How would you have described The Internet in the beginning of the 1980’s to your parents or grandparents? We bet you’re struggling to do the same with blockchain.
We know Blockchain is going to be BIG, and we don’t want you to miss out. Already it is revolutionising some of the world’s oldest industries. So, WhatTheBlock is taking blockchain mainstream, going beyond the hype and into the core issues. Whether you’re an investor, business owner, politician, student, tradesman, pilot, artist or cleaner, everyone will be affected by this revolutionary technology. But first you have to understand it. It wont take long, you can start with an email a week.
1. WTF is blockchain
The blockchain is basically a distributed ledger that records transactions happening on a P2P (peer to peer) network. To turn this jargon into something more relatable, let’s use the analogy of Google Sheets, a product a lot of us use on a daily basis. Think of one google sheet as a ledger. You open the Google Sheet, invite people you want to also access it, and everyone can work on the sheet at the same time. Every time a person updates the sheet, people see the new these updates in real time no matter where they are in the world. So the blockchain is like a global spreadsheet that updates in real time with people’s transactions or information updates from anywhere in the world. What’s intriguing is that everyone on the network gets total visibility over these updates. Importantly, instead of this global Google Sheet being owned by one single entity aka Google, everyone gets to own their own copy of the sheet. Therefore on a blockchain network, data is neither erasable nor hackable, since everyone has a copy of the data.
Its thanks to this P2P distributed ledger (aka the global google spreadsheet) that is shared by everyone that we can do things like send cryptocurrency to our friends, family or a business without it having to go through a bank or intermediary. In this sense, blockchain is a new system of record-keeping, as well as collaboration and sharing resources with a network of participants rather than being controlled by one entity, which is susceptible to security threats, bad actors, political instability, power hungriness and a host of other pretty shitty things. This is the benefit of the blockchain network validating the transaction, instead of us relying on a centralised powerhouse.
2. How is Blockchain affecting the industries?
As technologists, creatives, and curious individuals, it is vital that we think about how blockchain will affect each us as humans, citizens and essential pieces in a jigsaw puzzle of industries, many of which are being, and will be overhauled by this technology. Being as inclusivity-minded as possible will hugely benefit us as global citizens, as we harness and progress with this new technology at rapid pace. A technological change as big as this is bound to affect the humans working within the space, and we need to make sure that you, your friends, family, country and our society is cared for as much as the tech itself.
Since the real disruption here is in the trust layer, its foreseeable that all industries which involve an element of trust (which at the end of the day, is present in everything we wish to do on a day to day basis) will need to revamp how trust is conceived, managed and executed. Think about this: if we no longer need a central authority, meaning we no longer need things like a bank to transfer money, an agent to facilitate property transactions, authentication and tracking for national elections, a Facebook/Google Ads entity between you and a seller, an intermediary reaping the rewards for creative works in the entertainment world, an insurance company acting as the third party, healthcare providers not sharing data due to security issues, you start to see how its going to be hard for *every* industry not be affected by blockchain.
"Twenty years ago you couldn’t really define the internet either. Now you think you can because you can't live your daily life without it," says Matt Markiewicz, managing director of Innovation Shares in New York. "That's going to be the same with blockchain technology. But trying to boil it down in layman’s terms and explain what sectors will benefit is really tough. We are all still figuring this out."
As Anthony Di Iorio, a cofounder of Ethereum and major investor in the space has stated “[blockchain] will create a lot more change and industries that the internet couldn’t change, and it’s going to impact every part of [the public’s everyday] lives”.
3. How did Blockchain happen?
Let’s start with two words: Satoshi Nakamoto. A big name in the industry that you need to be familiar. What Satoshi did was arguably very stealth, honorable, and game-changing. Ironically no one really knows who the heck he/she is as Satoshi preferred to remain anonymous and unleash their innovation to the world like a song to the wind. In 2008 S/he released a whitepaper called :”Bitcoin: A Peer to Peer Electronic Cash System which described this P2P version of electronic cash aka Bitcoin, and just like that, blockchain had its official debut.
Soon after this whitepaper release in 2009, Bitcoin became available to the open source community. The cool thing about blockchain was that it provided the answer to the digital trust factor, since it recorded important public info in a very public space, and didn’t enable anyone to remove it. It ticked the boxes of being transparent, time-stamped and decentralized.
One Forbes writer described bitcoin using blockchain as akin to email using the internet. Blockchain and the internet are both big electronic systems, on top of which you can build applications.
So around 2014 was when things started to really get more hyped. Many people started to realise blockchain could be used for more than just cryptocurrency and they started to invest in and explore the realms of blockchain possibilities. When entrepreneurs started to click onto it, and work around the Valley spread, there was a surge in investment and discovery to see how blockchain could impact supply chains, healthcare, insurance, transportation, voting, contract management and more.
