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Student Blog: Breaking Down Blockchain Technology

By: Zainab Alshabeeb | Posted on: 08 Jan 2020

Student Blog: Breaking Down Blockchain Technology

For many of us working on projects connected with blockchain technology, it comes as no real surprise that people continue to associate it with cryptocurrencies. This can be a little frustrating as the technology has the potential to be harnessed in a multitude of ways and across numerous sectors.

Yet, 10 years since it was first used as a core function to protect bitcoin transactions, blockchain remains synonymous with cryptocurrencies and beyond the scope of our everyday lives. However, this is likely to change over the coming years as organisations and governments begin to harness the technology in a multitude of ways.

So, how can a technology that was designed to protect cryptocurrency transactions be deployed in alternative arenas?

Well, bitcoin was first developed by Satoshi Nakamoto to act as “a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution”. To add to the air of mystery surrounding bitcoin, Satoshi Nakamoto is a pseudonymous for the yet to be identified creator or creators of the cryptocurrency.

For bitcoin to function as a secure currency, it needed to be able to change hands without it being diverted into the wrong account or spent twice by the same person.

To achieve this, blockchain was developed as a series of blocks connected by a chain. Each individual block in the chain acts as a record of every individual transaction or transfer associated with that bitcoin.

To ensure security, each block along the chain contains time stamped cryptographic data that is resistant to alteration. For a new block to be created on the chain, every transaction must be verified by millions of computers around the world.

Crucially, as Satoshi Nakamoto’s system is independent of financial institutions, it negates the need for service charges.

Now, think about the last time you bought concert tickets where a fee was added to your total by a processing company to protect your transaction. Because it’s a secure system, blockchain technology has the potential to eliminate those charges and reshape how we pay for goods and services.

Not only that, but imagine if the ticket you purchased also became a tradable block on a separate chain. If for whatever reason you could not attend the concert and decide to pass on the ticket to a friend - that transaction could be recorded as a second block along a chain.

In this case, each individual concert ticket would generate its own unique chain. Every time that ticket is sold or passed on, a new block would be created on the chain.

Each of those individual blocks could contain data identifying individual ticket holders, which would allow ticket holders to manage the secondary market, and destroy the exorbitant business model used by ticket touts. 

Additionally, as each block along the chain could potentially contain data identifying ticket holders, blockchain technology has the capacity to improve security at venues and communicate emergency messaging if contact details were also shared.

The deployment of this technology on a large scale might not too far away. Already, Blocktix is providing such a ticketing system to promoters, who can benefit from creating additional ticket revenue on the secondary market and a guarantee that they will be able to identify 100% of all ticket holders at events.

In the health industry, a company called Gem developed a shared blockchain infrastructure that allows different healthcare operators access the same information (blocks). On a practical level, this means that providers using the system can access medical data that might otherwise have been stored in siloed repositories.

As a result, if a tourist was to fall ill while abroad, their data could be accessed quickly by healthcare providers in different jurisdictions.

In developing countries, where people might not have access to bank accounts and dealing in cash can be dangerous, blockchain is being deployed as an alternative system for payments.

Across the developing world, Plastic Bank use the technology to reward users who collect and deposit plastic waste at established recycling centres with Plastic Bank digital tokens. These tokens (blocks), can then be exchanged for goods and services at locations that use The Plastic Bank app.

Furthermore, according to a Deloitte survey of 1,000 companies in seven countries, 34% already had a blockchain system in use, while another 41% expected to deploy a blockchain application within the next 12 months.

Nevertheless, despite the future potential of blockchain, its environmental impact has been called into question due to the amount of electricity consumed by the bitcoin blockchain.

Last year for example, a bitcoin specialist working at PwC estimated that the cryptocurrency, required a minimum of 2.55 gigawatts of electricity to power it, amounting to 22 terawatt-hours of energy consumption per year - almost the equivalent power consumption as Ireland.

Additionally, some members of the public are wary of the cryptocurrency and blockchain due to the negative connotations raised by the bitcoin’s inadvertent association with the dark web and the illicit transactions that took place on the “Silk Road”.

This is why it is necessary to disentangle blockchain from cryptocurrencies in the public’s imagination. Rather than look to bitcoin as an example of how blockchain is used, we should instead by highlighting how it can help in our everyday lives.