Blockchain or Blockchain as a Service? If you are like me, the use of the aforementioned sentence ender is the correct punctuation mark. To be clear, I didn’t immediately recognize the technology. However, if I said the word Bitcoin (aka cryptocurrency), you would likely recognize the name. Blockchain is one of the driving technologies behind Bitcoin.
Basically blockchain is the RAC DB and Bitcoin is the application. That being said, there is a lot more to Blockchain (or Bitcoin for that matter) than can be covered in a short editorial. Therefore, in this article I intend to introduce you to some of the basic concepts, gives sources for further reading/learning, and communicate some of the terminology (not nearly all!) so that you can decide if it is something you want to invest in - either monetarily or from time/resources perspective. Please note, I will use Bitcoin as the blockchain application example in my writing below, but you can substitute any cryptocurrency.
What is a Blockchain? A blockchain is a public (or private) distributed digital ledger of transactions. Transactions are contained in blocks which make up the blockchain. The blocks are verified every 10 minutes by public users (specifically powerful CPU’s) that validate a transaction at which time the blocks are committed to the blockchain. This process is known as mining. The unique thing about blockchain is that it is one long row; every block is linked to the one before it which aids in the validation and security. For the Oracle aficionados, this would be somewhat similar to row chaining. It isn’t a table with 100’s of columns and 1000’s of rows. It is one big record of all name-value pair transactions since the first until now. The terms public and distributed used in the opening sentence of this paragraph are very important. Public means no requirement for central intermediaries to validate transactions or store centralized data. Moreover, copies of the blockchain exists all over the world – England, Barbados, and/or Illinois – wherever the miners’ computers are working on validation.
Having many distributed copies of the blockchain helps prevent tampering with the latest blockchain, i.e. new copies of the blockchain are downloaded and uploaded as part of the validation process by those doing the mining. Part and parcel to this validation process is cryptography – principally checking and verifying that the blockchain transactions really happened and not allowing you to spend money you don’t have or that you have already spent. Furthermore, utilizing cryptography (as it relates to public/private keys, bitcoin addresses, signatures and wallets) is tantamount to your fingerprint. Without the proper algorithms, CPU power, or metadata, you cannot be verified and therefore participate in the blockchain. As you can see, cryptography is a big part of the mining (transaction validation) process as well as validating the participants.
Some terms defined:
Blockchain – a public record of transactions in sequential order. Each block is then connected (“chained”) to the next block using cryptographic signatures. This allows block chains to be used like a journal which can be shared and accessed by anyone with the appropriate permissions.
Cryptocurrency – a digital or virtual currency that uses cryptography for security
Cryptography – mathematics that blockchain uses to create mathematical proofs that provide high levels of security. Electronic commerce and banking (among many other industries) already uses cryptography. Regarding Bitcoin, cryptography is used to make it impossible for anybody to spend funds from another user's wallet or to corrupt the block chain.
Mining – the process of making computer hardware do mathematical calculations for the Bitcoin network to confirm transactions and increase security as well as triggering the release of newly created bitcoins. In return for their services, Bitcoin miners can collect fees for the transactions they validate. Mining is very specialized and the rewards are divided up according to how much calculation is performed – so you need a robust computer setup. To be clear, not all Bitcoin users do Bitcoin mining, and it is well-documented to be a difficult way to make money.
P2P – Peer-to-peer refers to systems that work towards similar goals allowing all users to interact directly with one another. Related to Bitcoin, the network is built in such a way that each user is broadcasting the transactions of other users. Since the network communication is between users (payer, payee and miner), no bank is required as a third party.
Possible Blockchain Use-Case When I was a kid I used to trade football cards. It was an easy way to get cards I didn’t have and get rid of ones for which I had duplicates. The nice thing was that it was a physical one-to-one transaction so I knew what I was getting and giving, and with whom I was trading. So it was a simple transaction because the cards were in our possession. Once traded, we could do whatever we wanted with the cards we received. Now what happens if we want to trade/sell original digital art? How do I know the person didn’t already sell it, really owns it, etc? To further the example, Pete owns a digital art storefront but the art pieces are signed and numbered so he can only sell one copy of each work of art. We can trust that Pete keeps an accurate record of what he sells via a physical journal or accounting ledger, but what if he makes an innocuous mistake? Is he responsible for the copyright infringement or are you?
Thankfully Pete uses a blockchain that was created specifically for digital art and all the transactions he has ever executed are stored digitally on a public ledger which is distributed on many machines around the world. If you recall the machines are called miners. So the miners validate that Pete hasn’t sold that unique artwork before and that the person making the purchase actually has the funds to pay for it. Once the authentication occurs and the record is written to the blockchain, Pete can’t sell a copy of the art he no longer has and the buyer can’t spend excess of the funds that remain in his account. Our transaction was verified just like we were trading football cards face-to-face in my room (with my Bart Starr poster hanging on the wall) only it happened digitally and reliably with cryptography so I know neither of us could pull a fast one and try to cheat one another. Now if only I could figure out what happened to my Ray Nitschke rookie card!!!
The Exciting Future of Blockchain and Cryptocurrency Blockchain was originally created for exchange of digital currency and Bitcoin is the de facto player but not the only one – there are over 1200 and counting. More to the point, several articles, authors and sources have said that the blockchain and cryptocurrency phenomenon happening now is similar to what the Internet was in the 1990’s!!! Even more thought provoking, there are numerous other use-cases for blockchain – smart contracts, medical data, or food lineage – which can be discussed in a future article. Want to learn more? There are myriad terms to know (over 100!) so I have included some links to help you continue your quest for knowledge. To get a feel for the nomenclature, please see the word cloud below. To start playing with the technology, look at Oracle, Ethereum, Hyperledger, Multichain, HydraChain, Openchain, IBM, Chain, and IOTA.
Matt Malcheski has broad IT leadership & strategy, technology, application development, and security knowledge, and has worked with Oracle (and myriad other technology products) for nearly 25 years. Feel free to connect with him on LinkedIn at email@example.com
Released: December 6, 2017, 8:38 am
| Updated: December 6, 2017, 9:30 am