Bitcoin operates on the Proof of Work (PoW) concept. This means *mining* has to happen in order to create a new block (aka set of trustless transactions). With PoW, miners (that are like decentralised nodes in the network) have to verify the transactions are legit. The miner nodes do this by solving a difficult problem, in essence, they want to “solve a block”. This is the *consensus mechanism*.
The key point to make here is that this is not mining in the conventional mineral-resource-intensive sense. This is hard-core mining carried out by computers, that ‘mine’ for the answer to the difficult mathematical calculation. And are incentivised to do so, as they want to be able to confirm more transactions.
The first miner to solve the tricky problem gets a reward and then the verified transaction is able to be stored on the blockchain.
The next major chapter in blockchain’s history was the rise of the Smart Contracts beyond just pure currency. One very clever fellow from Toronto, Vitalik Bhuterin, who had contributed as an engineer to the original Bitcoin codebase (like an OG recipe in the critical main dish), had by this stage become frustrated with bitcoin’s programing limits and thus set out to build (along with some other stellar engineers and cryptographers) a second public blockchain called Ethereum. The biggest difference between Ethereum and Bitcoin was that Ethereum could record other assets like loans and contracts, not *just* currency. This officially launched in 2015.
Another thing that Ethereum brought was the ability to conduct micro-payments, so it can handle small value transactions, which is essential if you want blockchain technology to apply to businesses (as an example) like large retail food chains or coffee houses. With the ability to run applications on top of the blockchain, it introduces the concept of tokenized digital assets. One more cool thing Ethereum gave birth to was the idea and creation of the DAO (decentralised autonomous organisations) which are decentralized corporations running entirely on smart contracts and have the potential to govern finances and company policy on the blockchain.
What’s important to point out here is that an essential part of a distributed ledger operating nicely is that the entire network has to collectively agree with the contents of the ledger. To go back to the Google Sheets example, its important that all the viewers of the Google Sheet agree on basic parts of the sheet and what the information in the sheet is all about. This is the job of the consensus mechanism.
Regarding the consensus mechanism, what’s problematical with Proof of Work, as we mentioned above, is that it is hugely resource intensive and takes tonnes of computing power to solve. Climate change anyone?
Hence the desire to transition to Proof of Stake - which has the same goal (validating transactions and achieving consensus in the network) but a different way of going about it.
The probability of creating and validating a new block is based on how large of a stake a person holds (how many coins they possess). For example, if one person were to stake 10 coins and another person staked 50 coins, the person staking 50 coins would be 5x more likely to be chosen as the next block validator.
For the validators doing the work, instead of receiving a block reward, they get network fees in exchange for their staking. The impact of this PoS method is that its alot more energy and cost efficient. Sustainability is key - and PoS shows a road that is far more environmentally aware than the older world of Proof of Work. Furthermore, it incentivises validators to be more vested and genuinely supportive of the currency they are verifying, since they must own enough, and also support it. ANother key difference is that in PoS, all the coins are created in the beginning, so there’s no chance of new coin creation and newly minted coins. Thus the reward is completely in transaction fees.
4. What are some real life cases of blockchain in use?
Blockchain is a new way of looking at the world, and it is already creating significant shifts in society. Here’s a few of some awesome ways that blockchain is being applied to everyday issues that are benefiting from the intervention:
Blockchain technology can be valuable to people who are trying to protect endangered species. A Uganda-based NGO, Care for the Uncared, is working with blockchain specialists in London to create a new way to track and record species’ health, geographic location, and migration patterns.
On a related note to endangered species, the UN Food Program is working with a project called Viant, to ensure better transparency over tuna so it can effectively throughout the whole supply chain be tracked from bait to plate.
Bounties Network: Bounties for the ocean - reward based social impact project - you verify that you’ve picked up ocean waste and receive ETH. The project partnered with coins.ph so that anyone participating in the cleanup could exchange their ETH into Philippine Piso and use the money to pay bills or buy groceries. This truly emphasizes how in the current era, blind trust is no longer a concept.
In the case of cryptocurrency, the use case is pretty darn obvious. At its core, blockchain enables super efficient ways to cut out third party authentication. So in the case of transactions between two parties, it can dramatically reduce the cost of these transactions. Currently, about 15% of financial institutions are using blockchain tech.
5. How can I invest in blockchain?
ICO’s (initial coin offerings) were a BIG thing in 2017/18. The tide has shifted significantly since the hyped ICO frenzy that enabled many blockchain startups / projects to raise a lot of money for many people to invest in their visions and tokens.
We are not here to solicit investment advice...this needs to be worked out how we frame this judiciously.