By Adinah Brown
Everyone knows that the blockchain is the technology that underlies Bitcoin. It is a distributed ledger that permanently records transactions, as well as verifying the transactions.
For peer to peer networks used to transfer currencies, the blockchain has been hailed as the next big thing. But, what is it about the technology that it has created so much interest?
The fundamental advantage of the blockchain is its capacity to solve what is known as “Double Spending”. Double spending is the issue with digital cash that allows the potential for a single token to be spent more than once. As an example, let’s think of digital currencies as simply a digital file that confers a $5 value. As a digital file, you can easily duplicate the file, giving you two identical files each worth $5. It’s the equivalent of printing your own money.
The blockchain acts as an internal ledger whereby each part of the blockchain is used to verify the file and transaction. In effect, each of the files are linked and part of the chain. This allows them only to be used once and prevents any duplication or falsification, as such an act would be blocked by those transactions of the chain.
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Where is the blockchain technology likely to take us?
For the last few years, electronic transactions have become increasingly common. Whether it is online banking or fund transfers, visa paywave, or the like, traditional banking have mostly been undertaken electronically. However, the system relied heavily on existing methods of transfer, which has the capacity to be easily hacked or corrupted. Blockchain technology, with its internal verification and chain linking to other blocks effectively removes the possibility of electronic fraud.
It is able to achieve this without utilising an intermediary, since it independently executes and verifies the counterparties. This improves not only the safety but also the cost of an intermediary, and speeds up the execution of the transaction. Not only does this make painfully slow bank transfers obsolete, it ensures that these transfers are more secure and accurate. And it does so automatically.
The blockchain was originally designed to decentralise transactions. In fact, decentralization and anonymity increase the security of the service. In addition, the architecture of the digital wallets involves interconnection. This allows for a streamlined peer to peer interaction, allowing the different users to improve the speed of transaction and interconnectedness.
With the increase speed and linking, it is not just the world of finance that recognises the benefits of the blockchain. Already there is development and use of the blockchain to undertake smart contracts (like Ethereum), proof of ownership, voting and basically any other activity that benefits from fast, secure self reconciliation.
Whilst the blockchain technology was designed specifically for cryptocurrencies and is a clear disruptor for existing currency transfer methods, other uses of the blockchain are being exploited. Whilst most work on the premise of decentralization, there is also a big advantage for “private blockchains”, which work as a sort of internal compliance function.
So whilst the noise about the blockchain grows with the price of bitcoin, its impact will be felt exponentially in the coming years as its capabilities are adapted for more and more scenarios.
The rise of the blockchain era has begun and it is only just getting started.
About the Author:
Adinah Brown is a professional writer who has worked in a wide range of industry settings, including corporate industry, government and non-government organizations. Within many of these positions, Adinah has provided skilled marketing and advertising services and is currently the Content Manager at Leverate.