Blockchain could drive some of our biggest innovations
If cryptocurrency was a vehicle, then blockchain would be the highway. In simplest terms, blockchain is the underlying technology that drives cryptocurrency.
The truth is, blockchain is capable of many more things and has real potential to change how businesses can interact with each other. In this article, we’ll get to explore the basics and the potential of blockchain.
What is blockchain?
Blockchain is an open decentralised database of every transaction involving value. The best way to imagine the blockchain is that it is a public ledger that chronologically records transactions made digitally.
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When and why was blockchain created?
Blockchain was created by Satoshi Nakamoto to serve as the public ledger for Bitcoin (the cryptocurrency that he released in 2008) transactions.
It was initially designed to solve the problem of ‘double spending’. Just like any file, digital currencies are easily reproduced which meant that everyone could simply be making copies of cryptocurrencies.
Blockchain eliminates this problem by keeping a record of transactions which are processed by a large peer-to-peer network made of thousands of computers around the world.
This large group of computers (or nodes) in the network, after having solved complex calculations, then reach an agreement (or consensus) that a particular transaction between different parties happened at a particular time.
Once consensus is reached, the records are stored in a ‘block’ to be used as a reference for future transactions. If a hacker attempts to modify a block, the changes will not be approved by the nodes in the massive peer-to-peer network which are already in agreement with each other.
What are its applications for business?
A new feature in blockchain, called Smart Contracts, lets users publicly transact financial derivatives, land deeds, insurance premiums, copyright protections, medical data, and voting records.
Smart contracts are digital contracts that store the terms of the agreement between buyer and seller, in code.
Blockchain ensures that all ledger participants know the contract details and that contractual terms implement automatically once conditions are met.
This method of peer-to-peer transaction cuts out the middlemen, and inevitably reduces time and money to process those contracts. This means that businesses can operate more efficiently and with a greater level of transparency.
How can blockchain help you?
The global economy is shifting towards one of distributed property and trust (sharing economy). Now, anyone with a smartphone and access to the internet can make blockchain-based transactions without the need for third-party trust organisations.
Because of its decentralised nature, blockchain technology will benefit many people including those in underdeveloped nations. In the future, immigrants could easily send money to countries where access to financial institutions is limited.
Blockchain technology will also significantly reduce fraud because all transactions are recorded in a public and distributed ledger and verified by the entire community.
More businesses are also jumping onto the blockchain bandwagon in hopes to improve their bottom line. For example, big tech companies like Samsung are looking into using blockchain technology to keep track of its global shipments, while Sony is planning to use the technology for digital rights data for PlayStation games sold online.
Blockchain is already disrupting the industry, with cryptocurrency and smart contracts as the main driving forces behind it. It will be an integral component in the digital economy, alongside the Internet of Things (IoT), virtual and augmented reality and artificial intelligence.