A newbie’s guide to Blockchain: How it is revolutionizing the planet
When it comes to blockchain, you must be thinking of Bitcoin for sure. In 2009, a guy sold his 10000 Bitcoins for 2 pizzas. Oh what a fool! Who knew how much it will cost after 10 years. Satoshi Nakamoto (pseudo name of the inventor of Bitcoin) did not create blockchain for get rich quick scheme. Although there are many guesses about why he created Bitcoin, the one that seems true is that money transfer to different regions of the world takes many days and the transaction fee also gets added so the total amount to be sent actually gets deducted due to many third-parties like banks. So if a parent wants to send PKR 100,000 from Pakistan to his son studying in USA, the amount he will receive will be about PKR 95000. The PKR 5000 deducted were charged by the banks as transaction fees.
Intro to Blockchain
Now, how does a blockchain helps in sending the money without a deduction? Think of a blockchain as an excel sheet which keeps record of each entry. Consider each cell of a sheet as a block and each block contains the ID of previous block. So each block is linked to the previous block by it’s ID and that makes a chain. Since each block is linked to the other, each block contains the information of the other blocks and the information in the block can not be modified or deleted. So each block is immutable.
When a person makes a transaction, a new block is created and the details of the transaction are added to the block just like a ledger in a bank. As the block is chained with other blocks, the transaction details can be accessed by each and every block on the blockchain. That makes a public blockchain network where each transaction details is highly encrypted by an encryption algorithm which makes sure that identity of the person sending or receiving money is not revealed.
What makes a blockchain secure?
Even though the blockchain contains the transaction details of each person which can be viewed by any other person, the personal details of a person remain anonymous. When a transaction is processed on a blockchain, it is validated and verified by each block on the blockchain. Suppose a hacker knows the transaction id of a person and he creates a fake block on the blockchain with the same transaction id, his block will not be verified by other blocks and will be rejected as the original block was verified by previous blocks. This makes the blockchain a highly secure decentralized system which is not manipulated by any single person or a company unlike local currency which is maintained by centralized banks.
How is blockchain a decentralized system?
If you have consumed the idea that each block is verified by every other block on the blockchain, you should have guessed that it makes the blockchain a distributed network. But here is the point, how does every block get verified by every other block? Wouldn’t it take so much time to verify each block? No, here come the miners. Mr. Nakamoto (the unknown person who created the Bitcoin) invented the idea of rewarding the miner with bitcoin for verifying other blocks. So the task of the miner is to verify the blocks on the blockchain and get reward in the form of BTC. As of today, the miners work in the form of pools and the reward is distributed to each miner in the pool. So this system does not depend on a single authority. Everyone who makes a transaction has the same authority here.
How is the blockchain influencing the world?
The blockchain system is mainly revolutionizing the traditional centralized finance sector which was created in 1800’s by replacing it with DeFi (decentralized finance) system based on Ethereum and Polkadot which are different blockchains and have several benefits over bitcoin blockchain. Banks are trying to adopt this technology because they can’t see their future without blockchain. This technology can be used in almost every sector of life.
Some countries are already working to apply blockchain in healthcare, supply chain, agriculture, travel, logistics, IoT and gaming industries to provide security to their people by protecting their identity and preventing theft and money-laundering.
How can Pakistan use blockchain?
In the healthcare industry, we can secure the patient’s data on the blockchain which can be accessed only by authorized doctors or personnel. We can use blockchain to securely distribute money to the people in Income Support programs which can prevent scams. We can secure the personal details of people on a blockchain which can then be used for railway and flight ticket reservation, paying bills, paying salary to employees.
Last but not least, we can implement a decentralized voting system for election which can prevent electoral fraud. Do you think our politicians are willing to implement such a system?
Please do mention in the comments what you think of a blockchain system. If you have got any ideas of what you can build using blockchain, feel free to contact me on facebook.
