Blockchain: 11 things you should know
5 MINUTE READ
“Blockchain technology isn’t just a more effective way to settle securities. It will fundamentally change market structures, and maybe even the architecture of the internet itself,” – Abigail Johnson, CEO Fidelity Investments
That’s a pretty big statement. While there is still some debate over how long it will take to happen, there is now widespread agreement among industry experts that this is where we are heading. Blockchain technology is set to have a huge impact on the economy and society as a whole. However, as it demands a fundamental shift in the way businesses operate, full integration of blockchain will likely take a number of years to accomplish. Given all the hype that has sprung up recently about blockchain (both positive and negative) in this post we’ll go over what it actually is and what you need to know about it.
What is blockchain?
On the most basic level, blockchain is just a new form of decentralised database that maintains a list of records. In a way you can think of blockchain as the “internet of value”. It’s a real-time ledger of anything that can be recorded (financial transactions, contracts, physical assets, supply chain info, etc.) but the key distinction is there is no one person or organisation in charge of the chain. Instead, it’s characterised by complete transparency. Everyone in the chain can see the details of each record. These records are called blocks and each block contains the history of every block that came before it.
All blocks are encrypted and precisely time stamped; the only person who can edit a block is the person that “owns” it. Each owner has a private key that give them access to their block. Whenever an owner makes a change to their individual block, everyone else’s distributed blockchain is immediately updated and synced.
What benefits does it offer?
The business opportunities created by blockchain promise to revolutionise business and finance. Eoin Woods, CTO at Endava, explained that as blockchain technology establishes a peer-to-peer network within one system, it minimises the time and costs associated with intermediaries.
“Current applications tend to be situations where organisations are relying on a trusted third party who is adding little value beyond keeping a trusted database. Securities clearing between banks is a good example of this. A blockchain removes the record keeping responsibility from the clearing house. This demands that clearing houses shift their focus to what real value they’re bringing to the process,” he said.
Blockchain won’t completely eliminate the need for for third parties in the financial sector – they’ll just have to work harder to prove their worth. “They can do so by adding liquidity, setting standard terms, providing custody facilities and so on,” said Eoin.
Alongside cost savings and efficiency improvements blockchain also offers enhanced security. Every transaction goes into a block, and each block connects to the one before and after it which amps up its security. While nothing is completely hackproof, blockchain is significantly more secure than traditional processes.
11 things you should know about blockchain
While we have given a basic overview here, blockchain is highly complex. Truly getting to grips with this technology requires a significant time investment. However, the facts listed below should help give you a better sense of blockchain (as well as equip you for when the topic next comes up in conversation).
- Bitcoin was the pioneering driver of blockchain technology. Today, it has more than 8 million accounts and its price has skyrocketed. But it is important to keep in mind that blockchain has functionality beyond Bitcoin.
- There are public and private variants of the model, depending on whether it is truly open or is a closed set of cooperating organisations.
- Blockchain technology is still very much in its infancy. It is at a similar point to where the internet was 20 years ago. We will see many new applications begin to emerge over the coming years.
- Tech giants such as IBM and Microsoft are investing heavily in blockchain technology. IBM dedicates $200 million and 1,000 employees to blockchain-powered projects.
- The global blockchain market is expected to be worth $20 billion by 2024.
- 90% of major European and American banks are exploring blockchain solutions.
- Similar to a shared Google doc, all participants within a network see all changes to the ledger. The ledger is constantly updated and each participant has their own copy of it.
- A blockchain is most vulnerable to a breach when it first comes online as the level of security corresponds to the length of the chain.
- Estimates suggest banks could save $8-12 billion annually if they used blockchain technology. Much of these savings stem from cutting out the ‘middle men’.
- An IBM study found that one third of C-level executives are already using or are considering adopting blockchain in their organisation.
- Just like with the internet, there will be jobs that become obsolete. But, there will be new careers that we haven’t even dreamed up yet that will be created as a result of the blockchain transformation.
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