WHAT ARE BLOCKCHAINS?
Although many people know blockchain as the technology behind Bitcoin, blockchain’s potential uses extend way beyond digital currencies.
It is really becoming well known in recent times. It’s admirers include people like Bill Gates and Richard Branson. Banks and insurers are all trying hard to be the first to work out how to use this nascent technology.
Most people make use of a trusted middleman such as a bank to make a transaction. But on the other hand, blockchain allows consumers and suppliers to connect directly. Hence a third party is not necessary.
Blockchain provides a decentralized database, or “digital ledger”, of transactions that everyone on the network can see and cryptography is used to keep the exchange secure. This network is a chain of computers that must all confirm and ratify an exchange before it can be verified and recorded.
HOW DOES BLOCKCHAIN WORK IN PRACTICE?
Blockchain stores the details of every transaction of the bit coin, and the technology makes it impossible for the same Bitcoin to be spent more than once.
The technology can work for almost every type of transaction involving value. This includes money, goods and property. It’s uses are almost limitless and ranges from collecting taxes to enabling migrants to send money back to family in countries where banking is difficult. As every transaction is recorded and distributed on a public ledger for anyone to see, blockchain also reduces fraud.
WHO CAN USE BLOCKCHAIN?
If blockchain goes mainstream, anyone who has access to the internet can use it to make transactions.
According to a survey by the World Economic Forum’s Global Agenda Council, about 0.025%, or $20 billion) global GDP is held in the blockchain. Although this is a very small proportion of the global GDP, the Forum’s research suggests this will increase significantly in the next decade, as banks, insurers and tech firms see the technology as a way to speed up settlements and cut costs.
Many companies are falling over each other to adapt blockchain. Some of these companies include UBS, IBM, Microsoft, and PWC. The Bank of Canada is also trying out the technology.
A financial technology consultant Aite, has estimated that banks spent $75 million last year on blockchain.