Understanding Blockchain Technology – Daily Trust
Blockchain technology is a decentralized, distributed ledger that stores the record of ownership of digital assets. Data stored on the blockchain cannot be altered, making the technology a legitimate disruptor for industries such as payments, cybersecurity and healthcare.
A technical expert, Sam Daley, writing at www.builtin.com, says that a simple analogy for how blockchain technology works can be compared to how a Google Docs document works. “When you create a Google Doc and share it with a group of people, the document is simply distributed rather than copied or transmitted. This creates a decentralized distribution chain that gives everyone access to the base document at the same time. No one is locked out and waiting for changes from another party, while all modifications to the document are recorded in real-time, making changes completely transparent. However, a significant gap to note is that unlike Google Docs, original content and data on the blockchain cannot be changed once written , which increases the level of security, Daley said.
Of course, blockchain is more complicated than a Google Doc, but the analogy is apt because it illustrates critical ideas about the technology.
Why is blockchain important?
Blockchain is a particularly promising and revolutionary technology because it helps reduce security risks, eradicate fraud and bring transparency in a scalable way.
Popularized by its association with cryptocurrency, blockchain technology has since evolved into a management solution for all types of global industries. Today, you can find blockchain technology that brings transparency to the food supply chain, secures health data, innovates gaming, and generally changes how we handle data and ownership at scale.
How does blockchain work?
For proof-of-work blockchains, this technology consists of three important concepts: blocks, nodes and miners.
What is a block?
Each chain consists of several blocks and each block has three basic elements:
The data in the block.
Nonce – “number used only once.” A blockchain nonce is an integer randomly generated when a block is created, which then generates a block header hash.
Hash – A hash in the blockchain is a number that is permanently associated with the nonce. For Bitcoin hashes, these values must start with a large number of zeros (ie be extremely small).
When the first block of a chain is created, a nonce generates the cryptographic hash. The data in the block is considered signed and forever associated with the nonce and hash unless mined.
What is a miner in blockchain?
Miners create new blocks in the chain through a process called mining.
In a blockchain, each block has its own unique nonce and hash, but also refers to the hash of the previous block in the chain, so mining a block is not easy, especially on large chains.
Miners use special software to solve the incredibly complex math problem of finding a nonce that generates an accepted hash. Because the nonce is only 32 bits and the hash is 256, there are approximately four billion possible nonce-hash combinations that must be mined before the correct one is found. When that happens, miners are said to have found the “golden nonce” and their block is added to the chain.
Making a change to any block earlier in the chain requires re-mining not only the block with the change, but all the blocks that come after. This is why it is extremely difficult to manipulate blockchain technology. Think of it as “security in mathematics” since finding golden nonces requires a huge amount of time and computing power.
When a block is successfully mined, the change is accepted by all the nodes on the network and the miner is financially rewarded.
What is decentralization in blockchain?
One of the most important concepts in blockchain technology is decentralization. No computer or organization can own the chain. Instead, it is a distributed ledger via the nodes connected to the chain. Blockchain nodes can be any kind of electronic device that maintains copies of the chain and keeps the network running.
Each node has its own copy of the blockchain, and the network must algorithmically approve any newly mined block in order for the chain to be updated, cleared and verified. Since blockchains are transparent, every transaction in the ledger can be easily checked and viewed, creating inherent blockchain security. Each participant is given a unique alphanumeric identification number that lists their transactions.
Combining public information with a system of checks and balances helps the blockchain maintain integrity and create trust among users. Essentially, blockchains can be thought of as the scalability of trust via technology.
Blockchain is not only used for financial transactions. Due to its secure and transparent nature, the technology is versatile for needs beyond one area of expertise. Industries covering energy, logistics, education and more are leveraging the benefits of blockchain every day.
Cryptocurrency: Blockchain vs Cryptocurrency
Blockchain’s most famous use (and perhaps most controversial) is in cryptocurrencies. Cryptocurrencies are digital currencies (or tokens), such as Bitcoin, Ethereum or Litecoin, that can be used to purchase goods and services. Just like a digital form of cash, crypto can be used to buy everything from lunch to your next home. Unlike cash, crypto uses blockchain to act as both a public ledger and an enhanced cryptographic security system so that online transactions are always recorded and secured.
The term Bitcoin, for example, is used interchangeably to refer to both the blockchain and the cryptocurrency, but they remain two separate entities. The very first blockchain application appeared in 2009 as Bitcoin, a cryptosystem that uses distributed ledger technology. This also marked Bitcoin as the first “blockchain”. The aspect of blockchain used to house this new digital currency is what brought both entities together, and what brought them quickly into the spotlight. The Bitcoin blockchain only describes the technology in which the currency is placed, while the Bitcoin cryptocurrency only describes the currency itself.
To date, there are more than 20,000 cryptocurrencies in the world with a total market capitalization of around $1 trillion, with Bitcoin holding the majority of the value. These tokens have become incredibly popular over the past few years, with the value of one Bitcoin fluctuating between several thousand dollars.
Here are some of the main reasons behind cryptocurrency’s recent popularity:
Blockchain’s security makes theft much more difficult since each cryptocurrency has its own irrefutably identifiable number that is linked to one owner.
Crypto reduces the need for individualized currencies and central banks. With blockchain, crypto can be sent anywhere and to anyone in the world without the need for currency exchange or without the intervention of central banks.
Cryptocurrencies can make some people rich. Speculators have driven up the price of crypto, especially Bitcoin, and helped some early adopters become billionaires. Whether this is actually positive is yet to be seen, as some retractors believe that speculators do not have the long-term benefits of crypto in mind.
More and more large companies came to the idea of a blockchain-based digital currency for payments. In February 2021, Tesla announced that it would invest $1.5 billion in Bitcoin and accept it as payment for its cars.
Of course, there are many legitimate arguments against blockchain-based digital currencies. First, crypto is not a very regulated market. Many governments were quick to jump into crypto, but few have a solid set of codified laws regarding it. Additionally, crypto is incredibly volatile due to speculators. Lack of stability has made some people very rich, while a majority have still lost thousands of dollars.
Whether or not digital currencies are the future remains to be seen. For now, it seems like blockchain’s meteoric rise is starting to take root in reality more than mere hype. While still making progress in this brand new, highly exploratory field, blockchain also shows promise beyond Bitcoin.
Meanwhile, the National Information Technology Development Agency (NITDA) in partnership with Domineum Blockchain Solutions has announced the launch of the NITDA Blockchain Scholarship, 2022 Scheme.
The programme, according to the Director General of NITDA, Kashifu Inuwa Abdullahi, is aimed at training 30,000 Nigerians on blockchain technology to develop career skills in the emerging technologies.
Abdullahi added that the scholarship will help “accelerate blockchain adoption in Nigeria and make Nigeria a global player in the blockchain industry”.
He called on Nigerians to take advantage of the scholarship to become “early solution providers in the Fourth Industrial Revolution”.
The scheme has Domineum Blockchain Solutions as implementation partner and BSV Blockchain Academy as supplier of course content.
Reacting to the announcement, Mohammed Jega, the co-founder of Domineum, reiterated his commitment to deliver “quality education and equip participants with the skills to build real blockchain solutions.”
Similarly, Calistus Igwilo, Course Coordinator and Country CTO of Domineum said, “Blockchain will power the next generation of data and the courses are carefully designed to equip participants with the right skills to become professionals and help shape the future of the blockchain industry.”
The program will be delivered through a hybrid mode (virtual and physical meetings) in all the states of the federation. Outstanding teams in the project phase have the opportunity to join an incubation program in London, while others will be exposed to the BSV Ecosystem where they can be involved in various projects.