How Blockchain Technology Could Help Developing Countries Part 5

Software code and consensus algorithms.

 

One the differences between decentralized public blockchain networks such as Ethereum and Bitcoin and centralized companies such as Facebook and Google is that while both the companies and the blockchains use the principle of decentralization, only public blockchains are truly decentralized. Google, Amazon, Apple, Facebook, Microsoft all have multiple servers and multiple data centers, but they also have a central authority that can make a decision to turn the servers off or introduce changes to how the servers work. On blockchain networks, this is impossible because there is no centralized authority making decisions about how a network operates. Networks operate because of the free will of the users on these networks. This is the true revolution that the blockchain technology has brought to the world, which is networks operating because of the incentives that they offer to users, including the ability to transact without a third party, ability to transact 24/7 from anywhere in the world, and having confidence that there is no central authority that can introduce changes to the system whenever it wants.

 

Software code on blockchains vs proprietary commercial software code

Another difference between blockchain networks and centralized commercial networks that is important to understand is that public blockchains such as Ethereum and Bitcoin work and serve as a way of value storage despite the fact that their code is open-source and free.

This goes against how most of the commercial software developers and companies, including Microsoft, Apple, Google, Amazon and others operate and how most people are used to software businesses operating.

Most of the businesses do their absolute best to hide the software code that they create and they have perfectly legitimate reasons to do so. They are hiding the code to protect the business, the trade secrets and also their users.

For example, people use Google’s search engine because they trust Google to show the results that will be relevant to them. Google is able to show the relevant results because of its proprietary algorithms. Being number one on Google is typically very profitable, which means there is a conflict between businesses and organizations who want to be #1 and monetize their position and customers who want free relevant results. Google has become what it is today by serving as a third party that solves this issue, yet one of the tradeoffs that the company has to make is that it needs to protect its algorithms and its systems. In the West, people trust both the companies and the government. In the developing countries, the level of the trust is much lower, which is why the potential of blockchains and cryptocurrencies is so much higher.

Today, most of the large corporations, including Google and Microsoft, are investing into blockchains and blockchain research, yet their main businesses are still working in the old ways because they have to.

If Google were to make its search ranking algorithms open-source, then businesses and other organizations would try and get on the first page of Google even when doing so would not serve the best interest of the users of Google. The same is true for Facebook, Amazon, Microsoft, and other large corporations today. They protect their property because they have to. Blockchains can make their code open-source because the technology works in a secure way even when everybody knows how it works. This is the side of blockchain technology that is critically important to understand.

 

Consensus algorithms on blockchain networks

Consensus algorithms are the algorithms that allow the blockchain software to determine which transaction to all to the blockchain or the ledger. On the cryptocurrency networks these transactions are about currencies or finances, which is why they include information such as to which address the funds are going, the amount of funds, and the time and date of a transaction. However, because blockchain technology can contain any types of data, transactions do not have to be about finances. They can be about almost anything, from historical real estate records to authentication passwords. For example, Steem is a blockchain-based social network and while Steem blockchain does contain information about the currency of the Steem network, it also contains information about new posts, likes, comments, and more. You can see the blockchain explorer for the Steem network and the kind of information that the blocks of the network include, by clicking on a number in the “height” column (height of a block on a blockchain network means the number of the block on the blockchain. The first block is typically 0 or 1 (and has a height of 0 or 1), the second one is 1 or 2 (and has a height of 1 or 2), and so on) here: https://steemblockexplorer.com