This article will discuss why blockchain matters? Most importantly, the benefits it is bringing about that make it important, are of much interest especially for the corporate world. In addition, for the newbie reading the article, it is always good to revise the concept again in a brief manner.
If you have been tuned to my blog or heard of bitcoin, you can surely say that the digital currency that is predicted by many, is going to revolutionize payments, or might prove to be a huge fraud, depending on what you understand. Bitcoin is the application lying behind running the blockchain that is eventually a more profound and striking innovation. The blockchain is the secured transaction ledger database that is shared by all the parties involved in a distributed, established computer network. It archives and saves each transaction that is happening in the network, necessarily removing the requirement for trusted third parties like payment processors. The supporters of the blockchain technology usually explain the innovation as transfer of trust in a trustless world, referring to the fact that entities involved in transactions are not essentially known to each other yet they exchange value with the surety and no third party validation. Due to this reason, the blockchain is surely to be a potential game changer.
As far as the significance of the blockchain is concerned, it seems to enable trustworthy transactions in a trustless world. The blockchain leads to anonymous exchange of digital assets like bitcoin, however, it is not technically reliant on bitcoin. The beauty of blockchain is that it necessitates the need for a centralized authority to verify the trust and then transfer the value. It transfers the control and power from big entities to numerous ones, enabling fast, cheaper and safer transactions irrespective of the fact that we might not know the parties we are dealing with.
The dynamics of the blockchain are highly disruptive and novel. As people transact in the blockchain ecosystem, a public record of all the transactions is generated automatically. Computers verify every transaction with complex algorithms to confirm the transfer of value and make a historical ledger containing all activities. The computers forming the network that are processing transactions are positioned all across the world and significantly are not possessed or controlled by any single entity. This is the real time process, and much safer than being based on a central authority for transaction verification.
There are a number of analogous ideas both classic and modern. Technology has and will keep on transferring the control and power from central authorities and disperse them to the masses. For instance, time used to be known and communicated by big clock towers that were costly to develop and maintain. Engineering innovations finally decentralized the time quantification to the individual. In the similar way, WhatsApp, a very popular messaging app, cut the cost of transaction of sending messages worldwide, and also cut carriers’ profits. The central authority i.e. phone carriers lost to this application, developed on decentralized network i.e. the internet.
In addition, similarly, the third parties that presently verify the transactions (central authority) stand to lose to the blockchain (the decentralized network). As such, blockchain necessarily disintermediates the third-party transaction verifiers: legal services, auditors, brokerages, payment processors and other similar bodies. While you might not be fully convinced that exchanging the bitcoin is an invaluable service, there are a lot of other critical instances of value transfer, and presently very slow and costly.
Think of the property exchange. A lot of intermediaries are presently involved in the process, like third party escrow service working for both the parties ensuring a smooth transfer. Just like other services, escrow services also developed solely on verification and trust, collect the fees that would be mitigated by executing the transaction on the blockchain-as would wire transfer fees, third party contract execution, financial auditing etc. The blockchain is a foundational technology, such as TCP/IP, which enables Internet, and much like the internet in late 1990s, it’s too early say when will the blockchain evolve, however, we can say that evolve it will.
Like the internet, the blockchain should also be permitted to grow unencumbered. This will need careful handling that considers the difference between platform and applications running on it. TCP/IP empowers many regulated financial applications, but it is not regulated as a financial instrument. The blockchain should get similar thoughts. While the predominant use case for this blockchain today is bitcoin currency exchange that might need regulation, this would change with time.