What is blockchain and what it can do for Papua New Guinea???

What is blockchain?

Looking at its core, a blockchain is not so different from a regular database. It stores information on things that happened in the past, with unique attributes, such as:

Decentralization — no single party has control over what information goes in

Consensus — many different parties store exact copies of the same ledger, so the majority has to agree on the information being added.

‘Add-only’, meaning you can’t edit what’s already there, you can only add information.

New information can’t conflict with what’s already been added. Information is able to be accessed and replicated by everybody on the network.

The most important feature of a blockchain is decentralization. Copies of a blockchain ledger are stored and updated on computers all over the world, meaning that there is no central authority to make decisions.

Let’s take a look at a Bitcoin transaction as an example of how blockchain works.  Bitcoin is just one possible application of blockchain technology.

Blockchain to Bitcoin what the Internet is to Email.

Let’s say Kaulga has one Bitcoin and he wants to send it to Koi. Everybody who holds a copy of the Bitcoin ledger can see that Kaulga has one Bitcoin and Koi has zero (but on the Bitcoin network their identities are relatively private).

Kaulga can then send Koi one Bitcoin, and the network will see this and immediately update every ledger.

But what if Kaulga is a bit greedy, and wants to try cheating the network?

Kaulga could change his copy of the ledger to say he has 2 Bitcoins, sends Koi one and use the other to buy himself something nice.

But in the history of the Bitcoin network this act of double-spending has never happened.

Why not?

Blockchain security

To understand how and why blockchains are so resistant to tampering and fraud, we need to understand how they work.

Without getting too technical, let’s take a look under the hood and see what’s going on.

The information stored on a blockchain is stored in groups — called blocks — and each block is time-stamped and linked to the one generated before it in time, creating a linear chain of blocks — hence the term blockchain.

Each of these blocks contains 3 types of information:

Data on transactions

The block’s hash

The hash of the previous block

What is a hash then?  Essentially it’s like a block’s fingerprint — a unique string of numbers that identifies each block.

The numbers are automatically calculated based on the information stored in the block. If you change the information in the block you change the hash, and therefore the block’s identity.

The hash of the previous block also sits in each block, which is what creates the chain of blocks, and is what makes a crypto currency like Bitcoin so secure.

Take a look at this graphic:

Each block contains the three elements listed above. But watch what happens when someone tries to tamper with the information in block 2 to give oneself that extra Bitcoin:

 Block 3 contains the hash of block 2, but when block 2 is changed, so does its hash, meaning everything in block 3 and beyond becomes invalid, breaking the chain.

You would then need to re-calculate the hashes of every block that has changed.

But it doesn’t stop there. The Bitcoin network makes it intentionally difficult to find these hashes.

On average, the hash for a block is found every 10 minutes by computers constantly guessing random numbers and seeing if one fits (it’s actually a lot more complicated than this).

So for every block you stuffed up, it would take you 10 minutes of intense calculation to mine each block and find the correct hashes.

And that’s just for your copy of the ledger.

The Bitcoin ledger exists on thousands of computers all over the world, so to fake that transaction, you would need to somehow get access to over 50% of the computers, and repeat the mining process for all the ledgers you control.

This is insanely expensive from a computational standpoint, as you would need an almost impossible number of computers to pull it off.

 So why is all this important?

That’s a good question. Blockchain technology is still very much in its infancy, but promises to revolutionize many different industries, such as: Banking and payments, Governments, Healthcare, Supply chain, Insurance, Tourism.

Banking and payments

 Bitcoin and other cryptocurrencies like Litecoin, Monero and Zcash are making the storage and transfer of value simpler and cheaper by removing the need for middlemen such as banks.

Governments

Governments can use blockchains to implement secure and accurate voting, public record keeping, citizen identification (IDs) and border control.

Healthcare

Medical records are notoriously inaccurate and difficult to transfer. If they were hosted on a blockchain they would be secure, accurate and easily accessible by approved parties.

Supply chain

Want to know if those apples are actually organic? Or if that diamond ring is sourced ethically? Putting goods like these on the blockchain would allow consumers and businesses to gain greater transparency on the lifecycle of their products.

Insurance

No more calling up and hassling your insurer for weeks before getting your payout. With the implementation of smart contracts on the blockchain, insurers would be able to instantly accept and pay out claims to customers based on predefined rules.

Tourism

Blockchain is currently popular in financial services but the use cases for other areas are increasing. In the travel spheres, it is potentially very significant for Papua New Guinea, where it can process and secure tourism marketing data in better ways.