The question of “why is blockchain technology important” has been asked many times since this innovation began, and 2017 presented many user cases and evidence of blockchain technology importance in the world today.
“Blockchain technology” is the technology behind blockchain, a type of distributed ledger made up of immutable digital data recorded in packages referred to as blocks. The blocks of data are stored in a linear chain forming a “blockchain”. A blockchain is one of many types of distributed ledgers, though not every distributed ledger employs blocks and chain transactions. Blockchain technology is the technology behind the major cryptocurrencies like Bitcoin and Ethereum and other crypto innovations we saw in 2017.
So why is blockchain technology still important in 2018?
Disintermediation
Blockchain technology enables peer-to-peer sharing of databases- no central administrator is needed. The consensus mechanism among participants allows independent processing and verification of transactions on the blockchain. Disintermediation is particularly important because it makes it impossible to tamper with the data. If the data was stored by a central authority, a person gaining access to it would possibly destroy or otherwise tamper with it.
Open Source
Open source technology comes with lots of efficiency in that by allowing others on the technology, you boost the number of possible applications making it to spread. This is why blockchain technology is going beyond bitcoin to offer different transactional applications. In the U.S. for example, the Securities and Exchange Commission has approved Overstock.com to issue its stock through blockchain. This demonstrates the many possible applications of blockchain technology.
Empowers Users
In a blockchain database, users are in control of all their transactions and information. It’s a public ledger with nothing hidden from the participants.
High Quality of Data
The quality of data is determined by its completeness, consistency, timeliness, accuracy and availability for decision making. Data on a blockchain database has all these attributes.
Transparency and Immutability
Transparency and immutability are key characteristics of blockchain records. In a blockchain, all participants have unrestricted view of all the data. This is what we are referring to as transparency. Additionally, a record on a blockchain cannot be altered or deleted, it’s immutable. A blockchain record is therefore highly reliable and could reduce disputes between transacting parties. In ordinary business transactions, it is common for transacting parties to differ on the substance of their transaction. This often leads to litigation which does not assure the innocent party of success unless the party has sufficient proof. With blockchain, the evidence is there for everybody to see.
Increasing the Speed of Transactions
Bank-to-bank transactions may take days to settle especially outside the ordinary working hours. Blockchain technology can reduce transaction time to minutes. You can send money anytime, to a recipient anywhere in the world.
With so many potential applications in business, government, healthcare, defence and energy, blockchain technology has the potential to bring about massive transformation across many sectors.
However, the technology is still in its early stages and the realisation of these benefits will depend on whether people will quickly take advantage of the technology or not. week the high and rapidly changing price of bitcoin brought the digital currency to the top of the news, reaching an all-time trading high, at about $1,150 per coin.
It has since fluctuated considerably; the cause of this being statements and actions taken by the Chinese government. The clear majority of bitcoin trading (more than 95%) takes place in China, giving events there an enormous influence on the price.
The profile of bitcoin (powered by a blockchain network) has often masked the rising importance and relevance of the underlying blockchain technology, but this is changing rapidly.
One perspective is that the blockchain is the ‘second generation of the internet’.
According to an article published on Raconteur, ‘The first generation brought us the internet of information. The second generation, powered by blockchain, is bringing us the internet of value; a new, distributed platform that can help us reshape the world of business and transform the old order of human affairs for the better. But like the internet in the late-1980s and early-1990s, this is still early days.’
The initial paper regarding bitcoin (and blockchain) entitled Bitcoin: A Peer-to-Peer Electronic Cash System (2008) was authored by a mysterious individual, likely a pseudonym, going under the name of Satoshi Nakamoto.
While the original paper was written with financial transactions in mind, blockchain has far wider potential. Time will tell, but it may be that Nakamoto’s paper will have ramifications on a par with Tim Berners-Lee’s innocuously titled 1989 paper Information Management: A Proposal.
In December 2015, the UK government’s Chief Scientific Adviser, Sir Mark Waldport, stated in his report Distributed Ledger Technology: beyond blockchain, that: ‘The technology [blockchain] offers the potential, according to the circumstances, for individual consumers to control access to personal records and to know who has accessed them.’
Canadian writers and researchers, Alex and Don Tapscott, authors of the recent book Blockchain Revolution, believe that the blockchain goes way beyond the second coming of the internet. The pair, like so many others, stumbled across blockchain via the bitcoin association, quickly realising the genie is out of the bottle.
Alex Tapscott observes, ‘With blockchain technology, a world of possibilities has opened and we now have a true peer-to-peer platform that enables personal economic empowerment. We can own our identities and our personal data; we can do transactions, creating and exchanging value without powerful intermediaries acting as the arbiters of money and information.’
The blockchain, essentially a database and a giant network, known as a distributed ledger, records ownership and value, and allows anyone with access to view and take part. The asset database can be shared across a network of multiple sites, geographies or institutions. All participants within a network can have their own identical copy of the ledger. Any changes to the ledger are reflected in all copies, like a Google doc.
The blockchain is currently having its biggest impact in financial services, with the largest changes caused by infrastructures using blockchain APIs, which are delivering in the areas of speed in data processing, transparency (amongst the right people) and security.
But what does the blockchain mean for businesses outside of the financial sector? The answer lies in the areas of - privacy/information control, disintermediation, and business processes.
As mentioned above, the blockchain offers consumers opportunity to achieve greater control over their information. This will impact on most organisations, as they increasingly rely on the acquisition and application of customer data.
The importance of privacy is obviously a sensitive issue. One current solution for consumers is the selection of ephemeral applications like Snapchat and encrypted messaging, but the future might lie in the anonymity of blockchain technologies.
Another change will affect business sectors where there are many intermediaries, for example travel and tourism. Here, the blockchain’s ability to simplify and speed up interactions, will likely lead to a process of dis-intermediation.
Current examples of businesses and categories active in the blockchain include: Peer-to-peer payments (Abra, BTC Jam), internet of things (Chimera-Inc, Filament), collaborative transport (La’Zooz, Arcade City) and online gaming (Auckur, SatoshiDice).
As the number of applications that utilize blockchain technology increases, so will its relevance. Not only will we be selling products through the blockchain, but marketing companies that run off it as well.
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