We've All Heard the Words 'Bitcoin' and 'Blockchain,' but What Are They?
School of Information Studies (iSchool) associate professor Lee McKnight is faculty advisor to the Worldwide Innovation Technology and Entrepreneurship Club and an affiliate of the Institute for National Security and Counterterrorism. He is also an expert on Bitcoin and its underlying technology, Blockchain. Chris Chomicki is a junior studying information management and technology and computer science in the iSchool He also works as a web developer for SIDEARM Sports and is also an athlete on the Division I Cheerleading Squad at Syracuse University. Together they answered some questions about Bitcoin and Blockchain for those of us who are not technical whizzes.
For more information on Bitcoin, Blockchain, and the Internet of Things, register for McKnight’s webinar Feb. 14, noon-1 p.m. EST, titled: “After Cryptocurrency: Blockchaining the Internet of Things.”
Is Bitcoin a cryptocurrency?
Its originators imagined it was, and current speculators may also be confused, but no. Bitcoin and other crypto ’currencies’ are actually commodities, or assets.
What is Blockchain?
Blockchain is a new distributed ledger technology that is the underpinning of Bitcoin. The blockchain contains a true, verifiable record of all transactions. Each entry is time-stamped, verified and linked to the previous one. This eliminates the need for third-party intermediaries to maintain trust on the ‘chain,’ since the blockchain auto-verifies every transaction. Each digital record or transaction in the thread is called a ‘block,’ for either an open (public) or controlled (private) set of users. The blockchain is either an invention from about 10 years ago by a guy named ‘Satoshi Nakamoto’ who lives in San Diego, or is an invention by a small group of coders/developers who anonymously released Bitcoin open source code under the alias Satoshi Nakamoto.
Why is Blockchain important?
When new data is entered, it can never be erased—it is immutable. Networks that run on a blockchain reduce transaction costs, because fees do not need to be paid to verify transactions.
How secure is Blockchain?
Blockchain is a secure, highly distributed way to store data with no single point of attack for hackers. Thieves steal users’ ‘digital wallets’ and crack ‘cryptocurrency exchanges’ instead.
How can a blockchain verify transactions?
Blockchains are updated with new transactions when consensus on the validity of the proposed entry occurs. Individuals and devices cooperate in maintaining and updating the ledger to not permit any false transaction onto the blockchain. When a false transaction is attempted, devices in the network quickly reach consensus to prevent entry.
Where is blockchain used today?
- Fintech: Verification of cross-border payments raises transactions costs. However, current blockchains, including so-called cryptocurrencies, cannot handle the transaction volume of Visa, MasterCard, PayPal or Venmo. “Fintech,” or financial technology blockchain start-ups using Ripple, seek to improve the trust, efficiency and speed of processing financial transactions.
- Supply Chain: Data in the supply chain cannot be tampered with, as the data in a blockchain is immutable. Individuals therefore can trust the data about where items are in the supply chain. Firms such as IBM and Maersk are seeking to create trusted supply chain with blockchain.
- Healthcare: Healthcare data must be private and secure. By utilizing a blockchain, only authorized users can access the data and change the distributed ledger. Firms are exploring blockchain use so patients can permit real-time clinical data access for physicians, so professionals can make accurate, trusted medical decisions.