Alphaslot CEO Raymond Chan explains the theory behind blockchain and why it will open so many doorways in the future.
Trust between parties is expensive when it comes to the ownership of things that have intrinsic value, such as money or a house. That’s why we pay professionals like accountants and lawyers to create ledgers.
When we want to determine the ownership of something or need to complete a transfer of ownership, we go to speak with these professionals and have them modify the records for us. This can be an expensive and time-consuming process.
In the internet era, there is a simpler way to record ownership in a trusted and immutable way. This method is called “blockchain”.
The concept is very simple: the ownership is recorded on the internet or intranet in blocks of data (hence “block”) bound to each other (hence “chain”) using cryptographic principles so it is immutable. To further ensure the data is agreed by everyone, the same blocks are recorded by everyone in that network at the same time. Unless hackers were to simultaneously hack all computers on that network at once, the data is safe from being altered by unauthorized people.
Bitcoin is the most well-known product powered by blockchain technology. You can think of Bitcoin simply as a digital “bit” on the internet. All of them are identically the same and each “bit” is assigned to an owner periodically on a “first come, first served” basis according to the rules written into the codes. Those owners are better known as “miners” – people who spend their time solving the mathematical equations that allow these bits to be verified. The “bit” owner can decide when and where to transfer the “bit” that he or she owns, just like how they transfer money in or out of their bank account.
Most of the so-called crypto-currencies nowadays work pretty much the same way except that the ledgers are managed by different groups of networked computers. This is the first generation of blockchain technology.
In December 2017, Axiom Zen, a Canadian technology company, successfully launched a product called “CryptoKitties”, bringing blockchain technology into a new era. “CryptoKitties” are digital pets living on the internet and of which ownership can be traded. This is the first time blockchain has been used to record more than just a “bit” – in fact a full digital image containing more than a “bit” (I know some tech-savvy readers will challenge me on my wordings).
Six months ago, Sony Music Entertainment and Sony Global Education also announced the development of a similar concept of authenticating, sharing and rights management of data for their digital content. We can foresee a lot more digital content, such as gaming avatars and digital music, “living” on blockchain in the near future once the technology matures.
Blockchain’s core value is the automation of trust between parties. It can significantly reduce the operational friction required to validate ownership and identity by allowing participants to interact directly with one another without someone in the middle providing verification.
Most importantly, this technology creates a new asset class on the internet and these assets are well-adapted for fast and free transfer.
As the technology advances, the product can be way more than Bitcoin (a simple currency) but also a piece of music, a book, a work of digital art or even a full-size HD video. These newly available assets will impact how business is done on the internet – from finance and merchandise distribution management to the internet sharing economy.