What are the advantages of Blockchain?
Distribution of data ownership (trustless) – By using a blockchain to record data, no single entity owns the data and therefore the data cannot be tampered with by a centralised entity. This is because everyone owns a copy of the database, and the database cannot be altered unless a specific number of ‘nodes’ agree for the data to be altered. This includes adding additional data onto the chain of events or even altering the way the blockchain’s protocols function.
Time Stamped Data – Data recorded on the blockchain is time stamped in a chronological fashion, making it very easy to pinpoint when a chain of events happened. For example, if a blockchain was constructed to record the ownership of land, each block could represent the change in the title of that land and therefore a perfect sequence of ownership could be recorded and more importantly not tampered with. You could then look back through the blockchain to see who owned the land, when they owned the land and for what period of time.
Encryption and security – Through the use of encryption it is possible to secure sensitive information on a blockchain, with the information only accessible to the owner via their own cryptographic keys. Let us consider by way of example how you can ensure no one else can access the Bitcoin that you keep in your wallet. When you create your Bitcoin wallet it is allocated a unique private key. This private key, when matched with the public Bitcoin key, will unlock the ‘cryptographic puzzle’ to provide access to your wallet. Hence, there is a high level of security via encryption.
Evolving protocols – If you have ever heard reference to the protocols or the ‘layers’ involved within the Bitcoin blockchain, this is referring to the specific engineering behind the blockchain which makes it unique. For example, some blockchains are engineered to have a high level of privacy; others are engineered to have lighting fast transactions. The beautiful thing about blockchain is these protocols can evolve and be built upon over time. The possibilities of blockchain are limitless.
Governance – Governance is what determines the pace at which the blockchain evolves. No one person or entity can make the final decision to make changes to the protocols of a blockchain. The process is achieved in a decentralised way through voting and governance. All projects will have a team of core developers who are responsible for making proposals to the network on what they want to change. These proposals are then voted on, and if accepted the implications will occur at a certain block height. Major changes are called hard forks; minor changes are referred to as soft forks.
Calculated and Transparent cryptonomics – One of the major downfalls of the current fiat currency system is the ability for central authorities to abuse the money mechanism. The most obvious example of this is countries like Venezuela whose government have completely robbed their citizens by printing money to pay off their own debts. A major advantage of Bitcoin as a universal currency is the transparent nature of its monetary system. There will only ever be 21 million Bitcoin; no centralised entity or groups of people can simply print more Bitcoin. As a result we can be confident that our Bitcoin will not become worthless simply due to government or central banks irresponsibly printing money.