What is Blockchain?
Blockchain is a resilient, distributed, and decentralized digital ledger of transactions. It allows digital information to be distributed but not copied. Traditionally, central authorities were needed as an arbiter of trust between parties wishing to transact online. The blockchain makes it possible for peers to guarantee transactions in an automated, secure fashion. In short, blockchain makes possible the digital equivalent of cash exchanging hands.
Where did it come from?
Although blockchain saw its first effective use with the advent of Bitcoin, its roots can be traced back to 1976 in a paper titled New Directions in Cryptography1 written by Whitfield Diffie and Martin Hellman (Yep, those guys2), where they postulated the idea of a distributed ledger. Obviously certain things were required for this idea to come to fruition; a vast network of interconnected computers with enough computing power to crunch away at the complicated calculations required to validate the blocks (transactions) in a blockchain. Fast forward to 2009 and conditions are right for a real world application. Enter Bitcoin. Part of the brilliance of using blockchain to create digital currency is the ability to build in a financial incentive for users that are willing to use their computing power to validate the blockchain. Voluntarily validating Bitcoin transactions has the possibility of producing a percentage of a Bitcoin as compensation. This has given rise to the term miner and people building special purpose computers solely for the sake of high-performance mining.
An interesting aside, electricity usage for machines mining Bitcoin is expected to top forty two terawatts this year. That puts it just behind Peru in terms of energy demand.
How do cryptocurrencies use Blockchain?
Bitcoin and alternative currencies like Ethereum and Litecoin all utilize blockchain technology a bit differently. In the case of Bitcoin, a new block in its blockchain is created roughly every ten minutes. That block verifies and records new transactions that have taken place. In order for that to happen, mining computers provide a proof-of-work; a calculation that creates a hash which verifies the block and the transactions it contains. Several of those confirmations must be received before a bitcoin transaction can be considered effectively complete. This provides resiliency as multiple independent entities all verify each transaction. The entire blockchain is maintained in this way. This means that no single entity can control the market or manipulate the blockchain’s history without controlling 51% of all mining computers. A feat reasonably assumed to be impossible. This is a vital component, because it certifies everything that has happened in the chain prior, and it means that no one person can go back and change things. It makes the blockchain a public ledger that cannot be easily tampered with, giving it a built-in layer of protection that isn’t possible with a standard, centralized database of information.
What is the future of Blockchain?
It’s definitely too early to tell, but the possibilities are vast. Blockchains could drastically improve identity management online, reducing identity theft. Blockchain could also help secure the woefully unsecured Internet of Things as well as networking in general. Blockchain technology could be used to distribute social welfare in developing nations, and even completely disrupt the election process.
In the Cyber Security world (and others), non-repudiation is a huge deal. Blockchain could complete the trifecta, slotting in with digital signatures and cryptography.