Blockchain
Introduction
Blockchain is mostly known for the impact it has had on the advancement of crypto-currency over the past few years. Developed in 1991 by Stornetta Scott and Haber Stuart, blockchain is identified as a public database that contains digital information. Blocks comprise of digital data that can be summarized into three parts, which are, information about transactions, information of participants in the transactions, and store information that is used to distinguish one block from another (Tapscott & Tapscott, 2018). A block is added to a chain whenever specific actions are performed, such as, the occurrence of transactions, verification, storage, and a block being assigned a hash which is a unique identification differentiating it from other blocks. Some of the challenges related to the integration of blockchain in today’s business environment include understanding and awareness, governance and regulation, efficacy and cost implications, and privacy and security, as compared to conservative transaction methods.
Privacy is an issue that is somewhat synonymous with blockchain as it entails individuals connecting their personal computers with the chain to create what are referred to as nodes. What happens is that each time a computer is added to a blockchain, information is copied to this new node, ensuring that it is remotely accessible and secure. This is one of the key characteristics that make blockchain effective and unique. Also, the process of copying information in different nodes enables information to be available in numerous locations simultaneously. This in itself possesses as a challenge for a hacker, as for them to successfully infiltrate and manipulate information, they would have to log in to numerous nodes which are located in very different regions of the world.
The mere fact that information is blockchain is stored in nodes leads to the whole issue of security as well. To some individuals, storing information in different nodes is equivalent to giving a total stranger your Automated Teller Machine (ATM) card and Personal Identification Number (PIN) and asking them to keep it for you for some time. To ensure security within the blockchain, storage of information happens chronologically and linearly, and what this means is that new information is added to the end of the chain. Once a block is added to a chain, the process of alteration of the block is rather complicated. The relationship between blocks and each block having a hash is the key behind the block chain’s security feature. For a hacker to successfully penetrate a blockchain, they would have to change the hash of each block adjacent to the one that they are targeting and do the same along the entire chain which in itself is a tedious and challenging process (Swan, 2015). Another essential thing to note is that a block cannot be deleted from a chain as it would entail the use of enormous computing power and resources, which a single hacker would also find impossible to fulfil.
For one to comprehend blockchain fully, they would have to consider it most recent application, and that is in bitcoin, which is the most widely known digital currency. Transactions through the use of digital currency work in the same way as printed money, the only difference being that the former is not physical in any way. The verification process in digital currency occurs through computer networks, unlike printed money which is governed and regulated by governments and central banks. One important thing to note is that even though the information is stored publicly when it comes to blockchain and digital currency, user’s data still remains a private affair.
The History of Blockchain
The idea of using the cryptographically secured chain blocks for record-keeping systems was first initiated in the year 1991 by W. Scot Stornetta and Stuart Haber and has shown the potential of reaching greater heights. The idea that W. Scot Stornetta and Stuart Haber had as they described the blockchain system was that it would be a system that will prevent changing the timestamps of the documents stored in the system (Swan, 2015). In 1992 with W. Scot Stornetta, Stuart Haber with the help of Bayer they made improvements to the system that the initiative had by integrating the Merkle tree into the blockchain. The incorporation of the Merkle tree in the system allowed the collection several documentations to be collected and stored in one block of the chain.
Over the years, many computer scientists came up with their theories on the secure cryptographic chain such as Stefan Konst in 2000 who provided a theory and ideas on how his approach can be implemented. In 2008 Satoshi Nakamoto which was not indicated if the name represented an individual or a group of people actualized the first blockchain concept. The system or design that Nakamoto had come up with was highly developed and improved compared to what Stornetta and Haber had in mind (Tapscott & Tapscott, 2018). The Nakamoto’s design incorporated the use of Hash cash like model on the document timestamps block system without requiring a trusted authority or party to sign. The Nakamoto’s system also enhanced difficulty parameters to ensure the stability of the rate in which blocks are added to the chain.
