Since its conception, people have been fascinated by blockchain, an emerging trend in fintech. The purpose of blockchain was to enable digital data to be recorded and appropriated but not altered.
Stuart Haber and W. Scott Stornetta, two researchers who aimed to develop a system where document timestamps could not be tampered with, initially proposed blockchain technology in 1991. Blockchain did not have its first real-world application until two decades later, with the launch of Bitcoin in January 2009.
Although blockchain may appear complicated at first glance, its underlying concept is simple. Blockchain is a specific type of database, and the way its data is structured differs significantly from a typical database. A typical database stores data in a particular way, for example, by using a table structure. Most databases use a relational data model, showing that all the information is stored in relation to each other and accessible using keys.
In blockchain, each block stores data in a unique way, which makes the system very secure and reliable. There is no linkage between blocks and records in blockchain because there is no need for that. The main idea behind blockchain – unlike databases – is that no central authority controls the database. Instead, all members of the network have an equal say in managing it. This allows for flexibility and transparency, as any client can check the contents of a transaction or database item without relying on a central authority. To do this, only one entity must be replicated on each machine in the network – the blockchain itself.
To understand blockchain, it is necessary to first understand its storage structure. Blockchain differs from typical databases in the way it saves data. It stores data in blocks that are linked together. As new information is received, it is entered into a new block. Once the block has been filled with data, it is linked onto the earlier block, resulting in a chronological chain of data. When a block is filled, it becomes a permanent part of the timeline. When a block is added to the chain, it is given a precise timestamp. Any change to a single block in a chain would be immediately obvious. Hackers would have to modify every block in the chain across all distributed copies if they wanted to destroy a blockchain system.
With the recent emergence of cryptocurrencies which are built on blockchain like Bitcoin and Ethereum, new blocks are constantly being added to the chain, greatly increasing the ledger’s security. Bitcoin depends on blockchain technology as a mechanism of recording payments in a transparent manner. Bitcoin was developed in 2008 by Satoshi Nakamoto, a designer who built the digital currency, as a peer-to-peer electronic cash system which does not require third party intermediaries. It runs as a decentralized, transparent, secure and distributed electronic cash system where the history of every transaction done is made public and can be viewed by anyone at any time. The Bitcoin ledger is collectively kept by a network of participants [nodes] spread across the globe. All nodes in the network keep track of all successful transactions and update their copies of the ledger accordingly.
A South African-based marketplace known as Sun Exchange allows individuals to invest in solar energy projects in South Africa using Bitcoin. Anyone with Bitcoin can buy solar energy systems, and lease them to schools, communities, businesses, and government facilities. This allows investors to earn rental income, while supplying clean energy to local communities in areas which have a critical need for energy infrastructure. It primarily focuses on South African solar projects but is expanding to other African countries like Kenya.
African fintech startups have made noteworthy progress in changing the landscape of the blockchain industry. Tari, an innovative South African blockchain startup launched in 2018 has a goal to integrate payment solutions across Africa. They are also in the game of supporting local African blockchain startups through a free blockchain university to spread blockchain knowledge across Africa.
Blockchain has potential applications beyond Bitcoin. Blockchain is an immensely powerful technology that can revolutionize multiple industries. It enables users to store information and share that information with others without the need for a trusted third party to ensure security. This means that all data is maintained privately, which provides users with complete privacy in their transactions.
Blockchain also has applications in finance, healthcare, energy, and other fields where trust and security are important. One good example is the use of blockchain to vote in democratic elections. The nature of blockchain’s immutability means that fraudulent voting would become far more difficult to occur. Here, a citizen is issued a single cryptocurrency or token under a voting system. Each candidate is then assigned a unique wallet address; hence voters would send their tokens or crypto to the address of the candidate they wish to support. Because blockchain is transparent and traceable, it eliminates the need for human vote counting and the ability of bad actors to interfere with physical votes.
Health care providers can leverage blockchain to keep their patients’ medical records securely. When a medical record is created and signed, it can be stored on the blockchain, giving patients confirmation and assurance that the record cannot be altered. For example, BurstIQ, a US based tech company creates big data blockchain contracts to help their patients and doctors transfer sensitive medical information securely. The smart contracts set up the parameters of what data can be shared and even displays details of personalized health plans for each patient.
Propy is a global real estate marketplace which leverages blockchain to create a decentralized title registry system and even sells properties that can be bought using cryptocurrency.
Launched in 2015 by Cellulant, Agrikore is a blockchain-based system for intelligent subcontracting, payment, and marketspace that allows all stakeholders in agriculture (farmers, consumers, product aggregators, insurance companies, financial institutions, and governments) to collaborate in a secure environment.
With many practical uses for the blockchain technology being implemented and explored, blockchain has the potential to make businesses and even government operations more precise, efficient, secure, and cost-effective by eliminating the need for intermediaries and giving comfort to its users.