BELIEVING IN MAKE-BELIEVE!

This electronic infrastructure’s potential spans many realms – Gloria Spittel

Not so long ago, the world was preoccupied with the term ‘bitcoin.’ Bitcoin and other cryptocurrencies were credited with making millionaires of teenagers, as well as amateur and professional investors. Coupled with the soaring popularity and success of bitcoin and other cryptocurrencies were their crashes… and the inevitable analyses of their value.

But this is not a discourse on decentralised digital currencies; it’s a discussion about the technology that made these cryptocurrencies and their trading possible: blockchain.

Blockchain is intricately tied to bitcoin. In 2008, a paper by someone called ‘Satoshi Nakamoto’ – whose true identity is unknown (some suggest it’s a group of people) – described a peer-to-peer system of electronic cash. Essentially, it challenged the need for financial service institutions by introducing bitcoin (and subsequent cryptocurrencies).

The paper identified what it considered to be weaknesses in e-commerce: a reliance on trust based models such as trusted third party financial institutions, the reversibility of transactions through mediation by such trusted third party players, and the costs associated with mediation.

To mitigate these weaknesses, Nakamoto suggested a distributed peer-to-peer network using blocks and timestamps to secure recorded data – i.e. a blockchain.


On the surface, the removal of a security level such as trusted third party financial institutions – especially those that protect against phishing scams, fraudulent transactions and other swindles – raises alarms. On the other hand, for those providing nonreversible services, blockchain technology provides nonreversible payments when used for transactions.

But how does the technology function – and is it secure?

Blockchain technology is essentially a digital ledger of which exact copies are distributed to multiple trusted nodes on a network across various locations. The multiple copies sync automatically when updated with new transactional data through the addition of a timestamped block.

Decentralisation of the ledger is a key to the integral structure of blockchain technology; but what ensures its security is a combination of data or block timestamps, transparency of ownership and the manner in which data is recorded. Unlike traditional business networks, transactions are recorded one time.

For example, if an error occurs while recording data, a new block that showcases both the previous error and subsequent correction will be added instead of editing the data. This is timestamped and provides a chronological overview of the entire record.

Similarly, because the ledger is distributed and data is recorded in this unique way, no node can tamper with or change the record. Among other features (distributed yet synchronised copies), this is why some suggest blockchain is hack and tamper proof. However, a major issue may arise if the nodes that host the distributed digital ledger are compromised or maleficent themselves.

Additionally, there are types of blockchain networks that provide differing levels of security and access. Those that require prior approval are considered ‘permissioned’ blockchains – such as consortium (which is the most accepted model for business, according to SAP) and semiprivate blockchains. Those that permit anyone to participate in the system – such as public blockchains like those that host cryptocurrencies bitcoin and Ethereum – are termed ‘permissionless.’

So what are the uses of blockchain technology?

As mentioned above, cryptocurrency is its legacy use; and as such it can be adapted for payment processing and even money transfers. But the technology has the potential to be used across a wide spectrum of business, social, private and public life.

In the state and public sectors, the tamper resistance of records on a blockchain network is a compelling reason for its use. Potential uses in the sector include digital voting as regulators would have an overview of any changes (or attempted changes) to the system as well as digital medical record-keeping. Blockchain can also be used in the development of digital IDs, which could provide access to services in conjunction with participating public institutions.

Basically, with the amount of record-keeping that government agencies undertake, blockchain technology could streamline, and provide faster and secure access to information – such as land ownerships and transfers – when required.

Some of its more surprising uses are in supply chain and logistics management.

It’s thought that blockchain technology could increase transparency and reduce inefficiency across the supply chain regardless of the product. In fact, it is possible to envision that a physical product’s journey from procurement to manufacturing, and delivery could be viewed through meticulous record-keeping that displays quality checks and becomes useful in analysis to increase efficiency.

For private and noncommercial uses, blockchain offers a safe and secure system to record wills, and share and back up data. But here’s the thing: blockchain technology is electronic infrastructure upon which applications can be built.

This places the technology in the realm of expanding uses and possibilities thereof. At present, it’s a technology that appears to have numerous uses across various spheres of life.