What is Blockchain?
At its most basic level, blockchain is a chain of blocks of data that is public to everyone. The data mainly contains the transaction record (such as the time for the transaction, how much money was transacted and what was bought).
How does Blockchain work?
To create a block of data, a transaction first must take place. Then this transaction record will be packed into a “block” with thousands of other transaction records. Meanwhile, “hash”, a complicated code created by a special algorithm, will be added to the block as protection. Each block of data is roughly 1MB (less than half the size of a mp3 song) that contains about 5,000 transaction records. Once the “block” has been created, it will be “chained” to other “blocks”, forming a chain of blocks.
Pros and Cons for the Blockchain
One of the biggest advantages Blockchain has is that it is highly decentralized. Unlike dedicated financial institutions such as banks, Blockchain keeps track of the transaction records on millions of PCs. Since everyone can view the transaction records, everyone who uses Blockchain has a copy of this record. Therefore, if a hacker wants to tamper with the record, he needs to change every copy on everyone’s computers, in other words, he must manipulate millions of computers at the same time, which is nearly impossible. Furthermore, the “hash” contained in every block is extremely difficult to change because each block has its own hash: If one hash is changed, the others will need to be changed to keep the data consistent. Therefore, hackers must change every “hash” in order to wipe their trails. However, no computer has the power to change hash. As a result, the transaction records will be theoretically “hack proof”.
If blockchain technology matured, it could potentially save money and time for both businesses and individual customers since they don’t need to pay bank fees and the processing time is significantly shorter. Customers don’t have to wait until next Monday for the payment to arrive since each block will be generated in less than 10 min with no processing fees.
Illegal issue: Although all users have access to the transaction records, they cannot access personal information about the users making these transactions. This means someone can proceed with a transaction for illegal activity and not get caught. Only the transaction sponsors and receivers can see their personal information. Blockchain keeps your personal information confidential. This will increase the difficulty for police investigation (and it’s hard to regulate).
Energy inefficiency: When a block is created, some processes is energy consuming. Since a lot of computers intend to create this block, and one block can only be packed by one computer, those computers must compete by solving an incredibly difficult algorithm. (Since they are doing this 24/7).
Human error: Once the data has been added to the block, it is nearly impossible to be changed. However, if blockchain is selected as the database, the information going into the database needs to be accurate. A singe human error is almost impossible to be corrected and will cause a faulty database.
Quantum Computing and Blockchain
Blockchain’s encrypting algorithm is extremely difficult to be decoded, which is considered safe based on current computing power. However, if quantum computing technology becomes more stable and reliable, we would witness an increase in computing power. It will pose a serious threat to current data encryption technology, including Blockchain. Therefore, the future for Blockchain remains uncertain.
Blockchain is a double-edged sword, its decentralized features make the data within safe but new technology such as quantum computing will potentially exceed it.