Why the Fuss over Blockchain Technology?
What might be the three things you need to know about Blockchain Technology?
Published October 29, 2019
I recently came across an article explaining the “Bitcoin phenomenon” and why many are considering Cryptocurrencies to be the currency of the future. As someone who hasn’t really spent the time to really understand the whole Blockchain/Cryptocurrency space I decided to undertake a bit of research for my own edification.
My research made me appreciate the concept a whole lot more, and gave me a hint as to why this technology seems destined to take over almost every facet of our lives someday.
What is Blockchain?
You have a file of transactions on your computer. Two government accountants have the same file on theirs. As you make a transaction, your computer sends an email to each accountant to inform them. Each accountant rushes to be the first to check whether you can afford it (and pay their salary). The first to check and validate hits “REPLY ALL”, attaching their logic for verifying the transaction. If the other accountant also approves, everyone updates their file and the transaction goes through.
Deloitte: "Blockchain explained in under 100 words"
In the above excerpt;
- “You” are a “node”,
- “Your computer” is a “ledger”,
- the “Two government accountants” are the “miners”,
- everyone sharing the “same file” is referred to as a “distributed system”,
- “Salary” is paid in a form of digital currency, called “Cryptocurrency” (e.g. Bitcoin), and
- “validation” is known as “proof of work”.
This is Blockchain Technology. While the implementation of the concept is complex, the concept in itself isn’t so much so.
Traditional modes of payment involve trusted 3rd party intermediaries for financial transaction.
For example; when you transfer money abroad or pay for your book online from Amazon, a third party (usually a bank), is used to direct the funds from your account to Amazon’s, or to the person you are transferring money to overseas. The process is not usually instantaneous, and the intermediary takes a commission from the transfer.
Blockchain disrupts this traditional mode of payment by introducing a “collective verification ecosystem” or “open ledger” system and using it to replace the traditional 3rd party transaction intermediary.
Your funds get converted into a Cryptocurrency woven into this “distributed, open ledger” system and any transaction involving them is processed instantly without any commission being chipped off from the funds.
Why Should You Know About Blockchain?
- The technology is rapidly being implemented throughout Financial Institutions. With increasing regulatory pressure, Financial Institutions have turned to Blockchain technology to conduct regulatory compliant transactions and reduce compliance costs. Blockchain technology does not need to always be public; an organization can have a private Blockchain environment for internal use.
- Blockchain has a very wide range of fields where it can and is being applied to. From casting votes, to Supply Chain management, as digital and physical worlds converge, Blockchain’s application will only grow.
- It is an incredibly secure technology that implements high level mathematical concepts such as Cryptography. Blockchain provides a 3-dimensional convergence platform where customers and vendors can interact in a secure, auditable and virtual environment.
If you’re interested in further reading into the topic, feel free to have a go through the list of references and also to drop any further recommendations you might have for me.
Until next time, keep scaling!
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