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Blockchain

Blockchain is designed to create a framework for secure, online transactions.

Blockchain is designed to create a framework for secure, online transactions (Rosic). It functions as a series of computers, called nodes. When one computer requests a transaction, each computer verifies the authenticity of the request, using certain algorithms. Then, once all of the nodes verify the request’s identity, the data about the request is added to a computerized ledger, creating another “block” in the “chain.” (Rosic). 

Beneficial/Harmful Effects of Blockchain

A beneficial effect of Blockchain is that one can save money on financial services infrastructure. Since it is distributed, it is safer by design, and this security allows the financial sector to decommission expensive systems currently used to secure transactions. It would reduce the amount of human resources necessary to audit and check the validity of transaction requests and put that duty into the hands of the computer software (di Gregorio). Banks and financial security companies would save money and time that would otherwise be spent training and paying human employees. This has an economy impact because banks save money in transaction security. This creates more confidence in the US economy as a whole as stock values for the major banks rise. A harmful effect of blockchain technology is that it uses a lot of energy. When the computers check with each other to see if they “agree,” their verification process is more complex than any other. The process uses a lot of computing power, and consequently, electricity (Fairley). Everyone in the country is impacted because we all use energy, and soon, we may all be using the Blockchain. Society itself, namely the environment, is harmed. We are forced to burn more resources to create electricity in order to supply this technology with enough energy to run. With the growing issue of climate change, this is an issue for all of humankind.

How Blockchain Works

The system of blockchain operates with a distributed ledger. According to Coindesk, “a distributed ledger is a database held and updated independently by each participant/node in a large network” (Bauerle). The computers use metadata from transaction requests. Each block of data contains a pointer to the previous block, a timestamp, and transaction data. Then, this chain of blocks is held in the storage of each node. The data it produces is the blockchain, which is a stream of transaction data separated into blocks by set intervals of time. This data is kept in a ledger, which does not need to be verified by a central authority (Siegel). It computes by taking that data and running it through algorithms to verify the identity of the request. “In the case of blockchain technology, private key cryptography provides a powerful ownership tool that fulfills authentication requirements. Possession of a private key is ownership” (Bauerle). The blockchain computes by running transaction data through algorithms that verify private key ownership. A privacy concern is “Bitcoin relies on a public blockchain, a system of recording transactions that allows anyone to read or write transactions. Anyone can aggregate and publish those transactions, provided they can show that a sufficient amount of effort went into doing so” (Berke). In other words, anyone who really wanted to could see transactions being made on the Blockchain, and with a little effort and computing ability, they’d have access to transaction amounts, time, and other personal data.
How blockchain works

Sources

[1] Bhaskar, Raghav “Securing the Future of Cryptocurrency” Appspicket, July 27, 2017, https://appspicket.com/private-key-security-cryptocurrency/ 12/13/17

[2] Frisby, Dominic. “Entrepreneurs Move in on Bitcoin as Blockchain Makes its Mark” Virgin, October 7, 2014 https://www.virgin.com/entrepreneur/entrepreneurs-move-bitcoin-blockchain-makes-its -mark 12/13/17

[3] Rosic, Ameer. “What is Blockchain Technology.” Blockgeeks, December 2016, https://blockgeeks.com/guides/what-is-blockchain-technology/ 12/13/17

[4] di Gregorio, Max. “Blockchain; a new tool to cut costs” PwC, February 2017 https://www.pwc.com/m1/en/media-centre/articles/blockchain-new-tool-to-cut-costs.ht ml 12/13/17

[5] Fairley, Peter. “The Ridiculous Amount of Energy it Takes to Run Bitcoin” IEE Spectrum, September 28, 2017 https://spectrum.ieee.org/energy/policy/the-ridiculous-amount-of-energy-it-takes-to-run -bitcoin 12/13/17

[6] Bauerle, Nolan. “What is a Distributed Ledger?” Coindesk, March 9, 2017 https://www.coindesk.com/information/what-is-a-distributed-ledger/ 12/26/17

[7] Siegel, David. “Blockchain” Investopedia https://www.coindesk.com/information/what-is-a-distributed-ledger/ 12/26/17

[8] Berke, Alison. “How Safe are Blockchains? It depends.” Harvard Business Review, March 7, 2017 https://hbr.org/2017/03/how-safe-are-blockchains-it-depends 12/26/17

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