Imagine you found a shipwreck and the ship is named “ChalShip”, which was caught in a storm and floated aground. The ship was carrying chal (Rice) of bags. 100 people found themselves on a deserted island with 100 bags of Chal salvaged. Each bag contained 40 kgs of chal. Each survivor had a bag of chal for himself. Unfortunately within a few hours, another shipwreck happened.
This time it was “DalShip”. Coincidentally again 100 survived with 100 bags of dal (lentils). Each bag of dal contained 40 kgs of dal. Each survivor here had also a bag of dal for himself. One self-declared Leader came out. A survival plan was chalked out. Each chal bag owner would give a kg of chal to dal bag owner in return for a kg of dal. The Leader would keep a tab. One would cook his chal and dal and survive till rescuers hopefully arrive. Soon confusion arose about who gave chal to whom and were they reciprocated properly with kgs of dal. Furore turned to be a fight, chal bags and dal bags were ransacked and spread in sand. 90 chal persons and 90 dal persons died in the melee.
One stooping wise man called a halt, managed to get the men to bury the dead. He then asked if the surviving 19 would like to live. All 19 said yes. Together with the wise man there were now 20 persons. Ten of them found a bag of chal each containing 40 kgs of chal. Another ten found a bag of dal each with 40 kgs of dal in them. The wise man said let us try this plan. He gave out a pen and a small notebook that he saved from the wreck to each. His instruction was as follows. Let us call each chal bag owner C1, C2,.. C10 and each Dal bag owner D1, D2, .., D10. Every exchange will be for 1 kg of either Chal or Dal. After every exchange, all would record the transactions simultaneously. After each exchange one will eat “chaldal” combination cooked for 10 days. At the end of ten days, each would have consumed one kg of chal and one kg of dal. After that, another exchange will happen with recording by everyone. Hopefully, rescuers will come by the time the last kg of chal and dal have been consumed. Before each exchange, the supplier, say, C1 would shout to all 20 that he is giving a kg of chal to say, D1. D1 would shout to acknowledge receipt of a kg of chal and to give one kg of dal in exchange to C1. Everybody would record it together with balances left with C1 and D1. Here C1 now has 39 kgs of chal and 1 kg of dal. D1 has 39 kgs of Dal and 1 kg of chal. After ten days C1 would have 38 kgs of chal and no Dal and D1 would have 38 kgs of dal and no chal. This would be publicly announced by each for recording by all. It is tedious to note this down for all but rather than risk another fight and self-immolation they decided to go with this system. All would reconcile their notebooks after each exchange and they all lived happily ever after till their last kg of chal and dal.
A ship saw their chal dal fire and they all were rescued. What were the characteristics of this Wise man’s system? There was no central authority keeping records. Each transaction was recorded by all members of group and therefore no one could dispute what all 20 had recorded. Distributed recording. Moreover, trust was not necessary between individuals but community/consensus/system provided the trust. Everyone depended on the consensus of records kept by the group. Add unchangeability/ immutability of transactions kept by all 20 survivors and this, ladies and gentleman is the fundamental concept of BlockChain.
Comparison of (a) Centralised,(b) Centralised with backup, and (c) a Blockchain technology based decentralized digital system over the internet
Centralized System
A boy Badal says to the girl Ganga “ I love you, Ganga.” Then Badal changes his mind and leaves Ganga. Ganga feels remorse but has no recourse. This is a faulty centralized system. Centralized with backup System Boy Badal says to girl Ganga in front of friend Fazal“ I love you, Ganga.” Badal changes his mind and leaves Ganga. Badal also cajoles Fazal to deny what Badal said to Ganga earlier.Ganga feels remorse but has no recourse as Fazal was compromised. This is a faulty centralized system with backup. Blockchain technology-based digital decentralized Systems over the internet Boy Badal says to girl Ganga“ I love you, Ganga” in an open space with lots of strangers.” Badal cannot change his mind and leave Ganga as witnesses are strangers, too many, and cannot hence be manipulated. This is essentially a Blockchain system. Blockchain eliminates centralized authority and hence one point of vulnerability and one point of failure.
