So, you’ve probably been hearing the word Blockchain a lot lately, and that’s for good reason. Blockchain is the latest in a long line of technologies set to disrupt markets across the globe, just as AI and IoT have before it. But what makes Blockchain so buzzworthy?
To put it simply, Blockchain technology is an incorruptible digital ledger. No bank or trusted administrator required.
Blockchain technology is a bit like having a notary present for every transaction, ensuring the collective bookkeeping is verified at all times. And because Blockchain ownership is decentralized, no one party is ever in control, but rather, all transactions are publicly available and verified using mathematical principles that ensure every block agrees on every trade.
“Blocks” refer to each node in a continuously growing list of records, which are linked securely using cryptography. Essentially, a block cannot be changed without altering subsequent blocks, which will always lead to a network majority. If for instance, a hacker were to attempt to alter a transaction amount, date, time, or participants, they would actually have to access every block within the network at the same time. Otherwise, the remaining nodes would reject this change as it conflicts with their own copy.
Though Blockchain dates back to 1991 in concept, the first distributed blockchain was implemented by Satoshi Nakamoto in 2008 as a core component of the digital currency Bitcoin.
One Bitcoin can be divided by 100 million units, and each unit can also represent value in multiple ways – i.e.; cash, property, votes, energy.
Bitcoin’s use of blockchain technology made it the first digital currency to solve the problem of double spending. Instead, each exchange is verified by bitcoin miners, and the underlying mathematical principles that ensure that each node retains a consensus. However, other forms of blockchain technology do not require miners to help verify transactions.
In the case of a Blockchain 2.0 application developed in 2014, Ethereum injects smaller applications into blockchain technology to allow the typical cash-like tokens of Bitcoin to represent more complex units of value like loans or bonds. From the ability to create “smart” contracts that initiate an autopay function once shipments arrive, to autonomous vehicles that automatically pay charging stations, blockchain technology’s applications will continue to grow over the next few years.
Where are we now?
The value of cryptocurrencies like Bitcoin and Ethereum really lies in the level of confidentiality, authentication, and integrity they provide between sender and receiver. And banks are recognizing this potential, with roughly 15% of financial institutions worldwide expected to be using Blockchain technology in some form throughout the coming year. International currency transfers can also be drastically improved, moving processing from days or hours, to a few minutes with even greater reliability and security.
Other applications of blockchain technology include logging events and data pertaining to medical, food, or shipping records, allowing businesses to unlock a whole new level of traceability. After all, a Blockchain can only be added to, not changed or removed. Not to mention those manufacturers adding Blockchain technology between their ERP system and parts supplier, enabling IoT-connected machines to safely order replacement parts that arrive just in time for an engineer to install. In fact, this particular application might just be the safest possible method available today to minimize asset downtime.
It doesn’t end there either — other blockchain applications are emerging for the real estate and energy markets, as well as for the storage of intellectual property, wills, and art.