In short, Blockchain is a technology for keeping secure, ordered, decentralized public records of any transaction between any two parties in a verifiable way. Batches of such transactions are called blocks. They are added sequentially one after another with a digital fingerprint of the previous block, thus forming chains. Blockchain is secure by design. It keeps copies of its database across its network and requires all copies to agree to confirm new transactions. So no transaction information can be rewritten retroactively.
According to Wikipedia, "decentralised consensus can be achieved with a blockchain. This makes blockchains suitable for the recording of events, medical records, and other records management activities, identity management, transaction processing and proving provenance. This offers the potential of mass disintermediation and vast repercussions for how global trade is conducted."
The technology is already there. It's already being used to record Bitcoin and other cryptocurrency transactions. It's not going to stop at that. And, like mobile phones and the internet, it will gradually become an integral part of our lives. And it will affect not only how we get and spend money, but many other aspects of our lives, including, ultimately, how we interact, deal and trade with each other.
There are two excellent TED talks on the subject that will give you more interesting insights, and a couple of very detailed articles on Wikipedia and O'Reiley as well - wikipedia.org & Understanding the blockchain
Blockchain isn’t a new kid in town, though it probably sounds that way because the technology has rarely been discussed before. However, it is finally being debated seriously by not just tech companies, but also the banking, financial and even healthcare sectors around the world.
What Exactly Is Blockchain?
Do you know about Bitcoins? The digital currency, aka cryptocurrency? It is very likely that you are aware of the revolutionary currency Bitcoins.
Blockchain is the core technology behind Bitcoins. The same technology is, in fact, being used by other companies that are planning to introduce their own cryptocurrencies such as “Kin” by Kik messenger.
If we talk about the technology in plain words, Blockchain is a digital public ledger of transactions which exist in a decentralized form. The nature of the technology makes it publicly accessible to anyone on the network. Since no single entity on the network owns the Blockchain, there is not a single point of access for any sort of tampering.
Every node (system) has a copy of the Blockchain on the network. The transactions made via the technology is secured in a verifiable form. There are no user ids or passwords, but only mathematical equations derived from cryptography.
In the words of Don Tapscott, the CEO of The Tapscott Group, “the blockchain is global spreadsheet — an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Blockchain – Behind the Scenes
As we’ve discussed earlier, Blockchain is a single version of the many files, distributed and maintained on a network of computers, aka nodes. Consequently, the decentralized system of the technology makes it impossible for a single system to add or validate any new data to the Blockchain.
The data records or ledgers are pooled in a “block”, and to add more blocks to the system, the user would be required to first get the new data validated by at least 50% of the nodes on the network.
The validation is done through cryptography. As a result, the user would need to decrypt an equation to get the data or Block validated. Once the validation is done, the Block gets a unique timestamp which is called a Hash.
The new hash will then be required to add more blocks to the network. If there’s a slight change in the hash than the original version, all the subsequent blocks in the network will be changed accordingly. As a result, a new chain would be formed which cannot be revalidated.
Since there is no single source for validation, it gets fairly difficult for anyone to tamper with the original data.
Blockchain Data Privacy Sets to Restore Security
Usually, a user would require a single point of access to tamper with a data. Remove that single source, there won’t be any access and there won’t be any tampering.
In Blockchain, the identical files are stored on a network of many computers. To tamper with all the systems in the network, a huge computational power would be required, which is not just expensive but also limited.
Due to the “lack of tamper-with” nature of the technology, some may assume Blockchain to be perfect for data privacy. Vitalik Buterin, the inventor of Ethereum, says, “Blockchains do NOT solve privacy issues, and are an authenticity solution only.”
After all, the technology is only used to store data that cannot be altered, and remain genuine across all the nodes. Since the data is shared across the network, there is a huge risk of data transparency. Such transparency increases Blockchain privacy concerns amongst users.
One of the best ways to reduce transparency and thus the chances of any privacy breach is encryption. The data should be encrypted first and then added to the Blockchain network. Vitalik Buterin also proposes the same suggestion of combining the power of Blockchain and encryption. The result would be a perfect security solution rather than an authenticity solution.
Final Thoughts on Blockchain and Data Privacy
Blockchain is a pretty complex technology and not to mention it is still in its infancy. There’s more research that is being carried out on it, and therefore there are more fruits the technology is yet to bear.
Regardless, we live in a world where data, or you may say personal privacy is being threatened to be exposed to unwanted eyes. With cyberattacks on the rise and a huge force of anti-privacy laws being passed, we need an immaculate security solution more than ever.
Blockchain can be the perfect solution that we have been yearning for. It has the potential to significantly reduce the number of privacy breaches and thus secure what is dearest to us, our online privacy.