Blockchain is Becoming More Than a Buzzword
Blockchain, the technology behind many cryptocurrencies like Bitcoin is making a headlines again, but this time it's here to stay
It seems like not that long ago that Bitcoin was rising in popularity. Blockchain, the technology behind many cryptocurrencies, promised to change the financial system as we knew it and change the way we paid for goods online, among other things. And while the crypto community never really lost interest in blockchain, the future it promised just never really came to fruition, so it seemingly disappeared from everyone’s mind.
Then Bitcoin is reached $50,000.
This sparked a huge resurgence of the blockchain technology to the public stage over the past few weeks, which was capped off by the grand entrance made by non-fungible tokens (NFTs) this week.
Today, we’ll look into what blockchain is, what NFTs are, and what impact blockchain has on our future.
What is Blockchain
Blockchain is often tied closely to cryptocurrency, but it’s important to note that blockchain is a technology, which happens to power cryptocurrencies. The technology can be thought of as a way to store data across multiple machines. These are literally computers in different parts of the world, running whatever software the blockchain uses. These machines are called “nodes” in the network, and the more nodes there are, the more secure the blockchain — I’ll explain the reasoning for this in a bit.
The term blockchain comes from how data is stored. Each transaction, or “change to the data,” is stored as a block. For example, if A transfers $100 to B, we subtract $100 from A’s account and add $100 to B’s account and we store this transaction as a block of data, which we represent by some unique ID. This block is then sent to all the nodes in the network, which do some fancy work to verify that this is a legit transaction, like checking does A have more than $100, does B’s account exist, etc. Once validated, the block is attached to the previous transactions, so that we now have a chain (:O) of transactions, which represents every single thing that has happened.
So if all of this happens on each machine, why do we need all of the other ones, aren’t we duplicating work? Well, the role of the network of machines is to verify the correctness of other nodes’ blockchains. The “authoritative” chain is the one which is agreed upon by a majority of the nodes; so the more nodes you have, the more nodes that need to agree. If you think of just a single chain on one machine, someone could manually modify the data and give themselves an extra $100. But if we have three machines, the other two will see that this extra $100 must be an error, and correct it on that machine. In order to make the same change, the hacker would now need to make the change on two machines instead of just one. Now if the network had 1000 machines, they would need to hack into 501 machines. As you can see, as we increase the number of machines, the more secure we actually make the system.
What are Non-Fungible Tokens
With that background out of the way, we can get into what Non-Fungible Tokens, or NFTs, are. Aptly named, NFTs are tokens that are non-fungible, meaning they cannot be replaced by something by the same value. Basically, it’s a one of a kind. The “token” piece refers to the fact that NFTs are a block in some blockchain. This means that the NFT needs to be able to be represented electronically so that it can be converted into one of those digital blocks that I described earlier. Just this week, we’ve seen examples of NFTs like music albums, digital art, and even tweets.
Since NFTs are just digital entities, the content may not be unique; an image may be copied and shared in multiple places. But there is only one version of that image that exists in the blockchain. This exclusivity is what fuels the excitement and sky-high prices, like the $11.7 million that 3LAU made for his NFT album.
The Future of e-commerce
Now maybe I didn’t need to explain the whole background of blockchain, but at least now you can impress your boss. But it also just shows the advancements that our society is making with technology; some low-level way of storing data is earning people millions of dollars and has the potential of reinventing the financial system.
Technology has been used to shift power back to independent creators and away from centralized giants, something I’ve written about previously, and NFTs appear to be just one more way for this to happen. Not only can creators make more money, but they can also offer exclusives for those who buy their NFTs. For instance, band Kings of Leon is planning on releasing their next album as an NFT, releasing only six of them, where each one comes with perks like four front row tickets to any of their shows for life.
While my description may have made blockchain seem like some complicated thing, the simplicity of creating and selling an NFT — it’s basically as simple as uploading your image/song/document into whatever marketplace you choose to use — is what I think will make NFTs more than just a phase. We have already seen technology changes our lives, and while I think the vision of a cryptocurrency-first world is still a ways away, I do think blockchain is here to stay.
I’ve realized that my posts have leaned heavy toward the tech side of things, and I have been looking for other topics to write about, I swear! I just end up feeling more comfortable here. But writing this newsletter is all about growing and challenging myself, as well as writing about relatable topics for you. So what would you like to read about? Please feel free to reply directly to let me know! As always, thank you for reading! :)