Decentralizing the world
Satoshi Nakamoto probably couldn’t imagine the current craze about Blockchain when he designed the encrypted database that forms the basis of Bitcoin. In the high tech community its decentralized nature has revived the old dream of an open and equalitarian Internet.
Blockchain combines a decentralized database, strong encryption, and a proof-of-work update mechanism. It relies on a meshed network of computers to register transactions between anonymous participants inside a shared ledger in a secure, transparent and reliable way.
Blockchain secures both the ownership and the exchange of values through encryption functions, ensuring non-repudiation and proof. Everyone can read the database, which creates transparency. Finally, the distributed nature of the system makes it very resilient.
quicker and less expensive
Compared with centralized systems like a bank, Blockchain has built-in trust and is quicker and less expensive for exchanging values. This technology has the potential to extend beyond Bitcoin to build decentralized applications that can manage transfers fast and securely. Developers throughout the world have in fact created applications leveraging the Blockchain in several areas: smart contracts, finance, legal, supply chain, the Internet of things, to name a few.
Ripple has created a Blockchain to manage international money transfer between financial institutions. It aims at short-circuiting the old correspondent bank system with a decentralized network of market makers handling currency exchanges. Its settlement infrastructure is quick (3-6 seconds instead of 2+ days for Swfit) and powerful (86 million transactions/day instead of 19 million messages/day for Swift). However, Ripple does not rely on proof-of-work but on consensus and is more distributed than decentralized.
Openbazaar is an open source decentralized marketplace for exchange of goods that brings together sellers, buyers and arbiters. They want to free peer-to-peer trade by abolishing fees and restrictions set by traditional centralized marketplace players. Sellers list their goods on the Openbazaar client on their computer and the list is disseminated across the network.
Agreed transactions are managed by a smart contract under supervision of a moderator, that requires a majority of two over three parties to execute. However, Openbazaar doesn’t have an internal currency to incentivize the participants nor is it replicating the locally stored data throughout the network.
Ethereum is perhaps the most promising platform using Blockchain technologies. It allows for the creation of smart contracts, small applications stored in the network that run exactly as intended without any possibility of downtime, censorship, fraud or third party interference. Ethereum has its own cryptocurrency and provides the language to code contracts as well as the infrastructure to execute them. Unfortunately, Ethereum is more famous for its security issues, like the DAO hack that forced a hard fork, than for its real-life achievements.
As seen with these examples, the technologies known as Blockchain are still in their infancy and require intensive development efforts to improve. Investors have injected over 1 billion USD into Bitcoin and Blockchain startups between 2013 and 2015 but the flow of money is drying. Corporates also entered the game but with their own set of rules that translate into systems like R3 Corda that manages financial agreements between regulated financial institutions but is not decentralized, nor transparent, and relies on local consensus.
Overall, the Blockchain technology has the potential to revolutionize several industries. The progress made so far shows that it is hard to stick to the original design when extending to other use cases than Bitcoin. It is almost certain that the future of Blockchain
is not in the Blockchain.