Blockchain is older and more evolved than you thought |OPINION|

What’s the purpose of blockchain? I’m often asked this question when outside the Bangalore tech circle. I mostly talk about the need for decentralisation, digital security, transparency in our digital life without compromising on privacy, and trust through immutability.

Each of these are complex topics are worthy of a deep dive of their own. Perhaps then a more effective way to answer this question would be to go back into the history of the technology—to understand why the smartest minds in universities, technology circles, and more dove deep into this field.

The history of Blockchain

The history of blockchain technology is often traced back to the 2008 release of the Bitcoin whitepaper by Satoshi Nakamoto. However, the underlying concepts of the technology have been in the works for much longer.

In 1982, computer scientist David Chaum proposed a system called “blind signatures” that used cryptography to create completely private transactions. The paper proposed a privacy-preserving transaction system that still improved upon the suitability of the then-existing payment systems. As you may know, enhanced privacy and auditability are two of the central tenets of modern blockchain technology.

Nearly a decade after Chaum’s paper, Stuart Haber and W. Scott Stornetta added the element of “time-stamping” to this idea. In their paper, they introduced the concept of a “cryptographic timestamp” or “digital timestamp”. The idea was to create a system where digital documents could be timestamped in a way that each timestamp included a reference to the previous one, creating a chain of timestamps.

A chain of such timestamps, Haber and Stornetta proposed, would make digital documents immutable and tamper-evident. Remember, those were the early days of the internet boom, and “copy-pasting” of digital documents, in entirety or certain attributes, was a major concern.

In their paper, “How to Time-Stamp a Digital Document”, Haber and Stornetta introduced the idea of making use of a family of cryptographically secure “hash functions” to achieve this. The hash would be unique to the document’s content. Any change in the document would alter the hash. Tamper would thus be evident.

The paper was a major breakthrough, opening up for the first time the possibility of securing digital records in finance, legal, and other critical fields.

And yet, these scientific breakthroughs did not move the needle. The world was still communicating and transacting online with little to no privacy. Documents were as easy to forge as it was in the early days of the internet. Instead of moving documentation online with the internet, the world was printing out online documents for physical authentication.

Roadblocks during Blockchain's journey

Majorly, there were three roadblocks in the way of these academic feats to be widely adopted in the real world: Lack of incentive, technical limitations of early consensus mechanisms, and a lack of network effect.

This changed in 2008. On October 31, 2008, participants of a private mailing list received a paper, “Bitcoin: A Peer-to-Peer Electronic Cash System”. The paper provided the foundational principles and technical details of how this system would work, detailing a proposed proof-of-work (PoW) consensus mechanism, and the concept of mining.

Nakamoto’s proof-of-work consensus was revolutionary. For the first time, there existed a practical and repeatable system that brought together decentralised or unrelated parties and incentivised them to validate a transaction system without having to trust each other or a central authority.

In summary, Bitcoin's PoW consensus mechanism was revolutionary because it introduced a decentralised, secure, and trustless digital currency system that operates without the need for intermediaries. It paved the way for the broader adoption and development of blockchain technology and has had a profound impact on the financial and technological landscapes.

The Bitcoin paper consolidated all of the great works done before and then took it forward. In hindsight we know, what it truly accomplished: It transformed blockchain from an academic pursuit to a real-world technology—an answer to perennial problems of data privacy, trust, and digital ownership.

In an era of generative artificial intelligence that scrapes every data online—personal or otherwise—these characteristics of public blockchain have become ever more relevant. And that is the purpose of blockchain: To redesign our online interactions and transactions for the better, to build a better internet.

Recognising the utility behind Blockchain

As the purpose of this technology is realised by an increasing number of people, its real-world utility has unfolded multiple times, with new use cases solving age-old friction points faced by the government, the public, and even big institutions. This has led to the emergence of blockchain technology as a new industry poised to revolutionise the world at the internet scale.

However, a progressive regulatory framework is pivotal for any emerging sector. In case of the blockchain technology, which is a global phenomenon, it requires global regulations that are localised for domestic use cases. With regulations as the next logical step for the industry, India has used its presidency of the G20 to drive this conversation.

Throughout its G20 Presidency, India has taken a strong lead in encouraging international agreement on crypto regulations. The conversation has certainly moved away from a ban on this technology, as the government undertook measures to not only expand the dialogue but also improve the understanding of virtual digital assets (VDAs).

Our leaders today believe in the potential of technological advancements and being inclusive of them. This doesn’t just reflect a forward-thinking approach but also represents a positive stride for the country in leading the next technological revolution.

(The views expressed above are the author's own.)