5 questions about Blockchain
Curated. Original from Blockchain Company
What is blockchain, where is it used, and will it become mainstream? These are just some of the questions on the lips of the public as the word – and cryptocurrency in general – are becoming more widely used.
But if you’re new to the idea of blockchain, it can seem a tricky concept to get your head around. With this in mind, we recently sat down with Dr. Ying-Ying Hsieh, Assistant Professor of Innovation and Entrepreneurship at Imperial College Business School, to talk about blockchain and its applications in cryptocurrency and beyond.
Here are her confusion-busting answers to some of the public’s most common questions.
1. What is blockchain?
Blockchain is simply a piece of software that enables the sharing of value, such as payments, between peers online. Importantly, blockchain allows the information to be shared without the need to go through any third-party intermediaries such as banks or payment companies.
As its name suggests, it is made of blocks that are connected in chains and each block stores a small part of the history of the transactions that have taken places on the blockchain.
2. How does blockchain support bitcoin?
Bitcoin is a cryptocurrency that one can think of as digital cash. Bitcoin only exists online and therefore, its exchange needs to be recorded digitally. Blockchain essentially acts as a digital ledger to record all transactions happening between the peers online and provides a secure and decentralised (the information in the blockchain is not stored in a single place but it is distributed across the network of people who are using it. ) record for all of the exchanges.
3. Does the decentralised nature of the blockchain make it more secure?
Yes, here is an example: if you have a pot of gold you can store it in the vault and trust the people who own the vault, i.e. banks and their personnel, to keep it safe for you. But if your gold is analogous to bitcoin, then, rather than putting your pot of gold into a bank vault, you actually put it in someone’s house in some imaginary village and it gets moved to a new house every 10 minutes or so. No one knows where your gold will be moved, which makes it very difficult for any burglar to know where it will be at any given time. Moreover, to enter the houses in which your gold is stored, the burglar would need to solve complicated equations, which are both time consuming and extremely energy expensive.
4. Are there different types of blockchains?
Currently there are several different types of blockchains, which were mostly developed to improve the original bitcoin blockchain. Another very popular blockchain is the Ethereum blockchain developed to exchange ether tokens online. Ethereum blockchain is more energy efficient, allows smart contracts (transfer of currency only under certain conditions) and also uses proof-of-stake rather than proof-of-workprotocols to validate transactions.
5. Can blockchain be used outside the cryptocurrency field?
There are many potential avenues for the use of blockchain, though, so far, it has been used more as a proof-of-concept and not yet fully implemented. Essentially, any situation where trust is of key importance could make use of blockchain, whether that is the financial industry or electronic voting systems. In the shipping industry the blockchain could be used to track where the goods versus the money is, and in the healthcare system it could be used for the secure storage of patient data.