It may sound like something you’d find in a plumber’s toolbox, but Blockchain continues to play an increasingly important role in the world of online transactions. Being the technology upon which the ever-more prevalent digital currency, Bitcoin, is able to operate is reason enough to ensure we take Blockchain seriously. But this may just be the tip of the iceberg in terms of its global influence. The way in which it controls, logs and secures Bitcoin transactions demonstrating the potential to become the next revolutionary force in digital technology.
Blockchain and Bitcoin
So, let’s take it from the top.
Bitcoin is a form of digital currency, more specifically, cryptocurrency. A purely electronic method of carrying out online transactions, based on the mathematical protocols of Satoshi Nakamoto, of whom little is known (a sort of Keyser Soze of the maths world).
The key facets of Bitcoin are:
- It’s a global, completely decentralised currency. Meaning that it’s not operated or controlled by banks or similar institutions.
- It’s 100% digital. There are no physical coins or notes produced.
- There are only a finite number of Bitcoins in circulation, with Bitcoins ‘mined’ via mathematical formula. (Bitcoins can, however, be broken down into fractional parts – as you might pound and pence albeit with Bitcoin, the fractions can become extraordinarily small).
In this set-up, Bitcoin transactions occur directly between purchaser and supplier, with no involvement from banks or another third-party intermediary.
Blockchain is the platform upon which these direct transactions occur, using cryptography to provide a secure environment, while logging each transaction to create a giant database of ALL Bitcoin exchanges.
It’s basically an enormous online ledger book, with every Bitcoin transaction visible to all those on the network.
How it works
As well as providing a secure platform for business, Blockchain records every transaction made; storing every detail into its database.
A quick overview of the process:
- Each transaction made is called a BLOCK.
- The BLOCK is sent out to everyone on the network
- Each party in the network approves the transaction
- The BLOCK is added to the CHAIN of Bitcoin transactions
- This CHAIN provides a completely transparent record of the transaction
- The transaction is complete with the exchange of currency.
And this is good because?
Well, from a Bitcoin transactional perspective, Blockchain makes the whole system secure, simple and transparent.
By logging every detail, all transactions are visible, ensuring their integrity. Also, it helps protect the value of the currency by ensuring that the Bitcoin used in the transaction is not spent more than once. Essentially, Blockchain can account for all Bitcoins in circulation as well as every movement made across the digital channels.
Which is potentially huge
Canadian analyst William Mougayar, is clearly a big fan of the Blockchain potential. His book (The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology), released earlier this year suggests that Blockchain is going to be ‘The Next Google’.
Which is a lofty claim, given that Google probably still considers itself ‘the next big thing’.
But there is merit in the argument. The way that Blockchain works has exponential possibilities for the way we do business, move money and interact online.
As Mougayar states, the way Blockchain handles data and online transactions can be applied to almost anything:
“We will perform the equivalent of “googling” to verify records, identities, authenticity, rights, work done, titles, contracts, and other valuable asset-related processes. There will be digital ownership certificates for everything. Just like we cannot double spend digital money anymore (thanks to Satoshi Nakamoto’s invention), we will not be able to double copy or forge official certificates once they are certified on a Blockchain.”
Every transaction and transfer, monetary or legal, has the potential to be carried out online, secured behind powerful encryption, yet publicly available to create a sequential trail that can never be lost.
It has the potential to provide financial assistance, such as securely transferring money to individuals without access to banking, to preventing fraud through transparent transactions and resolving legal or ownership disputes with all documentation logged and accounted for. With its foundation based upon placing trust in the network community, rather than in the traditional institutions, Blockchain offers the possibility for fair and transparent global trading.
A Ledger for the World
The internet was born out of an idea of exchanging information. Blockchain can move this concept forward.
This is the age of smart technology, of mobile connectivity and the internet of things. The increasing fusion of physical world and digital. From data and legal documents to property, taxes, insurance policies or stocks, Blockchain is a way of exchanging and accounting for commodities that have a real world value.
Who owns and who owes – Blockchain attributes and facilitates the payment, logging it for evermore.
A digital ledger for the world.