Yap is a small island spanning a few hundred square kilometres in the western Pacific Ocean. The island is rather famous for its rather unconventional ‘stone money’, known as Rai, which are doughnut shaped, carved disks, up to 4 meters in diameter. Most of these ‘coins’ were mined and shaped in the neighbouring island of Palau, about 650 km away. The complex mining process, coupled with overseas travel and hostility of Palau Island, brought additional value to the coins. Death of one or more navigators in the gruelling transport process further inflated the value. The holes in the middle of these coins allow them to be mounted on massive wooden poles. Any transaction required several men to lift the coin and carry it to its new owner. This cumbersome task bought with it the risk of damaging the valuable coin. To avoid this risk, the villagers would leave the stone coins where they were, even if the owners changed. The islanders maintained a mental record of who owned what and referred to this distributed community record when dispute arose. This process had no involvement of any third parties as it relied on the community consensus.

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Compared to this time-honoured system of the Yap Island, the more common system to keep track of currency or other services involves the use of records that are held and maintained by some 3rd party intermediates who broker transactions of any value between people and groups. All such records, stored in the form of ‘ledgers’, are held by and centrally controlled by these intermediaries. Banks and credit agencies are basic examples of these third parties. In the digital realm, the need for such ‘brokers’ is even more as tokens of any value and of any kind may be digitally replicated numerous times where each copy is a perfect replica of the original. The issue, however, with such third party systems is that they tend to have a great deal of authority over the goods or services that they broker. Because of this centralized authority and a lack of transparency, the illicit tampering of these record is not an uncommon occurrence. The actual owners of the services that these 3rd parties broker can only make requests to make changes in the records. As such, the true owners have little true authority.

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Blockchain works in a fashion similar to the traditional currency system of the Yap Islanders. It is a stunning upgrade of the traditional ledger. Blockchain is a software that provides an open, decentralized database for any transaction involving value which includes, but not limited to, money, goods, property, work or votes. In the simplest form, blockchain makes the ‘ledger’ of records available and accessible to anyone connected to the network. Further, it allows any node of the network to maintain its own copy of the ledger and add transactions as they occur. Before a transaction is added permanently to the blockchain, it is verified across all the ledgers. As such, the authenticity of records is verified by a community. This eliminates the need for a 3rd party to act as the verification providers as the same is now handled by community consensus. Traditional ledgers, stored in any form, are tamperable, however, illegitimate manipulation of a blockchain based ledger is close to impossible.

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Blockchain has been called the ‘next big thing’ after the internet. With blockchain technology, the web gains a new layer of functionality. The applications are numerous. The first ever implementation of the blockchain in the form of blockchain based digital currencies is already challenging the role of banks by offering decentralization, distributiveness and security. Bitcoin is the first real application of the blockchain and its prices have risen by more than 5000% in just the last year. It has been suggested that the blockchain will do to banking what the internet did to media. The value of a decentralized and distributed financial system is intangible.

“I think the Internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing, but that will soon be developed, is a reliable e-cash.” (1999)

-Milton Friedman, winner of the Nobel Prize in Economics

IBM estimates about 15% banks will be utilizing blockchain by 2018. Banks, like Barclays, have already taken measures to incorporate blockchain into their ecosystem. The Government of India is planning on introducing its own currency based on the blockchain.

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True democracy in governments and voting systems is a controversial topic. Government processes tend to be slow and ineffective. The inability of the masses to closely monitor and track the changes in a complex bureaucratic system hinders democracy. Blockchain based government system, however, can reduce bureaucracy, increase security, efficiency and transparency. Dubai is already planning on putting up their official documents on a Blockchain system by 2020.

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A public voting system, implemented on the blockchain, could enable the shifting of the entire process online. The underlying technology could easily provide the security for such a system. The ability for everyone to see the changes in the records, in real time, would eliminate the possibilities of issues like vote counting frauds. It is a foolproof way of enforcing true democracy in our governmental systems. Blockchain simply brings the power back into the hands of the people.

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Blockchain also provides other promising avenues in fields such as IOT, insurance, privacy, digital media and more. Through IOT, devices can be made communicate directly with each other to update software, manage bugs and monitor energy usage. Smart devices could be set up with their own ‘virtual accounts’ so that the next time your printer runs out of ink, it can automatically purchase a new cartridge off the internet.

“On the blockchain, nobody knows you’re a fridge.”

– Richard Gendal Brown

Digital media creators can benefit from the blockchain by directly connecting with their audience and transacting with them without the need of intermediaries through smart contracts.

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The greatest innovations that we have witnessed, in all of history, have a single thing in common. They fill a deep void in the human society. They provide solutions to problems that we have long faced. Be it the printing press that filled the knowledge gap or the internet that filled the communication gap. The blockchain is no different. At the core of it, the blockchain fills a void that has been a part of the human race since the beginning. It fills the void of trust. It does so by providing a new method through which we rely on any service. Trust is a fundamental requirement of any business and any transaction. The blockchain brings digital exchanges close to the level of physical exchanges. It puts the authority over a service back into the hands of the people who own that service. Any system employing the blockchain provides transparency, reliability and dependability and thus instils a sense of confidence in the participants in that system. No more missed transactions, human or machine errors or even an exchange that was not done with the consent of the parties involved. 

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The world of blockchain is just starting to make waves in various sectors. Right now is a great opportunity for ordinary people to be involved in and to  be a part of a potentially ground-breaking innovation that could immensely change our social, political and economic institutions. You can see the blockchain of Bitcoin in action by visiting a service like blockexplorer.com or even invest some of your money into Bitcoin or into other such cryptocurrencies to get a sense of how efficiently the system functions and all the benefits it offers. The blockchain is one of the most fundamental inventions in the history of computer science. Blockchain is where the real excitement is. This technology has the ability to revolutionize entire industries.

References:

  1. blockgeeks.com – Bitcoin Applications
  2. medium.com – the crypto ecosystem
  3. blockchain.info
  4. linkedin.com – Yap Island and Blockchain
  5. nanalyze.com – Blockchain Startups
  6. forbes.com
  7. blockgeeks.com – What is Blockchain Technology
  8. nasdaq.com – The Bitcoin Revolution is coming
  9. thenextweb.com – Blockchain, the next big thing

 

 

Post by: Tabish Mir (@taabishm2)

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