Blockchain technology is not just a buzz phrase floating in the ether or some abstract idea; in the first half of 2017 alone, venture capitalists invested over $240 million in it. It has very real, practical applications that are starting to disrupt and change many industries.
So what is it, exactly, and how does it work?
Invented in 2008 by Bitcoin founder Satoshi Nakamoto, Wikipedia defines it as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”
Essentially, it is a decentralized ledger.
Think of Wikipedia itself, which is an open-source encyclopedia. The difference is that Wikipedia is centralized; all information flows into a central server that hosts a master copy that must be approved before going live. In the blockchain world, when updates are made (i.e. transactions), the information is sent out across every node in the network. Because it is verified and time-stamped, the latest version essentially becomes the new de facto master copy.
Blockchain is trustless, and yet completely traceable. Each user has a unique key to verify and protect their identity. It is encrypted and no one else can use or access it, making it virtually impossible for hackers to gain access to personal information. Blockchain works because, e.g. I am who I say I am (personal key) and I want to sign this document or transfer this money or cast a vote in this election. My data is encrypted into a “block” that contains a cryptographic hash of the previous block and a timestamp for a clear audit trail.
Some of the applications of blockchain already in use include: smart contracts, digital voting, decentralized notary and even coffee bean farming.
2018 promises more blockchain opportunities in a variety of industries. For more on how it can affect the banking industries, READ HERE.