Tech
Could Blockchain Have As Big An Impact As The Internet?
Remember dial-up Internet connection? The growling siren crescendo that signaled your intention to browse the World Wide Web?
Nearly 30 years later, we are a long way from those initial forays. Today, nearly nine in ten Americans use the internet, and in our ever-expanding economy, cryptocurrency isn’t an idea out of reach—it’s reality. However, the most eye-catching recent technology is blockchain, the technology behind cryptocurrency, which could be a game-changer for the global economy.
Still in its early stages, mainstream blockchain integration may still be years away, but some predict it will be as revolutionary as internet adoption. Just as the Internet has disrupted the way we share information, blockchain has the potential to revolutionize the way we exchange value, transfer ownership, and verify transactions.
Blockchain technology is currently being pioneered across industries, from financial services to manufacturing. Other industries, such as retail, are also starting to experiment with potential applications. In the long term, blockchain could enable a transformation of operating models across industries.
Just as the Internet has disrupted the way we share information, blockchain has the potential to revolutionize the way we exchange value, transfer ownership, and verify transactions.
What is Blockchain?
In short, blockchain is an encrypted digital database shared by multiple parties in a distributed network. Any transaction that occurs on the network is recorded, verified and stored in a database. Transactions are broadcast to all network participants, creating an unalterable transaction ledger.
Blockchain is based on a technology where multiple copies of data exist over a network, rather than a single server or database. Since no centralized authority, or institution, controls it, participants can access the same version of the data in near real time. Decentralized management allows for faster and less expensive transaction processing, while allowing untrusted participants to reach a consensus on the state of the database.
Types of Blockchain
Beyond the underlying technology, blockchain is classified into two spectrums: public blockchain and permissioned blockchain. A public blockchain is a transparent record of transactional activities that occur in a given network. The network is open and anyone can run the open source software on their computer to join the network. Due to the large scale of the network, agreeing on the status of the ledger can be time-consuming and often energy-consuming. Digital currencies like Bitcoin and Ether use a public blockchain to transfer value and record ownership.
Alternatively, a permissioned blockchain has an owner, typically a utility, company, or consortium of businesses. Selected participants must be allowed to join the network, which has a unique algorithm for reaching consensus on the status of the registry. The network is often faster than public blockchains. An example of a permissioned blockchain is Quorum. The Quorum platform was developed by JP Morgan and uses blockchain technology to process private transactions.
The advantages of Blockchain
Blockchain could potentially disrupt traditional business models and automate certain processes, so that companies can reallocate resources towards activities that generate more value. Additional potential benefits for businesses could include:
Greater transparency
By design, blockchain allows multiple participants to view the entire lifecycle of a digital ledger. It also provides a verifiable trace of all transactions on the blockchain. This essentially results in a “golden” source of truth that all participants in a network can trust, allowing them to exchange value or information with each other, without the involvement of a third party.
Savings
Blockchain allows for shared infrastructure between parties. In business, some processes require duplication of information, including many reconciliation cycles. By sharing infrastructure and trusting technology, the respective parties could save time and money.
Operational efficiencies
Smart contracts enable the synchronized execution of a transaction between participants. In other words, many processes can be automated, freeing up resources for other opportunities.
Improved security
Network participants trust distributed ledgers because blockchain encrypts transactions in a digital database, and the transaction history itself is immutable. These encryption techniques, the process of converting plain text into gibberish to protect it during transmission, are used to create unique fingerprints that must be verified before any changes are made.
The absence of third parties makes this technology completely decentralized and innovative.
What is the future of Blockchain?
Although blockchain is still emerging, it is advancing rapidly. Even as buzz continues to grow, there are still limits to widespread adoption, including technical hurdles such as scalability, data privacy, and technology standardization. Furthermore, blockchain requires the need for a market-wide understanding of the application of the technology compared to the current existing regulatory framework. Additionally, there are technical challenges related to security. To date, security breaches are related to human and user error, rather than underlying technology, but these vulnerabilities must be addressed.
Developing the right tools and addressing these limitations will take time, but continued investment in blockchain technology will likely solve many of these problems and challenges faced, similar to other technological revolutions in the past. Maybe in 30 years, like the Internet, blockchain will be a common technology and we will look ahead to the next innovation.
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