Blockchain Demystified, what it is, and how to use it!

You may have never heard of blockchain before. However, you most likely have come across a blog, a news item, or a social media post discussing Bitcoin, its first-ever application. Or you’ve heard your friends or colleagues mention it.

However, if both terms are strange to you, do not worry. This article is meant to apprise you about this technology right from the basics.

In particular, this article answers the questions of what is blockchain exactly and what it can do, especially in the (physical) security sector.

So, what is blockchain?

Many definitions exist. But blockchain is basically a set of rules of engagement (or a protocol) that independent computers on a peer-to-peer network use to communicate, form consensus, and record transactions on a shared ledger. 

Let’s unpack this first before we proceed further.

For a blockchain to exist or function, there must be a network of independent computers that communicate directly with one another (without going through a central server). This is what peer-to-peer is all about.

Then there must be a core software each of the computers on the network installs. It is through this core software that the blockchain protocol is implemented. Indeed, any machine that needs to join and participate in the network has to install the core software.

Last but not least, there is a shared ledger, a record of transactions. Each node or computer on the network has a copy of this record and simultaneously updates it with the rest so that all the copies are always identical.

The process of adding new transactions to the shared ledger is known as mining. In the process, each computer on the network collects transaction requests from users and hashes (calculates) them into a value set by the protocol.

The first computer to find the value has its batch of transaction recognized as the next block on the shared ledger, and all the other computers synchronize their copies to reflect the new changes. The process repeats itself. The actual procedure is more complicated than this, though.

Blockchain as a virtual machine

The blockchain protocol can support different kinds of applications. Indeed, the blockchain is a form of a virtual machine running on top of a peer-to-peer network of computers.

This virtual machine can replace the centralized server backend we are used to. It can host, in addition to cryptocurrencies like Bitcoin, anything from a website, a social media app to an elaborate surveillance system.

But why would anyone choose to host and run their application or system on top of blockchain instead of a server?

The blockchain offers better security, in particular, because it has no single point of failure that can be attacked and compromised. If, for example, your surveillance system is on blockchain, there is no physical server to be hacked and files stolen or deleted.

Also, the blockchain gives digital data something it has always lacked, and that is permanence (immutability). Once a record is made on the blockchain it cannot be arbitrarily changed. Indeed, files gain permanency on blockchain that they can never achieve on centralized server systems.

Another reason why the blockchain is a better backend is that it provides the privacy that is hard to achieve in digital systems built with other technologies. In particular, the blockchain uses a high level of public-private key cryptography. That means all data is encrypted, and you can only read it if you have a corresponding private key.

Smart contracts

Of the many applications of the blockchain, there is one that many believe is going to have the most disruptive impact, and that is the smart contract.

A smart contract is an agreement written in code that self-execute when predetermined conditions are met. In a nutshell, it is an automated (digital) contract.

The following are three reasons why the most effective smart contract can only be implemented on the blockchain;

  1. An automated contract on blockchain is fixed (immutable). Once it is launched, it cannot be changed until it completely executes. That protects all counterparties from attempts to sabotage a contract
  2. The blockchain provides a native payment method to complete a transaction where payment is part of the contract. Using conventional, centralized payment methods is a weak point because the payment service provider might cancel the service, and that jeopardizes an immutable agreement
  3. The blockchain offers appropriate security as no server can be compromised to disable the contract. As long as even a tiny part of the internet is around, the contract has a life

Types of blockchains

There are two primary types of blockchains; public (permissionless) and private (permissioned).

The public blockchain exists on a peer-to-peer network that anyone can anonymously join and leave at will, without asking for permission. The most used public blockchains include Bitcoin, Ethereum and EOS.

On the other hand, a private blockchain exists on a peer-to-peer network that you have to identify yourself and also need permission from an admin or those already there to join. The most used private blockchains include Hyperledger Fabric (by Hyperledger) and Corda (by R3).

Public blockchains are popular with open source projects that see the anonymity of participants as an asset.

Meanwhile, private blockchains are popular with companies and entities that are more comfortable working with those they know, often for regulatory reasons. Indeed, Hyperledger Fabric and Corda are by consortiums (Hyperledger and R3, respectively) by major banks and technology companies.

How can blockchain be applied in the security sector

Just like in other industries, blockchain offers a better back end for data processing and storage compared to centralized servers. For example, it can be used as a more secure backend for access control and surveillance systems. In addition to improved security for data, it offers better privacy for end-users.

More importantly, though, the technology is providing solutions to emerging security problems.

Here is one such emerging need regarding physical security, in particular home security.

Technology has provided a means through which homeowners can offer lodging in their homes for an extra stream of revenue. Indeed, Airbnb has become very popular with travellers and homeowners around the world as a marketplace for this kind of enterprise.

While everything seems to work fine on Airbnb, there is one particular aspect of the transaction between a host and guest that is often challenging. And that is the exchange of the keys during check-in and check-out.  

Often, a guest arrives at the host’s home while the host is away. For example, on vacation, hence the decision to rent out the place while away. It could also be the case that the homeowner has another residence.

In that situation, the host is often forced to leave the key under the doormat, with the neighbour or they have to cancel other engagements in their schedule so that they can be there to let the guest into the house, and again come back to take the keys when the guest is checking out.

The exchange of the door key becomes a really challenging part of the transaction in other ways too. It not only inconveniences but also becomes a security vulnerability. Leaving the key under the doormat, for example, exposes your home to burglary or invasion.

The risk of someone identifying this vulnerability increases each time it is the most convenient way to exchange the keys. Before you know it, someone gets to your house and steals or creates a copy of the key, and that puts your assets and life as well as those of your guests in danger. Not to mention that it might create a misunderstanding between the host and the guest if something is lost in the home., a German blockchain start-up, has built a solution to fix this exact problem. They designed a smart lock that is connected to the Ethereum blockchain.

It offers the technical capacity to generate door keys (in the form of passwords) that are guided by a smart contract. That means that if, for example, you decide to lease your home for a few days you are away, you would enter into a smart contract with the guest you meet on a marketplace similar to Airbnb.

Once they make a payment, they receive a passkey that works only for the days you agree they are going to stay at your home.

With that technology, a homeowner does not need to keep the key under the doormat and risk their safety. And the guest does not need to do the same when they check out. Indeed, you also do not need to worry whether the guest will check out as agreed. That is because the passkey will stop working at the expiry of the smart contract.

Many other similar applications are being built on the blockchain that would end up improving security or spurring security innovation.

Does blockchain have limitations?

Indeed, blockchain does not a perfect solution to every problem, even though that might seem so when you listen to its diehard proponents. Like any other technology, there are things it can do and others that it cannot.

For example, the technology has had challenges with capacity and scalability. The Bitcoin blockchain, for example, can handle about ten transactions per second, which is a drop in the ocean compared to what centralized systems can do.

In late 2017, the Ethereum blockchain, which is one the most appropriate for launching applications, clogged after it received a flood of more transactions than it could handle from a newly launched gaming application known as Cryptokitties.

It is important to point out however, that progress is being made in the scaling and creating capacity. There is also a movement towards making blockchain interoperable so that they can talk to one another, and that way creates more capacity among themselves.

It is also true that not all transactions need to be permanent.  For some kinds of transactions, it is necessary that things can be rolled back. The blockchain’s permanency does not allow that.

All in all, blockchain is a technology worth understanding and following its growth. Some have said that this technology is going to transform society the way the internet has. Of course, the internet has transformed the security sector. Therefore, if the prediction is accurate, blockchain is going to change security in one way or another.