One to many paradigms, decentralization, disintermediation, immutable
Blockchain moves the responsibility of custodianship from one to many. Everyone has the same information. Blockchain fosters a collaborative rather than a hierarchical system in finance, in business, in government, in education, and in any sphere of activity. The “many” paradigm ensures the system is peer to peer consisting of participants with equal status. Information once agreed by all is unchangeable and each participant has a copy of the latest updated information. It thus lends to a cash-like decentralized, disintermediated system over the internet. Blockchain enables the extrapolation of a small village cash-based system to a global electronic cash system. Blockchain turns the internet of information into the internet of value. Just as we send information across to each other we can send/ exchange value/ credentials across to each other with authenticity and confidence.
Interlinked blocks and Cryptographic Hash ID
Blockchain keeps data in a chain of interlinked blocks. Each block contains data that cannot be changed after everyone in the network agrees it to be true. The block added to the chain represents the latest state of affairs of the chain at that point in time. Each block has an ID that is derived from the previous block ID and the content of the current block. This ID or hash-ID of the current block is created by what is called a cryptographic hash function. Cryptography is the science of hiding information from third parties. Hash refers to a string of characters, hitherto meaningless, that represents the original meaningful data. The inputs to the cryptographic hash function are, amongst others, the previous block ID and the content of the current block. The output is the Cryptographic hash ID of the current block. This cryptographic hash ID of a block is a fixed string of characters, also known as a digest, and is essentially the fingerprint of the content of the block. This chain of interlinked blocks representing the latest state of blockchain database at that moment in time, maintained by each in the network, becomes a secure, tamper-proof, one truth for all information repository in the network.
Blockchain enables Sovereign ID system
Each of us presently doesn’t own our own personal digital data. Data is the new oil and social media companies/ outside agencies inappropriately use our personal data kept with them to, say, direct advertisers to push advertisements to us and
Blockchain applications, Permissionless and Permissioned Blockchains, Innovations
Blockchain applications are only limited by imagination. Any transaction-oriented, compliance hungry, privacy-preserving, authenticity seeking, immediate accessibility enabling to one truth for all system is likely to be disrupted and benefitted by Blockchain. Bitcoin, Ethereum (with Smart Contract – meaning software coded self-executing contract), and other Cryptocurrencies (Digital currency without any physical representation) have been the first applications of Blockchain. This is because Blockchain, based on Distributed Ledger Technology or DLT (ie one instantly verified shared ledger for all) can prevent against double-spending of cryptocurrencies, a crucial feature for the existence of cryptocurrencies. These cryptocurrency enabling blockchains like Bitcoin and Ethereum are essentially permissionless or public blockchains where anyone can join in. In contrast, permissioned or private/ enterprise or closed group Blockchains like Hyperledger, R3 Corda which exist in a centralized – decentralized continuum have also emerged for applications in, say, Finance, Supply Chain, Accounting, Government, Land Records, Education, Media, Charity, Music and a whole host of other areas.
Innovations are coming on stream to overcome Blockchain limitations, say, of the speed of execution, for designing better multiparty consensus algorithms, seamless inter blockchain operability, private-public chain anchoring, reliability of information feed (ie temperature, price of the security) from outside (called oracles) as inputs to smart contracts (contract automatically executed by a computer program, triggered by inputs) in the blockchain. Quantum computing with astronomical processing power can challenge the present cryptography-based security system. Innovations are also underway to produce Quantum safe consensus algorithms and hence evolving quantum-proof blockchains
Blockchain ushers in sanity digitization from the earlier vanity digitization
Digital systems, digital data so far have been prone to hacking
and tampering. Blockchain makes digital systems secure and
trustworthy through its immutability, distributed (information
replicated with everyone in the network), decentralization, and
consensus (agreement by all in the network required for
recording data) features. Digitization has transcended from pre
Blockchain vanity digitization to post Blockchain embedded
sanity digitization. In these days of the fourth industrial revolution
where many technologies like the Internet of things (IOT),
Robotics, Artificial Intelligence are at play resulting in an
explosion of data. How can we place confidence on these data so
created? The answer is this foundational technology, called
Blockchain. Blockchain technology only can lend authenticity to
these data so generated. Blockchain, therefore, is a humanizing
technology. We must understand and embrace this in
Bangladesh in all earnest.
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