What is Blockchain technology and Why Should You Care?
Blockchain technology is a form of database that is not centrally maintained. The database is distributed through a cloud-based, or cloud-like, systems that are linked. The data records and the processing of these records are not done by one central server, agency, or person. This technology is most notably used in bitcoin transactions. How does it work in bitcoin? Well, the computing needed to verify a transaction from one end to the other anonymously, and securely, requires a set of mathematical equations to be solved. These equations can be described as soling a 4-dimensional rubrik cube. A single person, or a single machine, would take hundred of years to solve such an equation to get the transaction approved. However, with a distributed systems, such as blockchain, there are millions of participants. These participants work together to solve the equation and approve the transaction in matter of minutes, or seconds.
The idea is to incorporate supply-chain principles with cryptography for blockchain to work. Banking, financial transactions, and stock exchange are some of the examples which blockchain can improve the security and efficiency of their process. We can take bitcoin as a case study of blockchain improving the financial services and markets. Trading and liquid assets in bitcoin are processed so much faster and with much less margin of error due to blockchain technology. The transactions of capital flow is a supply-chain issue in this case. Blockchain adds the cryptography to this by default.
The financial market noticed this and they are moving away from traditional processing of data to blockchain. IBM is already invested in a so-called “shadow blockchain” technology and offer it as a service to financial businesses. The Global Mail reports that many banks are already in transition to blockchain technology.
Why should anyone care about this? Why is this at all important?
Bitcoin as a virtual open source currency has revolutionized the way economists and technologists involved in banking think about currency and money flow. A central control of capital flow is proving to be at a disadvantage in comparison. What this means is that using Bitcoin as a currency is advantageous over using any other “real” currency. No only to the consumer, but also to the financial services providers as well. Computing power and security are distributed along the blockchain databases to millions of different machines globally. This makes hacking and manipulating the currency almost impossible to any individual hackers or groups.
Blockchain is also a source of anxiety to financial institutions and governments who exercise a great amount of control over their domain. It takes away their ability to control the amount of capital flow, taxation, and imposing unnecessary fees that banks are known for doing. A great effort was made to resist the spread of Bitcoin use by many financial institutions and governments. However, it seems that the technology that makes Bitcoin possible, blockchain technology, is being embraced right now. This could mean that financial markets and currencies are trying to be on-par with Bitcoin by using the same technology. It is still a form of resistance to Bitcoin, however, we can see this as an escalation of the competition between traditional currencies and virtual ones.