Blockchain launched in 2008; it was invented by a person (or group of people) using the name Satoshi Nakamoto to serve as the public transaction ledger of the cryptocurrency bitcoin. The technology was received in many spheres around the world with almost same level of enthusiasm as speculation.
Over the years, however, the system seems to have not only gained traction in major organizations but also to have fast become one of the most versatile and acceptable methods of exchange around the world.
The degree of skepticism has remarkably wanted, especially since the system has been put to use and seems to be standing the test of time and usefulness.
How Blockchain works
The two most essential points of endearment for blockchain enthusiasts are that it is decentralized and maintains a high standard of security.
Blockchain operates a strict, air-tight system that allows neither for external interference with transactional processes nor access to information of transactions already carried out. Transactions, once initiated, immediately begin to go through sorting and storage processes achieved via a system known as cryptography.
The process by which information is kept secure by converting it into an unreadable format known as cipher text.
This implies that blockchain transactions are inaccessible to third parties, except they are the people initially involved in the transaction.
Based on these factors; the decentralization of blockchain processes, as well as the system of cryptography which data is passed through and stored in, promises a degree of cybersecurity which the world may never have witnessed before.
Can Blockchain be Hacked?
The security (or extent of it) of Blockchain has been put under scrutiny over the years since it became common in systems around the world.
While there are a few instances where particular cryptocurrencies transactions were hacked, it should not be taken as a discredit of the reliability of blockchain technology.
Blockchain technology is not a separate piece of innovation operating in isolation: it is rather a system that consists of various techniques pieced together for the collective, specialized execution of all the stages of every transaction.
Once a transaction is initiated, the system immediately goes to work to put each stage through a unique verification process which is determined strictly by the blockchain application in use.
This implies that the ‘proof of work,’ is neither absolutely duplicable nor decodable and therefore is not subject to external invasion.
Going forward, verified pieces of transactional data are reinterpreted, sorted, and grouped into ‘blocks’ through a process called ‘hashing.’
Each block is sealed up and further converted into chain-like strings of data of specific lengths and a unique identification, referred to as ‘stamps’ is placed on each block.
Each stamp is designed to be in sync with every other block stamp in the chain.
Once data is converted through this cryptographical process, it is challenging to turn it back into its previous state or language.
There would be only one way to alter the data contained in a chain: revisit the entire string of blocks, identify a particular block, and reverse them into their previous language.
Even if that were to be achievable, the process of altering the form of the block would mean that it has a new stamp.
Since this new stamp will not correspond with the previous set of stamps, the chain rejects the block, automatically frustrating traceability of any other aspect of the transaction.
Transaction ledgers are also decentralized: copies exist in various nodes. Nodes are the computers that are involved in a particular transaction.
In order to alter a transaction, the majority of the nodes involved must grant permission by way of providing a specific ‘keys’: private key of ownership and a public key that typically indicates the address of the digital currency in question.
For many systems, this may not be the only way of confirmation as well.
Cryptologists have however argued that this process does not entirely remove the possibility of Blockchain being hacked.
Experts believe that ‘quantum computers’ may be able to hack Blockchain. Due to their exceptional ability to compute processes in very short time, it is speculated that they could attack and hack blockchain processes.
This could be through either both of two ways: disrupting the activity of a blockchain transaction by injecting the network with nodes that are under external control and made trackable or hijacking the entire process of the transaction by overloading the network with traffic.
Why Blockchain Technology is the Future
In 2017, the World Economic Forum surveyed the future of transactions relating to gross domestic products.
It resulted in a prediction that by 2027, up to 10% of such transactions would be stored on various ledgers. This, of course, would be achievable by blockchain technology.
In recent times, financial institutions, international administrative bodies, governments, and related institutions, electricity-based institutions and even a fraction of legal institutions have started to seek for new ways to integrate the blockchain system into their activities.
Not only does the system provide an impressive level of security, but it also promises exceptional efficiency in information storage and execution of transactions.
Governments are particularly optimistic about blockchain technology because its decentralized nature of the operation is perceived as a point of leverage in efforts geared towards curbing corruption in government.
Government activities would be better monitored. Fiduciary transactions would be highly decentralized and removed from censorship.
Citizen information would be stored more efficiently, and accessibility to them would be highly restricted. In all, the blockchain system would foster the accountability and efficiency of governments around the world, both at national and international levels.
Banks, however, seem to be the most enthusiastic about Blockchain as of now: they see the system as an opportunity to initiate faster, better and more secure processes of financial exchange and revive people’s trust in commercial systems.
It would also contribute to the facilitation of speedier acceptance of financial technology as people would be more willing to use Fintech if they are sure about the security and privacy of their transactions.
Financial institutions are also looking at the possibility of integrating smart contracts in their systems.
Smart contracts are transactions that execute themselves: every term of the contract is written into lines of programming language.
The parties to a smart contract are dissimilar and anonymous, allowing for identity privacy and management as well as limiting the possibilities of transactional disputes.
One other strong point for blockchain technology is its universality. Blockchain technology can be integrated into virtually any system at any place in the world.
This means that it provides the opportunity for smoother processes in ‘multi-currency’ transactions.
Blockchain or Coinbase?
The most crucial difference between Blockchain and Coinbase is that unlike Blockchain, the Coinbase system is not decentralized.
This makes information on transactions easily accessible to third parties, a situation that most users are generally uncomfortable with.
Although most users criticize this attribute, some others think it might be a point of strength. Vulnerability for Coinbase implies easy recovery of lost information such as passwords, transaction histories, and transaction ledgers.
In a situation where a user may be keener about keeping tabs on his data than maintaining privacy, Coinbase could be a great option. This, however, would jeopardize the security of transactional data.
Also significant is the fact that Blockchain provides users with information on security procedures and various ways to improve them.
Coinbase does not do very much to address this aspect.
Blockchain transactions, as of now, deal with cryptocurrency and do not involve banks at any stage of the trade and have not been predicted to seek to establish such at any time.
Coinbase, on the other hand, are usable in bank transactions.