The Nakamoto’s design of blockchain was implemented as the primary component for cryptocurrency, also known as bitcoin. The system was used as a public ledger which facilitated transaction over networks (Underwood, 2016). The use of Nakamoto’s design was fully adopted, and in 2014 the blockchain in the bitcoin file had reached 20 GB of transaction. The use of the system grew evidenced by the growth of the file size to almost 30GB in 2015, and in 2016 to 2017 the bitcoin blockchain file size went from 50GB to 100 GB. The trend in the growth of the file sizes was a testament to the adoption of the bitcoin or cryptocurrency by a majority of the organizations or population as it is predicted that by the end of 2020 the file size would have exceeded 200GB.
How Blockchain Functions
Over the year, most organizations and businesses have adopted and integrated the use of blockchain technology in their operations. The blockchain systems are a decentralized type of a public ledger that transacts record across a computer network without tampering with the information being transacted. The blockchain system uses the free use of peer to peer networks to manage its database (Lewis, 2018). So the blockchain system consists of cryptographic keys, peer to peer networks and a medium of transaction which is computerized. The three components are the key to enabling the system to work efficiently.
The cryptographic keys are usually two; there is a private key and a public key. The cryptographic keys are essential in performing successful transactions between two people or parties using the blockchain system (Underwood, 2016). The keys are used as decryption keys to the encrypted records shared via the blockchain, and they act as digital security credentials to allow access to what has been transacted via the network. The cryptographic keys are digital signatures which are used to give a green light on transactions and to control them from one point of the network to another.
Then there is the peer to peer network that is an essential component of a successful blockchain transaction. The peer to peer network can be defined as a group of individuals who transact on a network using their digital signatures in order to reach a consensus in the transaction process (Pilkington, 2016). The blockchain transaction must be from one point to another via a network, and that is why peer to peer network enables it to function. The transaction from one location to another or from one party to another is made secure by the use of cryptographic keys that the individuals use to access the transacted data over a digital medium or channel.
Using the essential components that make the blockchain transaction successful the one can transact securely.in the blockchain transaction is made through blocks which contains a timestamp, digital signature of the user and other relevant information (Pilkington, 2016). It is important to note that out of all the information contained in a block; it does not include the identities of the individuals involved in a transaction. The block that contains what one wants to transact to the other is transacted via the network nodes to its desired destination where the rightful receiver uses his cryptographic key to access the information. In a nutshell, blockchain functions on the bases of peer to peer over a network and the sender and the receiver must have digital signatures that allow them to access the block transacted.
Similarities and Differences between Blockchain and Conservative Payment Methods
The similarity between the blockchain and the conservative methods is that for one to access the transaction, there are security details or credentials that are required. For the bitcoin blockchain, it requires cryptographic keys or the digital signatures for one to access the block that has been transacted to them (Kramer, 2019). In the conservative payment methods, one requires a password or a pin code for one to access the funds. This similarity is brought by the need for security in transactions to prevent other unauthorized people from getting access. With technological advancement, both the payment methods can now be accessed through smartphones electronic wallet.
The difference between the blockchain types of payment method with the other conservative method is that payment is done directly and does not have to go through another financial institution for it to get to the receiver (Tapscott & Tapscott, 2018). The blockchain is a peer to peer method of the transaction through a private network which does not need a third party for the transaction to be complete as long as the individuals involved have their digital signatures the transaction is direct. The conservative methods where financial institutions have to be involved in the transaction to be successful and act as an intermediary and charge some service fee for every transaction.
Issues/Problems Related To Blockchain Use in Current Business Environment
Lack of regulations is a big issue affecting blockchain. The fact that the blockchain transaction is direct and does not have an intermediary to control or regulate it possesses a risk to the users. The lack of regulations exposes the users to scams where they lose a lot of money which is a negative thing (Attaran & Gunasekaran, 2019). It is stated that the major Ponzi schemes recorded were as a result of investors being scammed in the name of investing in the next bitcoin that will give them huge returns. Also, criminals might use the system to transact funds in the form of bitcoins to fund their illegal activities since there are no regulations which enhance crime and terrorism. Lack of regulation poses a significant problem in the bitcoin blockchain systems.
