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Blockchain and Cryptocurrencies: What even are these things and why won't Charlie stop talking about them?

February 4, 2018

Apologies for not updating this blog in a couple of months; I have jumped on the blockchain bandwagon and it has completely taken over my life.

 

This interest began as simple curiosity, but quickly spiraled out of control as I began to read everything available on the Internet about this new technology. As I tried to understand more, I spoke to everyone and anyone I could engage in conversation about blockchain with. I even went as far as mentioning this on my Tinder profile, which, by the way, is a great way of meeting nerdy and potentially wealthy partners. The point is, I am now part of a conservation cryptocurrency concept discussion group and am in a workshop to learn how to code smart contracts on Ethereum. I realize that these terms may be foreign to most and the relationship to conservation is not overt. I have therefore decided to attempt to explain blockchain, cryptocurrencies, and the relationship to conservation in a simple manner in this blog post. I won't go into as much detail in this blog as say, an article on Wired, but hopefully this will give readers a fairly basic understanding of what these terms mean.

 

First and foremost, it is necessary to create a distinction in one's mind between blockchain, bitcoin, and cryptocurrencies. These terms are not synonymous with one another, but they are related. For example, bitcoin is a cryptocurrency that uses blockchain, blockchain can be used for other purposes that do not involve a cryptocurrency, and cryptocurrencies do not need to use blockchain. Don't worry if this seems like you're reading another language, I'll explain each of these terms below.

 

Blockchain is actually a really simple concept. It is essentially a decentralised open ledger, or a continued list of transactions that is not controlled by any one entity and is publically available. This means that anyone can possess a copy of the blockchain to see all transactions. Say I paid my friend £14 and they paid someone else £20. Both of these transactions would be recorded as blocks on the blockchain and everyone would be able to see this. 

 

Understand the Blockchain in Two Minutes by Institute for the Future (IFTF), 2016

 

Okay, so if this is such a simple thing, why are people excited about it?  There are two main reasons why blockchain is causing so much ruckus. First, blockchain increases transparency based on the fact that the ledger is publically available. In turn, this increases security. False transactions can't really be created because these false transactions would need to be added to every copy of the blockchain, which seems to be a pretty impossible task. This means that anyone would be able to spot an inconsistency in the blockchain. The second reason blockchain has caused so much excitement is based on its decentralised nature. Because no one entity controls the blockchain, transactions can occur directly between two people, completely cutting out the need for a middleman, such as a bank.

 

Smart contracts are an incredible use of blockchain. A smart contract is a digital contract run by an algorithm stored on a blockchain. This is awesome technology because the contract is automatic, meaning payment can be automatically sent when a task is completed. Because these contracts are on a blockchain, the transactions can be validated and are open for all to see, meaning editing a smart contract without authorisation will be noticed. 

 

Smart contracts - Simply Explained by Savjee, 2017

 

The decentralised aspect of blockchain is one of the driving factors behind bitcoin. Bitcoin is a cryptocurrency, or an online currency that has no physical properties like US dollars or UK pounds. Bitcoin can be used to purchase real things, such as Teslas. It is often described as a store of wealth, equivalent to gold. Bitcoin uses blockchain to keep all transactions completely transparent. In order to confirm transactions on the blockchain are true, each transaction must be verified, known as 'proof of work'. This proof of work is confirmed when a complicated math problem is solved. This math problem can only be solved using a guess and check model. Because this takes time and oh so much energy, the math problems must be solved using computers. The people who solve these math problems, known as miners, are rewarded with bitcoin. This is how bitcoin is created. The process is a little more complicated than what I have just explained and involves the use of public/private keys and the SHA-256 hashing algorithm, which I will not go into detail here. If you do, however, crave a deep understanding of bitcoin to impress your friends, I recommend reading this easy to understand book that my cousin gave me for Christmas (Thanks, Adam!). Basically, because solving these math problems is laborious, both financially and energy-wise, and competitive, as miners compete simultaneously to solve a problem, it is unlikely that a transaction will be falsely verified.

 

What is Bitcoin Mining? by BitcoinMiningCom, 2013

 

Bitcoin is not the only cryptocurrency. Others include ether and IOTA. These cryptocurrencies operate slightly differently to bitcoin. For example, ether, a cryptocurrency used on the Ethereum smart contract platform, uses something called 'proof of stake' instead of 'proof of work.' A complicated math problem still must be solved per transaction, but instead of many miners competing to solve the problem at the same time, proof of stake is when one person solves the problem based on how much ether they put up as a stake, which they lose if it is found that they falsely verified a transaction. This method significantly cuts down on the energy costs associated with mining bitcoin. IOTA is a cryptocurrency associated with the Internet of Things. I'm not going to go into what the Internet of Things is here, because the point is that IOTA is a cryptocurrency that does not use blockchain technology. They use something called the Tangle. The Tangle requires that each time a user creates a transaction, they must verify two other transactions. So while bitcoin's use of blockchain allows for outsiders to verify transactions, IOTA requires that only those participating in transactions can verify transactions. 

 

But what does any of this have to do with conservation?  This is the part that has made me so excited over the past few months. Although there is potential of a conservation cryptocurrency that could be used to reward volunteers and incentivise corporations to increase their green image by accepting it as a form of currency, blockchain technology is currently being used in the conservation sector! Blockchain is being used to track tuna from the moment they are caught by fishers all the way to the consumer. It is also being used to track tea. Both of these examples use blockchain to increase transparency by ensuring that a company's products really are sustainable. 

 

Introduction to Hyperledger Sawtooth by Hyperledger, 2017

 

Although the use of blockchain has only just entered conservation, there is great potential. Watch this blog to keep up to date on a project I am working on which will incorporate the automatic, decentralised and transparent nature of smart contracts with conservation.

 

Please use the comments below to ask any questions regarding this topic - I will do my best to answer them!

 

 

 

 

 

 

 

 

 

 

 

 

 

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