Introducing the blockchain technology
Till very recently, cryptocurrencies were dismissed as nothing more than a seasonal fad. Now we are in 2017, and Bitcoin’s stocks have only soared since then. While Bitcoin is going strong, the underlying technology powering this digital currency, called blockchain, has elicited unprecedented interest from across the globe and across industries.
For example, several governmental departments have commissioned pilot projects to use this technology for maintaining records and registries. Start-ups across the world have been working on newer ways and applications of blockchain technology. In fact, governments have issued advisories and policy notes concerning regulatory structure for this still emergent technology. So what precisely is blockchain and what does it accomplish to have generated such a buzz?
Stripped of all the jargon, blockchain is simply an enabling technology that records, verifies, secures, and validates data in a distributed manner. You can conceive of blockchain as a database where information is stored in packets or batches, called blocks, and they are linked together through the help of a secure validation mechanism.
The ABC of blockchain
Let us now take a deeper look at how blockchain technology works. A basic grasp of blockchain technology would enable you to appreciate how this technology would usher innovation and shape several industries going forward.
As mentioned above, blockchain maintains a record of data in a distributed manner with an open architecture. In other words, there is no one central registry that owns the master copy of the transaction(s). The database exists on multiple computers at once and anyone can access it. Now comes the most unique aspect of blockchain technology. It preserves all the past records and transactions concerning the database in a self validating and tamper proof fashion. Newer transactions are automatically added to the database through the same self validating system, so that anyone can simply look at all the past records at any given time.
In simple words, blockchain has emerged as a incorruptible and transparent database that exist on multiple locations. The next question, then, is what are its potential uses and how would it transform industries as many are claiming. Let us take a look at just some of the areas where considerable work has already been done to introduce blockchain.
Blockchain technology applications
1. Next generation contracts
Also known as smart contracts, these coded documents self-execute the duties and obligations once the agreed upon conditions are fulfilled. These smart contracts would obviate the need for messy, expensive and time consuming legal documents. Currently, blockchain technology has been deployed in financial and derivatives markets to execute basic tasks.
2. Elimination of intermediaries
One of the most exciting aspect of blockchain technology has been its potential to take out intermediaries in several businesses. Let us take the example of finance industry. Finance industry is basically run by intermediaries such as banks and brokers because as users we need an independent and impartial registry to validate and safeguard transactions. With the introduction of blockchain technology, there would be no requirement of a central and independent third party, as the database is immutable and provides a true and permanent record of all the past transactions.
Similarly, blockchain has seen promising work in peer to peer industry. In particular, crowdfunding sites have done a lot of pioneering work in this respect, and we may witness crowd-sourced VC funds within the next few years.
3. Government services
Blockchain would have a particularly big impact on how government delivers various services, and maintains public records going forward. For example, several governments have already introduced pilot projects based on blockchain to maintain a directory of land records and property titles. In terms of governance, blockchain would enable a more transparent and accessible record of decision making in various departments.
4. Safeguarding your identity
One of the most persistent security issue that plagues individuals, governments and corporations the world over concerns identity. Most of the financial and other crimes online takes place because the criminal succeeds in impersonating someone else and fools the system. With blockchain and its secure distributed framework, there would be additional safeguards to minimize the risk of identity theft. With online reputation becoming crucial going forward, blockchain would play an important role in ensuring your protection against malicious hackers.
5. Other uses
Aside from the above, blockchain technology is being exploited in several other and equally important fields such as prevention of financial crimes including money laundering, smart data management, internet of things, protection of copyrights online, and much more.