Blockchain was introduced by the enigmatic individual or group calling itself Satoshi Nakamoto to implement the now famous cryptocurrency Bitcoin. (A "Satoshi" is now the smallest monetary unit of a bitcoin.) The same unique features of security and transparency which have brought about public acceptance of bitcoin as a valid form of money also provide a degree of trustworthiness never before seen on the internet. Many experts agree that blockchain has the potential to rewire the internet as well as traditional commerce in general.
"The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.", according to Don and Alex Tapscott, authors of the 2016 book Blockchain Revolution. Don Tapscott is the co-founder and executive director of the Blockchain Research Institute.
The key phrase here is "everything of value". The "incorruptible ledger" recording transactions in real-time has the potential to disrupt business as usual across the board. Since blockchain technology provides the highest degree of accountability, innovators were quick to see business data applications far beyond its use for cyber currencies such as Bitcoin and Ethereum.
The Google Doc/Blockchain Metaphor
One of the easiest ways to wrap your mind around the blockchain concept is to consider the Google Docs analogy proposed by William Mougayar, venture advisor, and blockchain specialist. In an article at blockgeeks.com, Mougayar uses Google Docs in a team collaboration scenario, where all changes made by all team members are updated continuously so that everyone is always, literally, on the same page of the most recent version.
This is how the blockchain functions, vs the traditional method of sending out copies of a Microsoft Word document to various individuals, who make changes and send an updated copy back to the authorizing party, who either accepts or denies those changes. It's obvious that synchronizing all the changes becomes a complicated task relying on a single central authority to determine which copy of the document is the final and authentic version.
Blockchain quite effectively removes the need for the traditional centralized authority. Let's take a look now at 5 of the most fundamental features that will "rewire the internet" and change the way the world transacts business and stores information.
1. The Incorruptible Ledger
The shared document concept, or public distribution without copying, enhances security by its inherent "decentralization". Since the centralized authority has been eliminated and the blockchain data is shared across the worldwide network of users and their computers, there is no single point of attack on which hackers can direct their malicious acts. This prevents attacks such as DDoS, or Distributed Denial of Service assaults such as those recently perpetrated against PayPal, Visa, and Mastercard.
Timestamp keys are integrated as each block of data is entered into the chain. Each new block is custom "keyed" to fit in sequence with the block which precedes it in the blockchain. This feature prevents deleting, tampering, or alterations of data after the fact because it would take an unimaginable amount of computing power to disrupt or alter the ledger across all the computers ( nodes) of the entire globally distributed network. Any attempt at modification would easily be detected.
2. Direct Peer-to-Peer Transactions: Goodbye Uber, PayPal, and eBay?
The blockchain is great news for consumers and entrepreneurs but for centralized authorities? Not so much. One of the most significant effects of blockchain will be the elimination of the middleman. Business intermediaries such as Uber, eBay, and PayPal can find themselves out of the loop. In a ride-sharing scenario, for example, the passenger and driver each save by the direct payment for services without middleman Uber's fees adding to the trip cost. Direct peer-to-peer payments without fees or commissions will make these business models obsolete.
3. Banking After Blockchain
Banks are the ultimate middleman of any economy and have been for quite some time. In his article at Forbes, "a day without banks (and bank robberies)" is first on Daniel Newman's list of the changes to come brought about by blockchain technology. Newman notes that blockchain has the capability to convert all currency to digital so there is no need for storage and consequential security by a central authority such as the traditional bank. Consumers would also benefit from the elimination of transaction fees on loans, wire transfers, and other middleman banking services.
Banks aren't about to bow out gracefully, in fact, they are quickly adapting to the blockchain revolution. Banks are already using blockchain to speed up banking services in their highly competitive field.
4. Goodbye Payday?
Wouldn't it be great if every day was payday? One of the features we haven't mentioned about the blockchain ledger is that it functions as a worldwide computer which runs continuously. It never turns off. With this capability, it's easy to imagine a payroll system which updates continuously throughout the workday and deposits earned income directly to the worker's ledger account in real-time. The era of weekly or bi-weekly pay could become an artifact of the 20th Century, as progressive companies use "Real-time" payroll as a benefit to attract the best employees.
5. More Smart Contracts, Fewer Lawyers
Lawyers are expert middlemen, inserting themselves into agreements ranging from mortgages to service contracts and everything in between, configuring transactions in a way that require lawyers and courts to enforce. "Smart contracts" enabled by the fully transparent and continuously updated public blockchain ledger execute themselves once pre-determined contract conditions have been fulfilled. Money in escrow can be released as soon as a deed is transferred for instance.
Blockchain is the Web 3.0
We've touched here upon just a few of the general applications and benefits of blockchain technology. As blockchain continues to gain traction around the world as the ultimate technology for real-time data storage, security, and accuracy we're sure to see it opening up an entirely new level of computing on the internet.
Blockchain applications will be prevalent in identity verification, land management, shipping and materials tracking, government, and finance. The day is not far off when we all may find ourselves asking how we ever managed before Blockchain.
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