Apr 10, 201812:13 PMLegal Login
with Mindi Giftos
Blockchain is bigger than bitcoin
(page 1 of 2)
Over the past few months, cryptocurrencies such as bitcoin have been the talk of the town, inspiring commentary verging on hyperbole. When valuations soared toward $20,000 per bitcoin the commentary seemed apt, and despite the recent plunge in value there are still many influential voices who believe the cryptocurrency will supplant existing media of exchange. Twitter CEO Jack Dorsey was quoted recently in The Times of London as saying that “[t]he world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin.”
It is unknowable whether cryptocurrencies are going to be digital bullion or a modern-day version of the tulip mania that gripped Europe in the 17th century. Having said that, we should not allow the crypto-craze to obscure one thing that seems more certain: the technology that cryptocurrencies are built upon — blockchain — is here to stay. It has a variety of applications across multiple industries and is potentially one of the most disruptive technologies currently under development.
Understanding the applications of blockchain requires that we appreciate how it works and what it does differently than the technology currently utilized. At its simplest, blockchain is a system for organizing and storing data in chronological order. If this sounds like what an old-fashioned ledger does, that’s because at its core blockchain is an electronic ledger. What makes it revolutionary, however, is the open, distributed nature of the so-called ledger book.
Blockchain gets its name from being made up of a number of “blocks” of data. Each data block represents a single, distinct data point or a series of data collected simultaneously. Each data block includes a date and time date stamp. The blocks are then sequentially linked together into a chain by “hash” identifiers, typically an alphanumeric sequence of a designated number of characters that is generated by running a data set through a hash-generating function. Each block includes the hash identifier of the previous data block in the chain. This provides safety against the unauthorized modification of data blocks because if the original data of a block is altered, the hash in the next block would not be the same and it can be determined that the data in the block is not original and has been modified. In effect, this operates as an automatic authenticator of changes in the data set.
While the block-and-hash mechanism provides the “ledger” function of the technology, there is another key component of blockchain — it is built upon a decentralized and distributed network where a copy of the blockchain is saved on a number of storage nodes instead of a centralized server. An identical copy of the blockchain is maintained through a syncing function, which updates and syncs the data on each node at a given time interval. Syncing may include repeating the hash function for some or all of the blocks to authenticate that the data in a block has or has not been changed.
From a legal perspective, blockchain offers four discrete benefits:
Data security — Conventional centralized networks, data storage, and access systems are far more vulnerable to theft and tampering because data is stored in one location and accessed from many. If a hacker can access or infiltrate that one single location, the hacker can steal or sabotage the data or take it hostage.
By contrast, the decentralized nature of blockchain requires a hacker to infiltrate each and every node to effect a permanent change in the blockchain before the blockchain syncs. In addition, because there are numerous copies of the blockchain simultaneously maintained, there is little worry a hacker can hold data hostage. New ways to secure the blockchain are currently being developed and implemented from a fresh perspective, especially now that blockchain technology and platforms are seeing an increase in adoption rate.