Why do we need to talk about Blockchain?
You probably heard about block chain or cryptocurrencies by news, friends, or the internet. However, it seems not easy to understand what is the core technology and what is benefit for you.
What is blockchain?
It is simply defined as a shared, immutable ledger, has the potential to be the technology that redefines those processes. Most of people will associate the blockchain with Bitcoin. However, bitcoin is not the considered as the main topic in this article. The article will discuss about the key elements what will be benefits in your life.
Most of financial people believe that central banks and clearing systems within them clear billions of checks and transactions every day without any errors. Still, many business transaction remain inefficient, expensive, and valuable, suffering from some barriers.
Manav Gupta in 2018 pointed that
- Cash is useful only in local transactions and in relatively small amounts.
— The time between transaction and settlement can be long.
— Duplication of effort and the need for third-party validation and/or the presence of intermediaries add to the inefficiencies.
— Fraud, cyberattacks, and even simple mistakes add to the cost and complexity of doing business, and they expose all participants in the network to risk if a central system, such as a bank, is compromised.
— Credit card organizations have essentially created walled gardens with a high price of entry. Merchants must pay the high costs of onboarding, which often involves considerable paperwork and a time-consuming vetting process.
— Half of the people in the world don’t have access to a bank account and
have had to develop parallel payment systems to conduct transactions.
In order to solve those given challenges, bitcoin (a digital currency) that was launched in 2009 by uncertain person named Satoshi Nakamoto.
What bitcoin’s core value is
Cost-effective: Bitcoin eliminates the need for intermediaries.
Efficient: Transaction information is recorded once and is available to all parties through the distributed network.
Safe and secure: The underlying ledger is tamper-evident. A transaction can’t be changed; it can only be reversed with another transaction, in which case both transactions are visible
What is the Blockchain?
It is true that the blockchain built on the bitcoin, it serves as shared leger. Blockchain is similar as an operating system like Microsoft windows, Apple MacOS, and bitcoin is the software such as Excel, and Powerpoints.
Its technology provides recording bitcoin transactions. It can trach the movement of any asset whether tangible, intangible, or digital.
The benefits
With traditional methods in Business era, the cost is not efficient, since it involves intermediaries that charge commissions for their services. It’s clearly inefficient due to delays in executing agreements and the duplication of effort required to maintain numerous ledgers. Morevoer, It’s also vulnerable because if a central system (for example, a bank) is compromised, due to fraud, cyberattack, or a simple mistake, the entire business network is affected.
A blockchain network has the following key characteristics:
— Consensus: For a transaction to be valid, all participants must agree on its validity. (See Chapter 2 for more about consensus mechanisms.)
— Provenance: Participants know where the asset came from and how its ownership has changed over time.
— Immutability: No participant can tamper with a transaction after it’s been recorded to the ledger. If a transaction is in error, a new transaction must be used to reverse the error, and both transactions are then visible.
— Finality: A single, shared ledger provides one place to go to determine the ownership of an asset or the completion of a transaction.
It means, the blockchain network is economical and efficient, because it eliminates duplication of effort and reduces the need for intermediaries. It’s also less vulnerable because it uses consensus models to validate information. Transactions are secure, authenticated, and verifiable.
Next Article will discuss about the industry where will be the first era to utilise blockchain technology, and what benefits will be followed.
Written by Suya Park & Cale Hur
If you want to feedback us, contact by suya.park31.2@gmail.com
Suya Park & Cale Hur were an editor at Bloconomist from 2018. They are now in the Seoul, South Korea.
