Understanding the Blockchain

Years ago, we were introduced to the Internet. One big network that completely redefined the means and rules of communication. Through the internet, all kinds of people, irrespective of geographical boundaries, gained access to unlimited information. Others found their voice, made statements, became influencers and leaders, and all conventional rules of communication went straight out of the window. That was the first phase of a digital revolution.

Today, we are taking slow, but steady steps into the second revolution of its kind, as we get introduced to a new kind of Internet. An Internet of Value. Ladies and gentlemen, all hail the Blockchain. In the words of Melanie Swan, Founder of the Institute for Blockchain Studies, the Blockchain is in position to become the fifth disruptive computing paradigm after mainframes, PCs, the Internet, and social networking.

But what makes it so important?

The Blockchain is essentially a public ledger which could be the next huge wave in technology. As a worldwide, decentralized record for the listing, inventory, and transaction of all assets, including financial transactions, contracts, physical assets, supply chain information, and even things like our health record, personal identity, votes and intellectual property. The Blockchain presents in itself an enormous opportunity for the future of trade, the financial industry, and governance. As more and more businesses prefer cryptocurrencies for a transaction, its significance becomes just too hard to ignore.

The term decentralized acquires extra importance as it means there is no one person or organization in charge of the entire chain. It is public in the sense that everyone in the chain can see details of each record, or “block”, as it’s called, but each block can be edited only by its owner. The owner accesses the block using a private key. Each block is time stamped and encrypted. Any edits made in an individual block will be updated in everyone’s distributed Blockchain in real time.

A lot of reasons have encouraged the growing dependence of businesses on the Blockchain. Being decentralized, it completely eliminates the need for intermediaries and speeds up transactions. This way, the costs associated with middlemen can be saved. It also brings down the complexity associated with the use of different ledgers throughout the lifecycle of any transaction.

In Blockchain, a stock purchase would be completed in minutes, without the need to wait for a third party to process the transaction. Every transaction is recorded and goes straight into a block where it stays secure between the blocks before and after it.

What Next?

The blockchain will take years and decades, probably, to be fully integrated into our infrastructure. If we were to compare the development of the Internet and the Blockchain, the latter is still about 20 years behind. Only 0.5% of the world’s population uses blockchain today, as against about 50% or 3.77 billion people using the internet. In 2009, the Bitcoin, the most popular cryptocurrency as of now, was introduced, and blockchain technology has enabled its existence. Some have called it the future of trade, some named it an outright scam, yet others defined it as a mirage. But one thing is for sure. The Blockchain will change a lot of financial practices.

In the words of Ginni Rometty, CEO of IBM, “What the internet did for communications, Blockchain will do for trusted transactions.”