Why Blockchain Matters
As a subject of great interest, blockchain traces its origins back to the creation of Bitcoin, the first decentralized ledger, in 2008. Since then, blockchain technology has been associated with the concept of decentralization.
A little bit of history
French diplomat Alexis Tocqueville was the first to talk about decentralization in the political context of a country shifting from a centralized power to a democratic system. He defined political decentralization as “the true spirit of liberty”.
Although, the concept of decentralization that we associate today with blockchain has changed, it is generally based on the basic principle of disrupting an obsolete standard and establishing a new way to operate.
Why is blockchain important?
Defined by the crypto community as a means of “transferring trust in a trustless world”, blockchain technology has the potential to disrupt almost any industry. For example, in the banking industry, a wire transfer involves more than just the sender and the receiver of a payment. In fact, intermediaries are responsible for the validity and security of transactions. Because blockchains are distributed ledgers, any data transfers are verified and validated by automated consensus protocols without the interference of a central authority or any 3rd party.
The true revolution that blockchain brings to the digital world are these protocols. Given that trust-centered processes are connected to distributed ledgers, assets can be transacted in a direct and transparent manner, without the delays and additional costs associated with traditional methods. As blockchains are entirely digital, asset management through a blockchain also becomes programmable. This is where smart contracts and distributed apps (DApps) come into play to facilitate the automation process, allowing for the enhanced flexibility of data transfers.
That being said, the spectrum of blockchain usability is limitless. Healthcare, voting, banking, payments, asset management, public administration, public records, accounting and finance, tourism and traveling and many other areas of business can benefit from blockchain integration.
Defined by Don & Alex Tapscott as “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value,” blockchain has five basic attributes which transcend the limits of applicability to a single domain:
• Consensus: The validity of a transaction (data transfer) requires the agreement of all participants.
• Provenance: The parties involved know the origin of the asset and how that asset has changed hands over time.
• Immutability: Once a transaction is confirmed and signed by the sender, it becomes irreversible and no party can tamper with it. In case an error occurs, a new transaction must be initiated.
• Finality: The completion of a transaction or the ownership of an asset is determined by one single, shared ledger, which is the only place to go to for double-checking this information.
• Security: Transactions (data transfers) take place in a secure, tamper-proof environment, where the receiver is the only person who can decrypt the data received using his/her private key.
This, significantly simplifies processes in any business and adds accuracy and transparency. That is why an increasing number of companies irrespective of size and domain of activity have turned to blockchain. Expedia broke the ice for travel and tour businesses, while financial giants from JP Morgan to Rabobank, USB, and Barclays are already experimenting with the technology behind cryptocurrencies and some of them are already launching or planning to launch their own coins and blockchain networks.
This is only the beginning for blockchain, since sooner rather than later, it could become the standard of how we operate in several industries!
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