Are you a bitcoin owner?
Whether you are or not you’ve probably heard of it and other cryptocurrencies that have been gathering a following. The technology behind these is nothing short of a revolution for how business can be done.
While this is often a difficult one to get your head around, the open source nature of it means that we have the opportunity to see all sorts of opportunities realized.
Here’s a quick rundown on blockchain and why that open source feature is important:
Where else can blockchain be applied? Get our quick guide here
What is blockchain technology?
Blockchain was first invented by Satoshi Nakamoto, which is a pseudonym, although we don’t know if it is for a single person or group of people. Initially, blockchain was the technology behind the digital currency, Bitcoin, but it has opened up other avenues of use across the internet.
This definition from Don Tapscott provides a nice concise description:
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
A good analogy to describe blockchain is that it is like a distributed database or spreadsheet. This spreadsheet is replicated thousands of times across a network of computers which work to regularly update the ledger. As there is no one central location for storage, hackers aren’t able to corrupt the data and records are public and verifiable.
The importance of blockchain for digital currency is that it has in-built robustness to ensure records are accurate. “Blocks” of identical information are stored across a network so there is never a single point of failure or control given to one entity.
The relative security and incorruptibility of information is an important feature – as BlockGeeks reveal:
“The blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens in ten-minute intervals. Each group of these transactions is referred to as a “block”. Two important properties result from this:
- Transparency – data is embedded within the network as a whole, by definition it is public.
- It cannot be corrupted – altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network.”
Could someone still try to take control in order to steal Bitcoins? In theory, yes, but in doing so they would destroy the value of the currency so there would be no point.
The blockchain process – BlockGeeks.
Other applications of Blockchain
While blockchain makes Bitcoin possible, it has potential beyond cryptocurrency for tracking things of value. Beyond those sorts of transactions, blockchain also has growing usage in other areas, such as the media.
As an example, take a look at the new web browser, Brave. This browser was developed as a two-way solution to a problem – advertisers want to reach audiences but continually come up against ad blockers, while audiences don’t want to see ads that are of no interest to them.
Brave is a compromise – browsers can elect to block ads on websites and instead earn money for viewing ads which are based on their own preferences. The user gets a better experience while the advertiser reaches a targeted audience.
How does blockchain fit into the picture? Firstly, Brave uses the Bitcoin ledger to store data about user browsing behavior, secondly, Bitcoin facilitates the financial transactions between Brave, its advertisers, and users.
An Infoworld article outlines the investments of financial institutions and the technology sector in blockchain. These companies are seeing a wide range of potential applications as a worthy investment:
“It can help companies manage the flow of goods and related payments, let manufacturers share production logs with OEMs and regulators to reduce product recalls, help governments provide public records like vehicle registration, and allow systems to track individual device transactions.”
These are examples of the applications we can already think of – those we haven’t imagined yet may prove blockchain to be truly transformative.
The importance of open source
What makes open source so important for blockchain? At a glance, you may worry that it would make the technology vulnerable, but in reality, the open source nature helps to protect it and maintain that all-important transparency.
IBM recently unveiled “Blockchain as a Service”, based on the open source Hyperledger Fabric. This new service allows customers to build their own secure blockchain networks, opening the possibility of value transactions up to virtually anyone. Admittedly, IBM has added extra security layers to make it more appealing to enterprises, but it was the initial, open source project that brought skills and ideas together to make it possible.
Here are just a few reasons why open source is important for blockchain:
Unleash the potential of the technology
One of the core philosophies behind anything open source is the efficiencies that can be gained. When you allow others in on the technology, you can exponentially boost the potential applications available and the spread of the technology.
The business world collectively gasped when Elon Musk announced that Tesla was opening up its patents in “good faith” to anyone who wanted to use them. Why would he do such a thing? One argument is altruism – a desire to share in the spirit of open source, but there can also be more pragmatic reasons. Some believe that by opening up the technology for electric cars to more players, Musk was ensuring the proliferation of the technology in response to competing hydrogen cell plans.
Regardless of the reasoning, there’s no doubt that open source can be an important facilitator of ideas and further development. For blockchain, open source is taking it beyond Bitcoin by offering different transactional applications – for example, Overstock.com was recently approved by the Securities and Exchange Commission to issue its stock via blockchain.
Facilitates transparency and security
Open source for blockchain means that it is a very public, transparent way to keep records. This should all but eliminate any kind of operator tampering or revisions. Bitcoin itself facilitates transparency by requiring new entries to include a proof of work.
Another possible application of this transparency could be within governance. What if election results were fully transparent, enabled by blockchain technology? It would certainly help to eliminate allegations of tampering or, where pertinent, eliminate tampering itself.
Blockchain governance has already been applied, with the app Boardroom enabling transparency within organizational decision making. Company governance can become fully verifiable.
Decentralization can somewhat “democratize” currencies and other forms of decision making. Open source facilitates that decentralization meaning no one central “source of truth” can become corrupted or make decisions that impact everyone.
Putting aside any kind of political stance, this is a way to engage more people in everyday needs such as currency. Here’s how Open Democracy put it:
“It engages everyone to re-imagine the economy and democratically elect their own currency – one that is conceived, adopted and its flow directed by the people and for the people, not handed down by any state or corporate authority. This programmable finance is a form of free speech and as a protocol it has a potential for astounding innovation from the ground up. We are now beginning to re-envision what currency and exchange can really be in a way that profoundly affects our social and governmental structures.”
Get our quick guide to other applications of blockchain here
Open source is a fundamental feature of blockchain. In fact, despite the fact that there are so-called permissioned or private blockchains, many argue that these shouldn’t be considered a blockchain because openness is not there.
Blockchain is a technology that has the potential to change the landscape vastly, yet we are still only scraping the surface of the possibilities it brings.
An open source technology helps to spread the load and give the opportunity for better transparency and for those new possibilities to be tapped.
At Koombea, we’re passionate about open source projects and new technologies. Talk to us today about how we can help with your app creation.