“You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust. World governments will have to readjust”
This quote from the founder of McAfee is one of many made by experts on digital technologies when asked about their view on the disruptive potential of blockchain technology.
Nevertheless, what exactly is the blockchain technology? In a nutshell, a blockchain is a distributed digital ledger, and as it is the case with any other ledger, it is used to record transactions —or any other type of information; for this reason, this protocol is also known as Distributed Ledger Technology (DLT). However, some key characteristics set the blockchain apart. First, it is distributed in nature, which means that it does not depend on a central authority to process said transactions. Second, transactions are organized by blocks, and each block is constructed interlaced with the previous, creating a tightly interwoven chain of blocks, hence the name. Third, the blockchain uses cryptography to keep all the transaction secured and implausibly difficult to tamper with. Finally, to create consensus, the blockchain uses the principle of “proof of work” which gives priority to the chain of blocks that required the higher amount of computational power to be constructed; hence, making the blockchain more reluctant to meddling.
These characteristics enable blockchain technology to provide transparency, security, consensus and trust. The order of these attributes is not a coincidence; transparency enables security, security foster consensus, and the consensus is a key principle to generate trust, the ultimate goal of the blockchain technology.
So, how does blockchain affords all these attributes? Transparency is perhaps the most straightforward aspect to discern, it is provided by the public and interwoven record of all transaction; any member of a particular blockchain community can keep a copy of the ledger, and, under certain rules, append new transactions to it. Then, what prevents any user to tamper the ledger, by modifying or appending unauthorised transactions? This is discouraged by the rules of use, and it has a two-part answer. On the one hand, cryptography provides a secure way to communicate and verify each transaction, guaranteeing that only the appropriate member generates transactions using their available resources. On the other hand, the “proof of work” principle restricts any attempt to tamper the ledger, as this will require that “the attacker” uses an implausible amount of computational power to modify a particular block and then reconstruct every subsequent block, all this faster than any new legitimate block is created.
This is, indeed, a robust system; however, the word implausible is thoughtfully used here since, in theory, it is still possible to tamper the ledger. For example, it will be fairly easier to alter the most recent blocks, being that not much, if any, has been constructed on top of them. To prevent this from happening, the foremost renowned feature of the system is leveraged —the distribution of the ledger to all its users. Since each user stores and updates the ledger independently, the user community must follow a clear set of general rules to keep the ledger accurately updated and identical to the rest of the community. This consensus is created by making independent final variations of the blockchain “compete” with each other, allowing them to be used to build on top of them, and then appending the one with the highest “proof of work” —the one with the most blocks built on top of them, requiring more computing power to be created. This is an effective system since “the attacker” would need to produce the entire proof of work on its own, for the attacked block and the subsequent blocks created from the initial one, while competing against the whole community and their combined computational power.
In this way, although possible, it is very unlikely that the blockchain will be altered, at least not without someone noticing. Which brings us to the last characteristic of blockchain technology —trust— or “synthetic trust”, as I prefer to describe it. Synthetic trust here does not mean false or misplaced, but rather artificial; it is created by the implementation of consensual mechanisms that allow users to trust on the system, and that the community will comply with the rules.
That’s where the biggest potential of blockchain technology lies. By developing an agency system in which there is no asymmetry of power or information; a system in which all mechanisms are transparent, but at the same time the user’s privacy is inherently respected; a system in which every transaction is recorded and everyone is held accountable for their actions. Of course, this also raises suspicions about how the blockchain technology could be used in a harmful way.
Nevertheless, I prefer to mantain an optimistic approach. I’ll finish this post here, but I’ll be back soon to discuss some of the most interesting uses for the blockchain technology, as well as some of the legal and ethical aspects relevant for this technology. I hope you have enjoyed reading this first serious entry, and if you have any comment of wish to get in touch here are my contact details.