In the past two to three years, you have probably heard of Blockchain, Bitcoin, Cryptocurrencies, and digital coins. You might have thought that these new, ambiguous words signify the same concept or idea, that, for example, Blockchain and Bitcoin are identical and are, consequently, interchangeable terms. However, this is not the case.
Blockchain and Crypto Are Not Identical
Just as how emails exist thanks to the networks and infrastructure of the Internet; Bitcoin and Cryptocurrencies exist because of Blockchain and are solely by-products of this new technology. To better understand what Blockchain is, and how we can implement it, it is vital to understand how the current system operates and why it has been adopted.
Old Realities VS New Complexities
As human civilization develops and our economic market expands, we have consistently tried to create systems to lower uncertainty so that we could trade, cooperate, and ultimately exchange value freely and securely.
After all, businesses are mostly built on trust – which is why there are centralized, credible, and accountable third-party institutions that facilitate trade such as banks, legislative organizations (e.g., law firms), corporations, as well as governments that keep track of transactions, processes, and asset ownership.
However, cyber-security became a concern for organizations due to persistent hacking and data breaches with the increased digitalization of data and processing. These issues led to a decrease in accountability and amount of trust given to centralized institutions like banks and governments. The very organizations that were established to facilitate safe trade and value exchange are now fundamentally flawed and must be reformed and reengineered.
The result? Blockchain.
Don’t confuse Blockchain with Bitcoin – thinking they are identical would be similar to claiming that the Internet and email are the same thing.
What Is Blockchain and How Does It Work
Blockchain is commonly defined as a decentralized, distributed, digital ledger. Think of it as a large Excel file that anyone can access, but nobody can edit.
In this file, there are multiple spreadsheets – each one linked to the previous one. Each spreadsheet stores all the information (e.g. asset/liability type, former owner etc.) of the prior spreadsheets, but with an extra bit of information.
This information can be a new transaction, and it can be inscribed in a new spreadsheet only if it is approved by everyone that has access to the whole Excel file.
In a nutshell, new bits of data must be validated by a pre-set of rules agreed upon by everyone that utilizes the Blockchain. This process repeats for every new entry. Using the Excel file as an example, the spreadsheets are what we call Blocks (blocks of information/data), and the overall Excel file is the Blockchain.
Benefits of Blockchain
With the potential to cut off intermediaries and middlemen, blockchain allows for faster transactions, interchanges, and the addition of (new) data at a considerably lower cost.
For example, transferring money from Bank A in Europe to Bank B in Asia could take approximately 3 to 5 business days with the current institutional infrastructure. Whereas in comparison, Blockchain allows this transaction to happen within less than a minute.
Additionally, Blockchain is more secure than our current system; as a hacker would need to breach the specific Block, together with all previous Blocks in all computers to temper with that one data.
The Future of Blockchain
Providing a much faster and cheaper alternative to traditional cross-border payments methods, Blockchain has the potential to change the world and become the Transmission Control Protocol (TCP) and Internet Protocol (IP) of the 21st century. In fact, the Global Blockchain Survey by PwC finds that blockchain is fundamentally altering the business landscape with 30% seeing China as a rising blockchain leader.
Not only that, Gartner forecasts that blockchain will generate an annual business value of more than US $3 trillion by 2030 – hinting that Blockchain is here to stay.
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