The Technology That Will Change the World– Blockchain Revolution: Reinventing How Transactions Get Done…

Known by many as the technology underpinning the ‘bitcoin’ digital currency, blockchain has acquired a new identity in the enterprise. At a time when companies face new challenges in data management and security, it’s emerging as a way for organizations to make and verify transactions on networks rapidly without a central authority. 

Today more than 40 top financial institutions and growing number of firms in many industries are experimenting with concept of a ‘distributed ledger’ (blockchain) technology as a secure and transparent way to digitally track the ownership and management of assets– a move that would speed-up transactions and cut costs while lowering the risk of fraud…

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The blockchain revolution is about cybercurrency; it moves, it stores, it lends, it trades, it accounts… its peer-to-peer throughout supply chains or electronically initiate contracts… Blockchain is simply shared digital ledgers, and that might not sound like a big deal but it’s an immutable way to initiate and validate transactions through little or no human intervention… which usually takes days, weeks, months to complete…  it allows huge volumes of transactions to be validated automatically, instantaneously…

According to PwC; the market for peer-to-peer transactions is estimated to grow from $5.5 billion in 2014 to $150 billion in 2025, compound annual rate of 35%…

Blockchain is ubiquitous technology that will influence many industries, e.g.; financials, banking, music, voting, Internet of things… the list is endless… However, currently most of these applications are at pre-alpha development stage. With over $667.55 million invested to date in blockchain technology; don’t be surprised to see it slowly creep into your business…

According to Nic Cary; ‘blockchain’ will be the phrase of 21st century; it will be as commonplace as people saying ‘Google’, today…

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What is blockchain? The  blockchain concept is simply: It’s a business network in which members exchange ‘items of value’ through a ‘ledger’ that each member possesses, and whose content is always in sync… The basic components are:

  • Business network: A decentralized peer-to-peer architecture with nodes consisting of market participants (i.e., banks, financials…) Then protocol validates and commit to transactions in order to reach consensus…
  • Shared ledger: It can act as a source of truth for businesses doing transactions on a blockchain, i.e.; records all transactions across the network– shared among participants who have their own copy… And permissioned so that participants see only specific transactions…
  • Smart contracts:  A ‘smart contract’ can include a digital asset which is anything that has an owner and can be converted into value… Digital assets can be tangible or intangible, and a smart contract can include a digital representation of business rules that are embedded and executed in transactions. Its verifiable, signed, encoded in a programming language…

In the article Blockchain Technology by Bernard Marr writes: There is a lot of hype about blockchain technology… According to World Economic Forum; predicts that by 2025, 10% of GDP will be stored on blockchains or blockchain related technology. This means it’s probably something which everyone involved in business should take notice of… However, there’s still a lack of understanding about what it is, and what it does…

One way people describe blockchain technology is as ‘Internet of value’… It’s commonplace to sharing information on a decentralized online platform called the ‘Internet’. But when it comes to transfer of something of value, e.g.; money, assets, property… it’s commonplace to use traditional centralized banks, financial institutions… And even when using online payment methods they require integration with a bank account or credit card… Blockchain offers intriguing possibility of eliminating this ‘middle step’ by filling three important roles; 1. initiating transactions, 2. establishing identity, 3. facilitating contracts. Traditionally these activities are carried out by financial services…

Beyond the basic as a facilitator of value, blockchain is also used to store digital information, including computer code… The code can be programmed to execute when two or more parties enter private ‘keys’, meaning that everyone agrees that a contract has been filled… It can also read from external data feeds, e.g.; stock prices, weather reports, news headlines, or anything else that can be parsed by computer code– to create contracts which automatically ‘sign-off’ when conditions are filled. These are known as ‘smart contracts’…

Also, blockchains can be used to create permanent or transferable link between an owner and IP (intellectual property), or handle licensing issues, and even create ‘limited editions’ of digital information, securely limiting the amount of times a specific piece of information, e.g.; artwork… can be displayed, shared or copied…

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In the article How Blockchains Can Change the World by Don Tapscott writes: The blockchain is basically a distributed database. Think of giant global spreadsheet that runs on millions of computers. It’s distributed and open source, and anyone can change underlying code, and see what’s going on… It’s truly peer-to-peer; it doesn’t require intermediaries to authenticate or settle transactions… It has state-of-the-art cryptography, so for example; in a global, distributed database it can record the fact that a specific transaction was done… But it can do more– it could record any structured information not just who paid whom, but who married whom, or who owns what…

Also in the case of the ‘Internet of Things’, banks or other traditional institutions won’t be able to settle trillions of real-time transactions between things… hence, there is a need for a blockchain settlement system underneath… Blockchain technology is an immutable, less-hackable distributed database of digital assets… It’s a platform for ‘truth’ and it’s a platform for ‘trust’. The implications are staggering, not just for financial services, but for virtually every application that requires the sharing or transferring of assets…

Most blockchains are call ‘permission-less’ systems– transactions that satisfy each parties economic needs without knowing who the other party, and independent from central authorities… For many, the underlying blockchain technology is the biggest innovation in the 21st Century, it’s a distributed database where ‘trust’ is established through mass collaboration and clever code, rather than by powerful institution, that do all the authentication and settlement… This may all sound too good to be true, so what could go wrong? Yes it’s not all a slam-dunk, blockchain technology must still maneuver through some very key issues, and biggest is governance, or better yet lack of governance…

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The whole world of blockchain and digital currency is the Wild West… It’s place of recklessness, chaos, calamity… According to Steven Norton; currently there are no clear standards to govern how blockchain will be implemented across an enterprise. Some companies may choose to use an ‘established’ network, while others may opt for ‘permissioned’ or ‘semi-private’ blockchains… 

According to experts; blockchain technology is still at its infancy and it has many regulatory and legal hurdles, and even potential cybersecurity threats and privacy issues to overcome…