Blockchains can be complicated, slow and unreliable due to the encryption and decryption processes it might complicate things for the users, especially the first time user. The complexity of the process might make it cumbersome for the users leading to frustrations. The bitcoin transactions might be a bit slower compared to the other conservative modes of the transaction (Attaran & Gunasekaran, 2019). The time-consuming aspect makes it unreliable at times when one needs to transact for emergency scenarios. The fact that that bitcoin blockchain transactions are made via a network there are higher chances of transactions not being successful due to network issues. Also, it relies highly on electricity to power the gadgets so, in places where there is a blackout or no source of power, one cannot access the system.
There are high chances of blockchain failing due to the complication the blockchain has brought in the financial world there are many financial institutions that are established and feel the impact of the blockchain which want it gone. The financial institution benefits from playing the role of a middle man in transactions. Still, nowadays, people prefer using blockchain due to the lack of transaction charges which frustrates the financial organization (Pilkington, 2016). Also, the fact that blockchain lacks regulation the government might decide to bring it down as a way of preventing illegal transactions used for illicit activities. With those facts, then the blockchain might not be here for long.
Possible Solution to Facilitate The Process Of Migration To Full-Use Of Blockchain
The migration to full-use of blockchain might not be easy or possible, but there are a few things that can be done to facilitate it. First is the issue of regulations. People tend to trust institutions that are regulated by a trusted body or institution (Crosby et al., 2016). To achieve the migration, then the blockchain needs to register with the governmental agencies responsible for regulating financial institutions to enhance its legitimacy. With a government agency regulating it, then people might trust it and migrate to the full blockchain. Having regulations will ensure security for the users whenever they transact and also their personal information. With regulations, it might also be incorporated in the financial institutions which will enhance its longevity and attract more people to it.
Secondly, is the issue of stabilizing the blockchain system and making it less complicated and cumbersome. Since the system will be used by people of different ages, educational backgrounds and professions, then it is essential to make it easy to use and navigate. If a system is not easy to use, then it might be unfit for most users who prefer simple and direct such as ATMs and banks. So if the blockchain is made easy to use it might attract people to it. The issues of slow transactions, network time outs or unstable systems should also be fixed. In today’s world, time is everything, and people are in search of systems that are reliable and efficient anytime, anywhere (Zheng et al., 2017). It the blockchain system is stabilized and improved then people might consider switching.
Conclusion
The blockchain bitcoin technology might be the next big thing in the world of electronic funds transactions. The fact that it is secure and cheap to use, then it might come as the best option for people who are tired of paying transaction charges in the conservative payment methods. Although the bitcoin blockchain method might have its downside such as lack of regulations which make it untrustworthy, there are a few things that can be changed to make it the option for the majority of people. To achieve a full migration to the blockchain, it must agree with the authority’s guidelines of operations and make their system’s user friendly. If the changes are made, then the bitcoin blockchain will be the next big thing in the technological world.
References
Attaran, M., & Gunasekaran, A. (2019). Applications of blockchain technology in business: Challenges and opportunities.
Crosby, M., Pattanayak, P., Verma, S., & Kalyanaraman, V. (2016). Blockchain technology: Beyond bitcoin. Applied Innovation, 2(6-10), 71.
Kramer, M. (2019). An Overview of Blockchain Technology Based on a Study of Public Awareness. Global Journal of Business Research, 13(1), 83-91.
Lewis, A. (2018). The basics of bitcoins and blockchains: An introduction to cryptocurrencies and the technology that powers them.
Pilkington, M. (2016). Blockchain technology: principles and applications. In Research handbook on digital transformations. Edward Elgar Publishing.
Swan, M. (2015). Blockchain: Blueprint for a new economy.
Tapscott, D., & Tapscott, A. (2018). Blockchain revolution: How the technology behind bitcoin and other cryptocurrencies is changing the world.
Underwood, S. (2016). Blockchain beyond bitcoin.
Zheng, Z., Xie, S., Dai, H., Chen, X., & Wang, H. (2017, June). An overview of blockchain technology: Architecture, consensus, and future trends. In 2017 IEEE international congress on big data (BigData congress) (pp. 557-564). IEEE.