Why Blockchain Technology is a Big Deal?
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Most people are familiar with Bitcoin, some may have even heard of other cryptocurrencies such as Ethereum, Litecoin and a variety of the other popular Cryptos. But have you heard of Blockchain, the technology which provides the foundation of cryptocurrencies? Read on and find out why Blockchain is a big deal.
The understanding we have of Blockchain is growing thanks to activities by the UK Government's Blockchain task force, the Facebook Blockchain research group, and even the regular IBM television adverts.
Those who support Blockchain technology believe it will:
1) Replace voting systems, land registries and passports
2) Remove fees on financial transactions
3) Replace physical contracts
4) Remove the need for all types of keys
5) End the piracy of digital music, films, games, TV and other products
6) Completely eliminate spam
7) Start an era of self-driving cars which are fully self-owned
8) Create thousands of job losses in places such as banks, insurance brokers and government agencies
These are some bold statements, so you are probably wondering what exactly the technology is and whether it could have such a large impact on our world.
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What is meant by the word 'Blockchain'?
A Blockchain is a form of computer code, which uses cryptography to build a trusted public ledger which is open to anyone to inspect, but there is no single person which can control it. But, why do we need a trusted public ledger? The simple answer is trust. The Blockchain uses intelligent computer code to build something which we can all trust through its legitimate accuracy.
Why is trust so important?
Many of us take trust for granted during our everyday transactions, such as making a purchase with a credit card, selling something over the phone or even purchasing a house. The reason we can do this is because there are a whole technical system and a team of middlemen which are supporting these transactions, to make sure strangers are able to trust one another. The government land registry documents will prove that you have purchased a home, the credit card company will back you up when you want to purchase something, everything is supported by intricate layers of trusted people and technology.
We are lucky that a lack of trust isn't of major concern here in the UK, because our support system within banks, insurance firms and the government is so strong. This means we can safely trust each other to carry out business. But, this is not the case in many countries across the world.
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If trust is not an issue, why do we need blockchain?
Blockchain costs a lot less than the bureaucracies we currently use to create our high levels of trust, such as banks, insurance companies and government agencies. For example, imagine you are purchasing a share price of £14 from a broker, as the price has dropped significantly in recent decades. But, there are middlemen to pay throughout the process, in places such as the brokers and the clearing houses.
Another example is international money transfers, as there is no easy way to transfer money to another country. Instead, we trust a bank to act as a middleman and take care of the transaction, for which we are expected to pay a fee.
Although the land registry system in the UK works quite well, in some countries the system does not exist or simply does not work. There are stories in Russia of Mafiosi claiming the rights to unsuspecting people’s houses, with the papers to prove ownership. Trustworthy government bodies are surprisingly rare around the world, with those that exist costing a lot to run.
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Is Blockchain something to do with Bitcoin?
Yes, Bitcoin is a digital currency which uses Blockchain technology, but it is just one example of Blockchain application. In just five years the world could have millions of different Blockchains, which are each used to perform different tasks. For example, Nasdaq is currently building a Blockchain which will prove ownership of company shares. Other possibilities include a Blockchain to help you transfer funds, or pair you with your car, the applications of the technology are almost endless.
Interesting, but how it is going to affect me?
We are already using Blockchain applications in our everyday lives, with Blockchain companies replacing old technology at a surprising rate. Chain is a small blockchain company which provides the analogy used between the Blockchain and voice over IP (VOIP). VOIP technology replaced the standard telephony system over a decade ago when calls were transmitted through old analogue cables, switches and routers.
The new VOIP system brought phone calls into the digital age, without impacting the user experience. Although call quality did not improve much, the major benefit came when prices for phone calls dropped significantly. Today, it is possible to call anyone, anywhere in the world for free, through applications such as FaceTime, WhatsApp, Skype and Viber.
This is just a small example of the possibilities which open up through the use of Blockchain technology. If we can begin to trust this new form of computer code, councils, banks, lawyers and insurance brokers could all be in trouble.
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Is it possible to make money from blockchain?
Adam Ludwin of the company Chain believes that over the last six months big companies and banks have realised there are large potential profits to be made. They are all rushing to create Blockchain strategies, which has speeded up the process of adopting the new technology.
The first specific Blockchain companies can be seen on AIM already, including Coinsilium which is planning to float later this year. Although Blockchain might not replace our entire current financial system as some supporters expect, it will definitely bring huge opportunities to our lives. Some of the largest companies in the world, which we could see grow significantly or completely fail.
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