What is blockchain and what are the implications for development? Blockchain became an international talking point in 2017 following the jumps and dives of bitcoin (which has now existed for almost 10 years). In social impact circles, it’s increasingly gaining momentum as a disruptive force that must be harnessed for good – now – before it gets out of hand (Beeck Center).
Theoretically (and increasingly in practice), blockchain has many implications for global changemakers. From providing digital identities to refugees to providing transparency on global food supply chains, many sectors are ripe for disruption.
14 Atlas Corps Fellows and two tech sector guests (representing 12 countries) discussed this topic at Atlas Corps HQ last weekend. The notes of this discussion are provided below.
This is the second Saturday Session of Atlas Corps Fellow knowledge sharing sessions. We started this series to learn from the collective wisdom of this diverse network leaders global service leaders we call Atlas Corps. The notes from our first discussion on Managing Remote Teams can be accessed here.
What is Blockchain?
- Blockchain is a distributed ledger technology that enables an open decentralized database of any digital transaction. This is a mouthful of terminology, so I recommend watching some short videos from World Economic Forum and Simply Explained or reading this short explainer from LifeHacker which provides analogies. Some terminology from our session is provided below too.
- Block = A record of data/a ledger of transactions
- Chain = A series of block linked together sequentially
- Distributed Ledger = a chain of blocks. Each block has a unique identifier (a hash) and a record of the hash of the previous block which connects the blocks together. As each block is a ledger, a chain of blocks is a distributed ledger which allows all users of a network to view and verify the transactions between users.
- Immutable = once a block is created it can’t be changed.
- Timestamps = A record of the time in which a block was created or changed that can’t be backdated or tampered with (immutable)
- Distributed among servers = blockchain is verified and powered by multiple servers, rather than a bank’s server for example.
- Verifying transactions = To verify a series of transactions (a block), users of the blockchain must agree that the transactions are accurate.
- Miners = In bitcoin, miners are people verifying new blocks and earning reward for their efforts. The Economist explains this process in more detail.
- A wallet = An equivalent to an online bank account, which specifically allows you to own and trade cryptocurrencies
- A simplified explainer of the history leading up to blockchain:
- Humans originally traded goods with each other directly.
- As our societies became larger, we relied on banks and other 3rd party organizations to deal with our transactions so we could be sure to trust the end recipient or supplier
- We now recognize we can’t entirely trust the 3rd party intermediaries (i.e. the bank), so blockchain was created to distribute the verification of the supplier/buyer to a whole network of users. Watch out banks, crowdfunding platforms, music platforms (i.e. Spotify) and retailers (i.e. Amazon)!
- A key feature of blockchain is that you are anonymous until you make a transaction. And when you make a transaction, you are only represented as a number to everyone else on the network. The network can see “6” sent to “7” , but that number is not identifiable as a company/individual until they declare they represent that number. This feature of blockchain protects the privacy of users (and opens a technology to criminals shifting money without being identifiable), but it raises questions around trust and accountability of transactions between users.
- Is government regulation of blockchain needed and to what extent? Blockchain is a double-edged sword. While it has the potential for public good, it also can be used for illicit activities. Blockchain technology is open source and anonymous for users. Taxing citizens is much more difficult and regulating an open source technology is difficult. And so the discussion on the necessity of government or some sort of regulation surfaced.
- Challenges – The theory of blockchain is what excites so many observers and practitioners. In practice, there are many obstacles to its broader implementation across sectors:
- Anyone can write the code for blockchain. Theoretically, it is coded to be transparent and consensus driven, but it’s a human writing the code. Beware of governments, large corporates or anyone writing the code without being transparent on how it functions.
- Blockchain can still be hacked. While it’s more difficult to hack an entire chain of blocks (because of the decentralized verification process), the same rules apply for hacking of individual blocks. If your password is accessed, you’re hacked.
- There are challenges to the scaling of the technology. Financial transactions are a lot slower than the instantaneous bank transfers that we’re used to because of the verification process. Lighting Network and larger block sizes are attempts to tackle this problem.
- Investing in cryptocurrencies –
- Unless your profession is trading, stay away unless you know the market and the companies involved
- Beware of cryptocurrency influencers online. Often you’ll find they’re purposefully trying to drive investment to a particular currency for their own purposes (they’re not regulated financial advisers)
- The questions we left the room to ponder: With so much disruption on the horizon, what role does education play in informing a broader audience around the opportunities and challenges of this technology?
Tools/Resources – where can we go next to learn more or apply the technology?:
- Beeck Center’s Blockchain Ethical Design Framework
- You can go to Github to download applications to verify/mine cryptocurrencies.
- Blockchain.com and Medium.com have a lot of useful articles
- You can download your digital wallets by heading to the websites of any major cryptocurrency (Bitcoin, Ethereum etc.)