Blockchain is a digital ledger that keeps track of transactions. A peer-to-peer (P2P) network of third-party coders verify the transaction is legitimate before recording it in the ledger. The ‘block’ containing this data can’t be altered after it is confirmed and recorded. Every transaction builds upon the block before it, recording transactions chronologically and publicly.
So, How is Blockchain Used?
- Building cryptocurrency such as bitcoin.
- Creating shared, distributed databases similar to Google Docs.
- Programming smart contracts to execute simple functions when specific conditions are met. For example, transferring money on a certain date or receiving a product on a certain date.
- Cutting out the middleman in international money transfers and other financial transactions.
- Improving the sharing economy by cutting out intermediaries when contacting vendors. Instead of using Uber, for example, you could contact the drivers directly and safely.
- Making elections and other government actions more transparent
- Tracking supply chains to make sure goods are genuine (not forgeries), don’t have unethical origins and aren’t lost along their shipping route.
- Protecting intellectual property, seen in Kodak’s blockchain project crediting photographers.
People searched Investopedia for the words ‘bitcoin’ and ‘blockchain’ more than any other words in 2017. Interest in the technology is clearly growing, as bitcoin’s value consistently makes news headlines. But what makes blockchain better than the current solutions to the above problems?
What are the Benefits of Blockchain?
- Sharing information in a public ledger keeps people accountable.
- Automatic reconciling improves version control.
- Hacking and corruption are unlikely because a centralized version of the information doesn’t exist.
- Decentralization removes intermediaries, along with the costs and time associated with them.
- No single point of failure exists, eliminating the possibility of ‘lost’ transactions and other errors.
- Online identity and reputation control is put back into the hands of individuals.
- The inability to alter blockchain data means digital information can’t be copied, only distributed.
- Adding ‘blockchain’ to your business name may increase your stock price … but regulators are cracking down on this ill-advised trend.
Technology experts call blockchain “digital gold,” a comparison we are particularly fond of. While still a relatively new concept, the capabilities of blockchain technology are poised to fundamentally change the financial services industry for the better by heightening the transparency and accuracy of global transactions. We look forward to seeing what blockchain developments appear in 2018!