Blockchain is not Bitcoin.
Blockchain is not Bitcoin.
Confused? I was too, the first time I heard about blockchain, bitcoin, one coin and about other 1,300 coin offering companies.
All those ‘coins’ can be safely referred to as cryptocurrency, which is powered by technology known as Blockchain.
And no, blockchain technology is not a new phenomenon as some will make you believe.
Blockchain technology was invented in the early 1990’s to replace the insecure manual paper ledgers; the sole aim being the need to record important information in a public space (peer to peer or computer to computer), with no third party authentication needed.
The technology would not allow anyone to remove the information. It was transparent, time-stamped and decentralised.
Blockchain’s main strength is pegged on its ability to decentralise access to transactions effectively.
This means not a single individual has authority over the transactions system (think about Uganda’s Government and how it operates).
Initially, it run on asystem known as centralisation where a central authority known as central Government controlled all the resources, and when they realised it was too hard and expensive to micro manage every corner of the country like that, they decentralised and gave power to the district and local councils to collect taxes, and prioritise their programmes and expenditures- Freedom without oversight.
Bitcoin, as we know it today, was an improvement on the earlier ledger system, and was developed in 2008 by someone only known as Satoshi Nakamoto, who is a mystery till now.
He basically found a way of creating an internet based currency independent of bank and government control.
People would buy and sell digital currency known asbitcoins between themselves with no interference or control.
It was initially largely used by people on the darknet (internet users with sinister motives) to buy guns and drugs, as well as hackers and ransom seekers to receive payments from their victims because the chain of transactions was virtually not traceable.
However, around 2014 entrepreneurs realized they can expand the bitcoin style operation to other areas; like data sharing in the health care sector, transportation, voting and others.
This gave rise to new companies such as Ethereum that is a multibillion-dollar company that uses block chain to enforce smart contracts, therefore enforcing non-deniability, meaning that even when contracts are signed between two people with no witnesses, none of the parties can deny or alter the contract without the other agreeing by altering their block of computer code.
The blockchain system however has had its fair share of problems, largely because it is not monitored by any authority. Most people prefer to interact with systems that have a face behind them, one they can complain to in case they get issues.
This has led to countries like China and India banning the whole crypto currency business as it disrupts normal money markets.
In December 2017, cryptocurrency operators saw their stocks fall; the biggest one being bitcoin which lost over 60% of its valuation in just over one week, falling from $16,500 to $8,000.
That volatility and ofcourse high cost of entry to purchase coins has scared off many would be users, and it is no different with the other 1300 plus coin companies as their stock keeps falling and rising, mostly due to their systems being hacked and coins stolen.
And of course, there is the small issue of finding (mining) coins to buy. The people that do it run very costly computer and electric power operations.
It is said that to mine coins, bitcoin and other such companies can consume on a day the electricity that can power Netherlands, Australia and Italy for the same 24 hour period.
It is however not doom and gloom as countries like Canada have found a way to tax crypto currency sellers, and banks such as Barclays and other financial institutions have jumped on board.
Other big multinational companies that are trusted such as Paypal are in the process of setting up their own blockchain based systems to rival bitcoin and it is fast gaining approval in the mainstream because it is now getting a human face.
However, that authentication being lauded by Governments may also be the downfall of the technology because blockchain was created to remove the bureaucracy and interference that governments come with, it was seen a ‘power to the people’ technology, TRUST by MISTRUST.
As Uganda is adopting the blockchain technology, the government needs to be very careful about its implementation, and understand the cyber security threats that come with it. And those threats are beyond good looking policies on paper.
Written by Emmanuel Cliff Muganhwa, Technologis & Certified IT Auditor