter fraud.
I'm in, too, and hope it succeeds, albeit hindsight may make all of us fools. We live in a world of finite resources. As long as there is power and the internet, cryptocurrency is offering additional value and resources.
It's refreshing to read counter opinions, such as Jimmy Song's blog.
What it Means to Me – So Far
If you've got this far, I salute you and give you 25,000 THOMS, a new cryptocurrency I've not invented yet, but worth a few hundred USD. Trust me.
Flippancy aside, Blockchain isn't 100 per cent ready, foolproof or hackproof and beginners do need to exercise caution, especially with cryptocurrency. There is enormous room for growth, albeit testing is still tricky and onerous.
Gamers are already creating Blockchain realities online, using cryptocurrencies to pay for virtual dragons or chainmail and so on in transparent worlds. They will be at the forefront of Blockchain's development and acceptance.
I've bought into Blockchain. It makes me feel excited about social change and a chance to reset the world's abacus back in the people's favour. Imagine if all weapons made could be traced, we could know who was supplying countries, terrorists and gangs. Fake news could be denounced and trust and faith could be restored.
Blockchain offers online digital identities and security, and we won’t need to give away our personal data so we can browse a webpage. But it's complex. Do people want to read 3,000+ word articles like this? Do they want to understand Blockchain? Do they just want things to work better, in their favour and not the centralised giants?
Blockchain systems can already solve many practical problems, but it lacks a conscience. Many shoppers I know would be aghast at having to share personal ID and an iris scan when doing their weekly shop. But it's seemingly okay to test the technology in impoverished areas of the world, with people giving up identity rights in exchange for basic aid.
Blockchain's main feature – recording immutable truths – may be its Achilles heel. Every (crypto) coin has two sides, and I'm not sure the world is ready for everything to be 100% true and transparent.
A 100% true and transparent world may sound alluring. But can we trust technology, or humans, 100%, especially when there is no reset button? Blockchain needs some rounding and some curves to its thrusting, flush and incontrovertible blocks, to make it more human.
Everipedia is a Blockchain-based rival to Wikipedia and may disagree on that.
Bottom line results – cheaper banking fees or safer systems for people - will undoubtedly be Blockchain's judge and jury.
I'll be writing shorter, more detailed blogs about Blockchain and my cryptocurrency experience over the coming weeks and months.