News, businesses, Wall Street banks, and more are all buzzing about blockchain. But, what is it, and how does it work? Follow along as we quickly define blockchain and tell you a bit about how it works.
What is Blockchain?
According to Don and Alex Tapscott, the authors of Blockchain Revolution, “the blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” What makes this online database technology really stand out, however, lies in the way blockchain allows digital ledgers to be shared — in sync — amongst multiple parties. In essence, blockchain works like Google Docs for transactions, but here’s the key difference: you can view and add to a blockchain, but you can’t change the history of information that’s already there. That means records can’t be counterfeited or altered by someone else.
Blockchain & Bitcoin
Blockchain uses the digital currency called bitcoin to create and finalize transactions with anyone, whether you know them or not. Bitcoin transactions are anonymous — there are no middlemen, like banks, asking for personal information — but bitcoin transactions are still validated, it’s just by other users who earn a small fee in the process. During these transactions, blockchain is used to verify ownership of this digital cash and to make sure only one person is claiming it.
The Security Benefits of Blockchain
Anyone with an internet connection can use a blockchain, but its millions of users make it nearly impossible for any one person to take down or corrupt a blockchain network. Here’s why: These millions of users use their personal computers to hold bundles of records submitted by others. Each of these records are known as blocks and they hold timestamps and links to previous blocks, which form a chronological chain.
Blockchain databases aren’t stored in any single location — they’re public and verifiable — which means there’s no central version of the information for a hacker to corrupt, and blockchain cannot be controlled by a single entity.
Businesses & Blockchain
Who is using blockchain? While the anonymity of bitcoin may cause many to quickly dismiss blockchain as a criminal’s tool, many banks, businesses, and government aid programs are seeing it differently: as a cheaper way of doing business and as a way to help some of the poorest people in the world. In fact, in the business or financial world, large investment banks are finding that blockchain can help them save eight to twelve billion dollars every year. The biggest game changer, however, may be for those living in the poorest countries in the world, as blockchain can help speed up business-based cash flow and provide a secure place to store records.
Is Blockchain For Your Business?
Blockchain technology is becoming popular amongst businesses, but is it right for your business? Stay tuned as we continue to cover this rapidly evolving finance-related technology topic!