By: Pooja Sharma
The term ‘Bitcoin’ still causes a little bit of frenzy. There are some who just can’t control their eagerness to embrace this new cryptocurrency and then, there are others who strongly believe Bitcoin is nothing but another bull market that is going to crash soon. But, considering the hype it has gained in the past few months, there is definitely something that can be reaped from the technology. And believe it or not – Blockchain is one of them.
How Did Bitcoin Grow?
It was in 1981 when investors were working on solving problems regarding Internet’s problems of privacy and security. They tried to re-engineer the process several times but there were always some leaks once third parties were involved. Paying with credit cards became increasingly insecure for the users because of the huge personal data they had to divulge and high transaction fees for small payments. In 1988, Nick Sabzo wrote a paper entitled ‘The God Protocol’. In his paper, he mused about the be-all end-all technology protocol which delegated God as the trusted third party in the middle of all transactions. He had a powerful point though – Doing business on Internet does require you to have a leap of faith.
It was not until 2009, just after the 2008 economic crisis and the crash of the whole financial industry, a new protocol for peer-to-peer cash electronic system was created using a cryptocurrency called Bitcoin. Bitcoin was created by a coder named Satoshi Nakamoto who might be a 33 year old man from Japan – his identity, however, remains unknown.
Bitcoin is a digital currency that uses decentralized technology to manage payment, transaction processing and verification to be done on the network. They are different from the fiat currencies that we use because they are not controlled by or under any countries. This kind of protocol ensured integrity of the exchanges that happened on the network because it is governed by a set of rules in the form of distributed computations. The transactions between billions does not go through a trusted third party. The technology has sparked excitement and captured the imagination of young minds.
Bitcoin is similar to the Internet, which runs on its own protocols by which data and information is transferred. But, Bitcoin transfers values and not data. The popularity of this digital currency is mainly because of the quick and easy transfer from one person to the other regardless of where they are located. And none of them relies on the authorities of the traditional banking system. This adds some benefits to the use of Bitcoin. When we are exchanging money through banks or any other monetary institute, we have to trust them to verify and ensure our transaction.
This is something that people have not experienced before. Bitcoin enables a trusted transaction to be held between two or more parties which is validated by mass collaboration and driven by collective interests rather than large companies driven by profits. With Bitcoin, the transactions happen quickly and transactions are virtually impenetrable.
The protocol that the Bitcoin uses is the foundation of growing number of global distributed ledgers called BLOCKCHAINS – of which Bitcoin Blockchain has garnered the maximum attention.
Some, including the JP Morgan CEO Jamie Dimon has testified that Blockchain is where the real excitement lies. Bitcoin is able to secure and transfer transactions by using a ledger to keep track of everything. The ledger is the underlying technology of bitcoin that various financial institutions, states, counties etc. are ready to spend billions on. Even Jamie Dimon who believes that Bitcoin is nothing but another massive financial bubble is investing billions of dollars on the technology on which Bitcoin runs – Blockchain.
How does Blockchain work?
A Blockchain is basically a digital ledger which is linked and secured by cryptography. Each blockchain is distributed which means it is run by volunteers on computers all around the world. So, there is no central database that can be hacked. The blockchain is also public which means that the data can be viewed by anyone who resides on the network at any point of time. It is not within a single institution that is charged with keeping the records. And since the blockchain is encrypted, it maintains virtual security.
After every 10 minutes, all the transactions are verified, cleared and stored in a block which is linked to the preceding block creating a chain. Each block should refer to the previous block to be granted as valid. This structure stores the exchange of values and thus, prevents anyone from altering the ledger. So, Blockchain is basically a network consensus of every transaction. It is called the World Wide Ledger of Value just like the World Wide Web of Information.
Blockchain has certainly spanned the food industry with even Walmart reaping the fruits of this technology.
Frank Yiannas, Vice-President of Walmart’s food safety conducted an experiment. He went to the nearest Walmart store and picked up box of mangos. He brought them to his office and asked the team to find out where the mangoes came from. It took 6 days, 18 hours and 26 minutes to find an answer. If there is a food outbreak, this amount of time can cost a lot of lives. Not to mention the amount of products they would have to pull out due to this.
With the help of Blockchain, it took roughly 2 seconds for him to know the same information. All he needed to do was type in the identification number on the package and the entire journey of those box of mangoes came right in front of his eyes – from the name of the farm to where they were washed and handled. In the event of an outbreak, this could be life-saving and even help the companies in reducing the number of waste.