What Blockchain is Really Used For
Blockchain got a lot of attention for being the foundation of cryptocurrencies, but it's practical outside of experimental finance, too.
At the height of the cryptocurrency mania, blockchain technology got a lot of attention. The jargon became popular and talk about decentralized systems sounded cool. But it mostly seemed like an abstract benefit that Reddittors imagined.
Understanding the technology behind the hype is difficult, but Blockchain: The Next Everything is a great primer on what blockchain is and how it can be used. That mix of practical uses and clear explanations makes it a must-read for anyone who rolls their eyes at NFTs.
What is Blockchain?
Blockchain is an online ledger. Data is recorded and stored there like a notebook.
The innovation is the way that data is saved. Blockchain isn’t stored in one place. Instead, every device connected to the blockchain views the data at the same time. Since every device is watching the data, the data can’t be changed by any one person.
Changes are made by adding a new piece of data to the chain. Everyone in the network sees the change at the same time. There’s also a record of what the old data was. By saving data across a network, there’s no need to press control-S. Everything updates in public.
Stephen Williams explains the significance of this method of saving data:
“…right now, if you want to wire money to an overseas company to pay for a shipment of widgets, you must depend on your bank to tell its bank…that the money you are sending is legitimate. It might take several days for you money to actually reach its account. In turn, the overseas company must depend on its bank to certify that legitimacy. Each step of this process has a fee; in effect you are paying for “trust.” The immutable nature of transactions on a blockchain can eliminate this need for middle agents and payments, because the money has been indisputably recorded as yours to spend.”
The trustless system makes blockchain one of the most secure ways to use data. That gives it many potential uses.
How is Blockchain Used?
Remember the last time you had an unreasonable contract dispute? Maybe your landlord didn’t return the portion of your security deposit you thought they should have. Maybe customer service didn’t accept the return you thought they should. Instead of hiring a lawyer, blockchain makes it possible for the contract to mediate these conflicts.
Smart contracts are contracts designed on a blockchain. The ability for blockchain software to connect to any technology, whether it’s a computer or a home’s digital lock, makes automatic contracts possible. Williams offers an example:
“…if you were to rent an adobe casita in Santa Fe for a weeklong getaway, your payment for the place would be held in escrow by the smart contract until you agreed that the landlord and the place met your expectations. Then your payment would automatically be released. If you overstayed the agreed-upon rental period, the smart contract would either negotiate new terms or lock you out of the house. The contract would also notify the housekeeper upon your departure and reset the door code for the next guest.”
Smart contracts automate steps of the agreement that usually have to be done manually by the people involved in the transaction.
However, automation also means that contract negotiation would become even more important. Conditions aren’t the only things set from the beginning. The entire sequence of the agreement would be able to play itself out. The consequences of breaking a smart contract would be worse, even if both parties agreed to renegotiate.
The Internet of Things
Imagine a solar panel being able to contact the city responsible for maintaining it if it gets damaged in a storm. How about a car that can call AAA by itself? Those are some basic examples of the Internet of Things — digital objects being able to use the Internet for themselves.
Objects wouldn’t use the internet like we do. Damaged telephone poles won’t be active on Pornhub, but inanimate objects can be connected to digital networks. Smart contracts could be one of the ways we automate our world.
It’s hard to think about this technology without concrete examples. William’s Blockchain: The Next Everything is full of clear examples, short snippets, and is a quick primer for anyone who wants to cut through noisy tech bro hype.