The blockchain is a unique way for a distributed network of computers that don’t necessarily trust each other to achieve consensus. Stephen Pair explains why this is important

New technologies are usually conceived with a specific use case in mind. But often that purpose evolves over time, and sometimes it changes beyond all recognition.

Take bitcoin. It was created as a digital cryptocurrency, but anyone who remembers Digicash from the 1990s will know that cryptocurrencies are nothing new, and several of them have already come and gone. But Bitcoin is different.

The Decentralized Blockchain

Unlike other currencies and payment networks, bitcoin is not controlled by a bank, government, or even a financial institution. Instead, thousands and thousands of computers around the world independently verify encrypted transactions and manage a decentralized ledger of every transfer on the network. This ledger can be accessed online by anyone.

Crucially, while records can be added to the ledger, no existing transactions can be changed or removed. It’s a permanent record that cannot be corrupted. The ledger essentially creates a trail of financial DNA which removes the possibility for fraud, theft or compromising sensitive data.

This open-source technology which underpins the entire bitcoin ecosystem is called the blockchain. It is a unique way for a distributed network of computers that don’t necessarily trust each other to achieve consensus. But why is this so important?

Commercialization and Control

As the internet has become increasingly commercialized over the years, we have witnessed a growing centralization of network infrastructure, with power and control concentrated among a small number of very wealthy corporations.

This has led to legitimate concerns about net neutrality and the ability of ISPs to control the web and tap into private user communications. As a result of well-publicized cases where user privacy has been violated, many internet users are becoming increasingly skeptical of how companies and government organizations are using the internet to track and analyze their behavior online, as demonstrated by the court case Google v González which eventually led to the ‘right to be forgotten’ becoming established in law.

Rebuilding Trust

It’s an issue of eroded trust. Trust between consumers, between businesses, between organizations and between governments has been broken down. The blockchain has the power to remove the need for trust in any third party, as every device involved in the public ledger must work to reach a consensus.