What is Blockchain?
Over the next several years blockchain is expected to further gain mainstream recognition as more innovative companies enter the market and the technology's benefits become more widely understood.
To bring you up to speed, blockchain is a distributed digital ledger or distributed database that maintains a continuously growing list of digitally signed transactions between two or more parties. The list is not limited to publicly available information but can also include data provided voluntarily, such as product specifications.
Each transaction within a block must be approved by members of a network before it is added to the chain. When the transaction is approved by a majority of members, it is added to the block and the transaction is added to the chain. The transaction's hash value, or digital signature, is used to verify that the transaction occurred correctly and that no one has tampered with the chain.
Blockchain relies on a constantly growing set of members that are connected to each other through a shared network. The network operates by synchronizing all the transactions made within each block of a block, one transaction at a time, to produce the "block" and adds the transactions to the chain.
At this stage, blockchain is essentially an electronic ledger (an electronic record of transactions that is stored and maintained separately from the actual data) that is nearly impossible to tamper with.
Why is it the Next Big Thing?
Blockchain has the potential to address a number of problems within industries. It has the ability to dramatically transform global financial services, retail and cross-border payments and settlement, and make a real difference to the way people live their lives. The main focus of the technology's application is the creation of a distributed digital ledger. When distributed, the ledger is likely to be easier and more efficient to keep track of large numbers of transactions, but the technology can also be used to issue smart contracts -- a contract that functions similarly to an electronic bank deposit in which the user can execute a virtual transfer of funds without actually transferring any money. The contract can be automatically executed when certain conditions are met.
Blockchain transactions can be far more secure than current electronic financial transactions, which rely on a trusted middleman to verify each and every transaction. If the middleman breaks the contract, then the users' money is in jeopardy, whereas with blockchain, the network is ensured to act as a trusted party and cannot be tampered with.
This is an example of an electronic ledger using blockchain.
Because all of these transactions are being made on a public network, everyone on the network is always updated. If someone from outside of the network tries to tamper with the chain, there is no mechanism to identify that the blocks have been tampered with. Also, all the transactions are not stored on the blockchain but rather can be accessed through the network, such as through a web browser. This opens up a number of new possibilities. For instance, the technology could be used in the production and distribution of land, property titles or contracts between parties.
Blockchain transactions are immune to being altered, which can make the process transparent and secure. The only data that would be stored on the blockchain is the hash value of the transaction that has been approved by the network and its associated data, which cannot be altered.
In the U.S., with a wide range of use cases in progress, blockchain is gaining a lot of attention, but there are still a few hurdles to overcome before the technology can be considered viable.
Big companies like IBM, Visa and Santander are already testing blockchain and have expressed interest in making it their digital Swiss Army Knife of sorts, according to the article from Financial Times.
Blockchain is still in its early days and the currency markets are likely to be the first to experience the changes the technology will bring. With the myriad of potential uses that are now being explored, the coming years will provide ample opportunity for the adoption and application of blockchain.