First things first

What is blockchain?

But how does it make blockchain verifiable?

Imagine an excel worksheet and how you can input new rows as you please. Instead, blockchain databases use cryptography to authorise that new rows have followed pre-agreed rules and involve authorised individuals.

After the new information has been validated, it broadcasts it to its peers across a network, ensuring all peers have the same data in their databases.

What is cryptography?

Cryptography is a method of storing and transmitting data into an unreadable format, where only authorised users can read and process the information. If you are sent information, you will not be able to read it without the key used to decrypt the data.

This also means that both the creator and the receiver cannot claim that they did not create or receive it.

But how does it make blockchain verifiable?

Imagine an excel worksheet and how you can input new rows as you please. Instead, blockchain databases use cryptography to authorise that new rows have followed pre-agreed rules and involve authorised individuals.

After the new information has been validated, it broadcasts it to its peers across a network, ensuring all peers have the same data in their databases.

Why has blockchain been referred to as the next generation of the Internet?

The Internet’s primary objective was to allow individuals to share and exchange information. Although it has developed into an incredibly powerful tool, its application has also revealed problems that aim to be solved by the blockchain. Instead of sharing information, blockchain will be the “internet of value”, enabling actual exchange of digital assets without intermediaries, such as the financial services industry. It’s important to note that this is not limited to exchanging money, but any digital asset, from music to legal contracts.

What problems does blockchain aim to solve?

Data protection In the current system, companies such as banks have centralised networks and are more vulnerable to widescale cyber-attacks. Blockchain aims to decentralise information so that only the parties directly involved will have access to the relevant information. Furthermore, it eliminates counterparty risk, as there is no third party.

Transparency – Information will be stored in an open, shared database, protected from tampering or revision. Individuals would freely transact with one another, without the use of an intermediary, and would be in control of all their information and transactions. This also means that they will be able to understand and analyse their own timely and accurate data.

Speed of exchange – If you were based in the U.K and wanted to send money to an individual in Hong Kong, the exchange would likely take a few days with the service provider taking a portion of the money. Through using blockchain, you could instantly and directly send money for little to no fee.

Ownership of digital assets – Instead of storing your assets in a bank or relevant third party, you would have complete ownership of them. This also means that everybody, no matter how much or little they possess, would be able to exchange value in the same way; the walls of exclusivity would be broken down.