Understanding the Blockchain
Image Courtesy: This article explains the working of 'the blockchain' - a technology that is all pervasive and used across all industries. Read on to learn about the origins of the blockchain and understand the way it works.
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‘Blockchain’ is an extremely potent technology - one that has taken the industry by storm. It is being used by almost all players in the maritime sector. It’s applications are widening and the technology is now being adapted to suit various players across the maritime ecosystem. With major players such as Maersk and IBM collaborating on this technology, one can safely say that blockchain “has arrived” and is here to stay. It has become a loaded buzz word that depicts the shipping industry’s paradigm shift to digitalisation. Considered to be safe, secure, foolproof and profitable, blockchain has made its presence felt, and how!
So what is the ‘blockchain’?
I have found the simplest definition of the term to be as follows, “Blockchain is essentially a distributed database that maintains a list of records. These records, or pieces of information, are joined together as blocks. Each block contains a history of the blocks before it, complete with their own timestamps. The blocks are hashed together (or encrypted) to form a chain of blocks, or a Blockchain.
The main purpose of the Blockchain is to act as a peer-to-peer network that enables information to be stored across a digital ledger. Through the Blockchain, everyone who has access to the system has a record of each transaction. The main benefit of this decentralised approach is that it’s practically impossible to corrupt the information within the network. Blockchain was originally designed to resolve transparency issues within the financial industry, but as the technology has evolved it has seen many further applications.”
Blockchain has come a long way since it was first introduced, however, it is important to understand the origins of this technological marvel to be able to foresee where it is headed.
Blockchain - The Origins
The idea behind blockchain technology can be traced to 1991, when Stuart Haber and W. Scott Stornetta described the first work on a cryptographically secured chain of blocks. In 1992, they incorporated Merkle trees into the design allowing several documents to be collected into a block.
The blockchain, as we know it today, is an undeniably ingenious invention – the brainchild of a person or group of people known by the pseudonym, Satoshi Nakamoto. Satoshi Nakamoto gave practical impetus to blockchain technology and solved the problem of double spending. It took the internet by storm when a white paper, Bitcoin: A Peer to Peer Electronic Cash System, was published and made public in 2008.
How does blockchain work?
Now that we know what blockchain means and when it originated, it is important to comprehend the actual working of the technology.
Each participant (each node) in a blockchain keeps a copy of all the historical transactions that have been added to the ledger, and by comparing to the other nodes’ copies, each is kept synchronised through a consensus process. Unlike in a traditional ledger system, there is no node with special rights to edit or delete transactions – in fact there is no central party at all, which is one of the reasons that blockchains can be useful when a trusted central party is either unavailable or too expensive.
cio.com offers the following explanation, “when a new transaction or an edit to an existing transaction comes in to a blockchain, generally a majority of the nodes within a blockchain implementation must execute algorithms to evaluate and verify the history of the individual blockchain block that is proposed. If a majority of the nodes come to a consensus that the history and signature is valid, the new block of transactions is accepted into the ledger and a new block is added to the chain of transactions. If a majority does not concede to the addition or modification of the ledger entry, it is denied and not added to the chain. This distributed consensus model is what allows blockchain to run as a distributed ledger without the need for some central, unifying authority saying what transactions are valid and (perhaps more importantly) which ones are not.”
Features of blockchain
PGP encryption: public / private keypairs that allow for individuals to prove their ownership over an account in a system or secure communications.
Distributed computing: the study of systems where components are networked computers communicating their actions through messaging protocols.
Merkle trees: the hashes of child nodes in the tree help verify contents for parents and generally large data structures.
Game theory: the behaviour economics of actors in a system. Blockchain design attempts to find a Schelling point where natural actions will converge to create stability and consensus.
Mathematical Proofs: mathematical proofs are necessary across all aspects of blockchain design in order to ensure the system is safe and secure.
Consensus (blockchain): reaching a shared agreement on the current state, update function and future state in a distributed, multi-actor system.
While the blockchain continues to be an enigma for some and creates a passionate divide between those that advocate it and those that don’t, it is inevitable that it cannot be ignored. This technology has managed to turn the once “traditional” shipping industry on its head, forcing it to rethink its strategies and embrace the digitalisation wave.
For more on this, and other digital trends, watch this space.