How Will The Blockchain Technology Transform The Finance Industry?

Blockchain — The technology behind Bitcoin

Blockchain is the innovative technological idea behind BitCoin. In computer science terms, a blockchain can be defined as a linked list structure that uses hash pointers. More roughly, as the name suggests, blockchain can be described as blocks chained/tied together to form a consecutive block structure. Each block contains one or more financial transaction details (amount, sender, receiver etc.); so the whole block chain holds a bunch of financial transaction information.

So where is the magic?

An important functionality of blockchain is the security provided by hash pointers. In other words, in a regular chain you may be able to replace each block with a different block and still have a regular chain. But hash pointer structure of blockchain verifies that all the blocks are the original blocks and cannot be replaced anyway.

Another important functionality of blockchain is that; although the blockchain contains all the detailed information about transactions such as receiver and sender information, the real identities of the receiver and sender is always anonymous. This is achieved by using key generation cryptographic algorithms. The blockchain contains public addresses which does not reveal the real identities of the receivers and senders. People can access their cryptocurrency funds and use them (send/receive) via their secret public keys.

The last important feature of blockchain that will be mentioned in this blog post is distributed consensus idea behind blockchain. Blockchain technology employs different incentive mechanisms to access the processing power of the P2P network. This processing power is used to run distributed consensus algorithms to eliminate malicious transactions such as double spending attacks.

What is next?

Blockchain has core advantages like enabling P2P financial transactions, building decentralized public ledgers with transparency and security in mind. Bitcoin is the main use case built on top of blockchain technology but financial industry is looking for new use cases that blockchain technology may help. Some use cases may be as follows:

• Smart contracts
• Bitcoin-enabled browsers
• Cross-border payments
• Micro payments
• IoT Payments (Machine-To-Machine payments protocol)
• Decentralized e-commerce platform