An Introduction to the Blockchain Economy Part 1

The Blockchain Breakthrough.

Most articles and books about blockchain today talk about Bitcoin and the history of money. While Bitcoin did solve some big problems that no computer network was able to solve before it, it also has some issues that prevent the network from gaining mass adoption, such as scalability. The Bitcoin network can process between three and seven transactions per second, which is nothing compared to tens of thousands of transactions that networks such as Visa can process simultaneously.

What is even more important is that money is the first example of how blockchain technology can change existing systems. It is also very possible that applications of the blockchain technology in other areas, from real estate to medicine, will be at least as important.

At its core, blockchain technology is a way to create, manage and store a ledger, in a decentralized, tamper-proof way. With Bitcoin, computers on the network called nodes contain a full copy of the Bitcoin’s blockchain, which means that all the nodes have information about all the transactions in Bitcoin that users have performed since the inception of the network in 2009.

 

Decentralization of blockchain networks

The decentralized nature of the blockchain technology means that every node on the network has a full copy of the blockchain, which makes blockchain networks much harder to attack than a single computer. One of the reasons for data theft from companies such as Equifax, Yahoo, and Target has been that these companies had a central point of information storage, a central point that hackers could attack and penetrate. With blockchain, such attacks are simply not possible because there is no central point that stores information. For example, as of the writing of this article, there are over ten thousand computers online all over the world, each of which contains a full copy of Bitcoin’s blockchain. You can see how many nodes the Bitcoin network has online as you are reading this article by visiting https://bitnodes.earn.com/

 

How blockchain networks preserve information

Another novelty of the blockchain technology is about the tamper-proof way in which it stores information. With blockchain, once information becomes a part of a chain, it is impossible to modify it. For example, if someone were to try and change one digit in the information about one of the transactions on the Bitcoin blockchain, the main blockchain would simply reject the block with the changed information. Blockchain networks are tamper-proof because of how the blockchain technology compiles the data into the blocks of blockchain and connects the blocks.

It may seem unusual that blockchain technology, which is essentially a simple ledger, can be called revolutionary and can be responsible for large shifts in how society manages information. But ledgers are at the core of many activities of people and ledgers are everywhere from the management of information about identifies to the management of medical records. Also, ledgers play a much bigger role than just record transactions. Any time people want to take a look at facts and come to an agreement about facts, they essentially use a ledger. Think about any event in your life. Whatever it is, it could be placed in a ledger with fields such as “date of occurrence,” “time of occurrence,” “personal perspective of what happened,” “who participated in the event,” “location of the event,” and so on. Information like this is exactly what many modern ledgers record. They contain all kinds of information about all kinds of events in human life and modern economy.

 

Blockchain ledgers can confirm ownership

One of the issues that the Bitcoin network was able to solve is that it can always tell who has how much funds, which is not always an easy task with modern computer networks. The ability of blockchain technology to confirm ownership at any time can be extremely useful in a number of industries. For example, currently, property titles registers contain information about who owns the land and the property and if properties are subject to any special rules, laws or exemptions. In most cases, this information is being stored on paper, which means that it can be damaged and tampered with.

Any business can also be represented in a form of a ledger, as a network of owners, managers, descriptions of tasks, goals, employment and product creation relationships and processes.

 

Blockchain technology can confirm identity

Many people think that blockchain networks protect the privacy of their users. This is not the case at all. For example, with Bitcoin, you can hide your identity behind an address that sends and receives funds, but everything that happens with the address is public information that is accessible to anyone via tools such as Bitcoin blockchain explorer. You can visit the explorer and find information about all the transactions that have occurred on the Bitcoin network since Satoshi Nakamoto launched the network in 2009 here: https://blockchain.info/

At the top of the page on the left, you will see a column called “block height.” The height of the block is the same as the number of the block. When Nakamoto created the network in 2009, he also created the Genesis block, which had the height of one. Then, the network added the second block, the third one, and has been adding new blocks this way since 2009. When you click on a number in the “block height” column, you will get to the page of the block with block height that you clicked on. At the top of the page, you will see a table with all kinds of information about the block, such as the number of transactions included in the block, size of the block, and the volume of transactions. You may not notice right away that the page that you land on is actually very long. If you start scrolling down, you will see Bitcoin addresses and amounts in Bitcoin that have been transferred between the addresses.  All the information about all the transactions for all the address on the Bitcoin network is a part of the fully transparent bitcoin blockchain.

This means that if person A was to send person B one bitcoin, everybody in the world would see the information about the transaction.