Blockchain: it’s the new buzzword being thrown around at the office and popping up in our LinkedIn feeds more and more every day. It claims that it’s going to revolutionize financial technology and disrupt life as we know it, but unlike the buzzwords one might see parodied on a show like HBO’s Silicon Valley, blockchain technology is the real deal.
Blockchain: What You Need To Know
In 2009, a mysterious figure by the alias of Satoshi Nakamoto came up with a digital currency called Bitcoin. This currency, meant to be an alternative to traditional currency issued by governments, uses blockchain to create a distributed ledger of all the transactions associated with any given bitcoin. The transactions are verified by a decentralized, peer to peer network of computers called “nodes.” These nodes create strings of data corresponding to the transactions and then put the data into blocks. The new block of transactions is then linked to the existing blockchain in a way that is permanent and unalterable. In the context of bitcoin, the process functions to safeguard the integrity of the new digital currency. This way, no one can spend the same bitcoin on two transactions at the same time — which would be like counterfeiting.
Bitcoin has gained value and notoriety since 2009, with a single Bitcoin priced at over $12,000 at the writing of this article. However, between competing digital currencies, government regulations and public skepticism, the original digital currency is far from gaining mainstream adoption. The blockchain technology underlying Bitcoin, on the other hand, has created major excitement.
Disruption Strikes Again
The decentralized verification of transactions could significantly challenge established industries. With the verification process occurring across millions of nodes at low costs, there will be less need to go through traditional middlemen, such as Visa, Mastercard or PayPal. Lower transaction costs would benefit businesses and consumers around the globe and loosen the questionably concentrated grip that major players have on the digital transaction market.
Blockchain technology stands to disrupt more than just the finance industry. The technology can be used to automate contracts, supply chains or even entire businesses. Smart contracts, which are programs that behave according to predefined logic, can autonomously execute legal contracts. These can automatically enforce contractual obligations, dramatically reducing costs.
What’s Next for Blockchain?
Blockchain technology is in its very early stages, with firms still experimenting with the technology to get a clearer picture of its value and applications. It’s unclear whether blockchain will play a role in future society where it’s front and center, or quietly help everything run more efficiently in the background. One thing is certain: blockchain is more than a buzzword. Don’t you think so?