What is it and what isn’t it
Blockchain has been quite the buzz word for the past couple of years, but for many, the technology has been challenging to fully grasp. So we’re going to try to explain how it works and how it can work for you, our lovely lotteries.
Let’s start by what it is not.
Blockchain is NOT a cryptocurrency. Blockchain is the technology behind bitcoin: bitcoin cannot exist without a blockchain. It is like Internet and Facebook: Facebook cannot exist without Internet. It enables virtual currencies to be open, anonymous, and secure. Over time, cryptocurrencies may fade in and out of fashion, but blockchain can still offer value by providing a tamper-proof record of transaction data, regardless of transaction type.
What it is.
Originally intended to timestamp documents so that they couldn’t be tampered with. It is a chain of blocks that contain information.
A blockchain is a distributed ledger, that is completely open to anyone. Once data has been recorded inside the blockchain, it becomes very difficult to change it.
It is like a fingerprint. It identifies the block and its contents and is always unique, like a fingerprint.
Each block contains data (for instance money transactions, documents or personal data), the hash of the block and hash of the previous blockchain.
Once a block is created, its hash is calculated. Any changes to the block will cause the hash to change. Very useful when you want to detect changes to blocks.
The hash of the previous block will be visible on the following block, so changing a single block will make all following blocks invalid.
The hash system is only one element of security as it can’t compensate for the speed in which computers can calculate hashs and subsequently be able to tamper.
Proof of Work
To further mitigate tampering, the next step is a Proof-of-Work. It is a mechanism that slows down the creation of new blocks. In bitcoins case, it takes about 10 minutes to calculate the required proof of work and add a block the chain.
Instead of using a central entity to manage the chain, they use a Peer-to-Peer network and everyone is allowed to join.
When a new block is to be added to the chain, it has to be verified by the network of peers first, and once this is done, the transaction can be inserted in the blockchain.
A blockchain allows anyone to send value anywhere in the world where the blockchain file can be accessed. But you must have a private, cryptographically created key to edit only the blocks you “own.”
The more people are using a blockchain, the more secure the system is.
Why should lotteries apply this technology?
The lottery is a high-volume industry which can also be called as a commodity. With the growth of the digital economy, the industry faces challenges like the lack of transparency and fairness.
The primary advantage of money—like dollars, euros, and Bitcoin—is that the currency is understood by everyone, yet can be controlled by individuals or institutions. The blockchain, and Bitcoin, offer the additional benefit of transparency.
Why is transparency so important?
A famous fraud case that many are familiar with was when the former information security director of the American Multi-State Lottery Association, Eddie Raymond Tipton, was caught rigging the RNG that he and two others used in various cases of state lotteries frauds. He installed a software code which enabled him to modify RNG and guess winning numbers, allowing him to win a $14.3 million jackpot in 2010. This drew major criticisms and concerns to the integrity of lotteries.
Distribution of Funds
Lotteries were created with the goal to serve the communities they are in by their profits going to good causes. Unfortunately, in some cases where countries have high levels of corruption, players can question the fair distribution of funds.
Because the blockchain is a distributed ledger technology with a secure write-forward authentication system, it can add data without the risk of a single point of failure. Every node involved in the blockchain network has a copy of the ledger. We see where the money goes.
Due to the smaller size of some domestic markets, many global players have been restricted to participating in smaller local lotteries while wanting to be a part of the larger jackpots. This would allow them to play globally in a legal, legitimate way while also incorporating local tax regulations.
If you’d like to know more about blockchain, or the products and services Genera Networks provides, please contact Vanessa Garro Peeters at firstname.lastname@example.org