We're In The Middle Of a Blockchain Reaction
With the recent mass hysteria surrounding cryptocurrencies rise to popularity, you will undoubtedly have heard ‘blockchain’ mentioned on the grapevine, read a Buzzfeed article about it, or maybe you already use it in your day to day life. By experts in the finance world, blockchain is said to be the future of digital banking, but what exactly is it?
If you’re completely unfamiliar with the term ‘blockchain’, this may be due to the fact that it’s still a relatively new entity in the world of digital finance. Bitcoin, however, is something you’re probably more familiar with. Created in 2009, the peer-to-peer electronic cash system, which comes under the umbrella term cryptocurrency, offers users lower transactional fees than traditional online banking with high street banks as it’s operated by a decentralized body rather than being under governmental control.
There’s no physical currency with Bitcoin or other types of cryptocurrencies (for example Litecoin and Ethereum to name a few). If you’re looking for solid anti-investment advice, you can read our recommendations for 6 types of cryptocurrencies you probably shouldn’t invest in here. Anyway, cryptocurrencies are technically only balances and transactional information stored on a public ledger in the cloud. This is all powered by a massive network known as, you guessed it, the blockchain.
Originally started to power Bitcoin, the blockchain now spreads much further afield and is now being used for everything from annual tax returns to copyright protection, and more recently with the laws surrounding sexual consent. With blockchain making the news regularly at the moment, and the daily turmoil surrounding the rise and fall of Bitcoin and other cryptocurrencies that all rely on the technology, now is a better time than any to get to grips with the concept and how it has the potential to transform our lives in the future.
On the surface, it seems as if blockchain is a relatively easy concept to understand. However, it only gets more complex the harder you look and the further you delve. In simple terms, a block is simply a record of new transactions. It can cover a wide range of data forms, from the obvious transaction amount to the location of the transaction, and, more recently, even medical records and voting records.
Each subsequent block is added to the chain, where they’re creating – wait for it! – a blockchain. This is essentially a modern form of paper trail which can be tracked and monitored in the same way any bank account can be. However, it’s sadly not as straight forward as that since cryptocurrencies are encrypted, for obvious security reasons. So processing any transaction, regardless of type, means solving complex mathematical problems – which of course become more and more tricky as the blockchain expands. Solving these complex problems is no mean feat, and it requires specialist personnel. These experts are often paid in cryptocurrency in a process commonly known as ‘mining’.
The Internet of Value
The idea that blockchain is a digital public ledger has led to it being described as the internet of value. So, put simply, just as the internet makes it possible to freely distribute data online, blockchain does the very same thing for money.
For a lot of people, the value in blockchain and cryptocurrency is that it allows them to transfer and use money how and when they like with zero constraints. Instead of relying on media outlets of all forms (newspapers, television, magazines etc.), which are mainly controlled and often censored by central corporations, the internet gives everyone a voice in which to express their opinions. This is the same with money and blockchain as it allows users to move and spend money across the world freely, by completely cutting out any middle men (central banks and the government).
While cryptocurrency and blockchain comes with a lot of positives, but there’s also a negative in that any users sending money to another or selling that cryptocurrency, will immediately be publicly shown in the blockchain. This means that while your identity may not be shown, the exact value of the transaction can be viewed by absolutely everyone. This is understandably a concern for many people – and perhaps especially with an entity as sensitive as finance. Recently, Youtuber Ian Balina was hacked and robbed while reporting live on his cryptocurrency investments.
The Google Doc Analogy
Our favourite blockchain expert is William Mougayar, the author of “The Business Blockchain” who compares the technology to Google’s Document sharing function.
In the days before Google Docs, if you wanted to work on an article, you would have to create a Microsoft Word document and send it to your collaborators. You would then request that they made edits, wait until said changes are made, and then sent back to you. This all takes up valuable time, and a lot of unnecessary back and forth between the collaborators. The introduction of Google Docs made this process so much easier by allowing multiple users to view and edit a document simultaneously.
In the context of cryptocurrency, think of traditional banking processes as Microsoft Word, where only one person can make changes, in this case authorize transactions, subsequently locking everyone else out until they are done. Google Docs are like blockchain in that they instantly remedy this problem by updating in real-time so users can view and make changes at will.
In a banking context, this also means that any transactions can be simultaneously verified on both ends without there being any need for any administration or back and forth. This element of collaboration blockchain offers means it is now being used more and more in the legal business or architecture planning— really any business where people need to collaborate on documents.
To The Future
Blockchain as a technology is in a rapid state of growth which doesn’t look like slowing down anytime soon. A new blockchain is generated around every ten minutes and then shared throughout the vast network. There is a vast amount of blocks on the chain at one time as they are in a constant state of generation. In other words, as soon as one block gets completed, another is automatically generated.
The blockchain is the future of both finance and data archiving in general. It has the potential to transform everything from how we send money to how communities grow, and even positively impact the way justice systems work by keeping meticulous.
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