Due to the early-stage of the technology that blockchain represents much confusion has blurred its being. So many talks have been given so many conferences created so many use cases explained. The Blockchain term is often used interchangeably with the one of Distributed ledger technology (DLT), but there lies a difference between the two.
A distributed ledger is a database that is replicated and saved in each node within the network which is being updated by each and every node individually.
No central authority stands as a point of reference. Updates are voted upon by nodes in a process that ensures majority agreement on the decision of the proposed update. Once consensus is reached on one version of the ledger, the special algorithm disseminates this information with the latest consensus decision on the updated form of the ledger being saved on every node. This process significantly eliminates the need for trust and trusted authorities provoking a paradigm shift to information collection and communication.
A chain of blocks is a form of DLT. An arrangement into a chain of blocks that provide a shared single source of truth via automated consensus and records transactions into a peer to peer network (typically public) is not the way every distributed ledger is built of.
Its structural architecture is what makes it stand out from the crowd. Each new block by referring to the hash of the previous block gathers transactional or any other form of data which is then linked (hence a ‘chain’) with the next block using digital, cryptographic signatures, a connection that stems from the very first block (the ‘genesis’ block). (As a paradigm one can refer to Bitcoin’s Blockchain)
Its append-only structure only enables data to be added to the on-going and continuously growing record list. Nevertheless, altering or deleting any specific data entered is nearly impossible thus making it ideal for record noting, tracing, processing and many more.
Both utilize consensus protocols but Blockchain being the star of the game differs to its data organisation to hashlinked blocks and add only nature.
- It is P2P due to the direct transactional capability without any 3rd party intermediary
- It is nearly Tamper-proof due to the mathematical principles that enable the continuous agreement of the nodes and tampering would need to take place across many different places at the same time.
- It is Irreversible because once the transactions at hand are verified the underlying transactions cannot be altered.
- It is Decentralised due to the dissemination and custody of a verified ledger from every node that maintains the ledger within the ecosystem.
- Bitcoin is not synonymous to Blockchain. Bitcoin is the virtual currency (a subcategory for a digital token) that runs on the Bitcoin’s Blockchain and is mainly considered as a commodity.
Cyprus has evidenced a great interest in the promotion of DLTs and Blockchains as it has recently signed in Brussels, Belgium, on the 4th of December a Declaration ( the “Southern European Countries Ministerial Declaration on Distributed Ledger Technologies”) alongside EuroMed 7, France, Italy, Portugal, Spain, Malta and Greece which will collaborate to implement Blockchain technology in education, transport, mobility, shipping, land registry, customers, company registry, and healthcare.
This article was written by Agis Charalambous an Associate, Head of the IP department of the Firm who is currently studying towards a Blockchain Business Analyst certification.