GUEST BLOG: Blockchain will change the world

You’ve surely by now heard of Bitcoin, and may well have heard of the term Block Chain (more usually these days spelled ‘blockchain’). The two things are different, although both started out as an integral part of each other. Confused? It’s worth understanding this, as it is going to change the way the world works and will impact all of us.

When Bitcoin was first released in January 2009, the open source code in which it was written, also contained an element called the blockchain. The two can now be considered as separate entities, with Bitcoin as a digital currency, and blockchain as the separate, but essential underlying technology that allows Bitcoin, and other applications, to work in the way that they do. It may be helpful to consider blockchain as the ‘operating system’ (like Windows 10 or MacOS), and Bitcoin as one application that runs on the operating system (such as Excel, or WORD).

Whilst Bitcoin, Ethereum and other crypto currencies make the news, it’s the blockchain technology that will make the biggest change to the world as we know it. Blockchain is essentially a distributed database or ledger comprised of linked transaction records. However, because this database is distributed across a peer-to-peer network and is without a central authority, network participants must agree on the validity of every transactions before they can be recorded. This agreement, which is known as “consensus,” is achieved through a complex computational process called “mining.”

It is the ‘without a central authority’ piece that makes this technology both revolutionary and controversial. It means that, unlike the accounting and record keeping systems we have been using since the days of clay tablets, there is no single, central repository – no unique place that acts as ‘the truth’. So, for example, instead of NatWest having a central database that contains your current account balance and transactions, which both you and NatWest agree is THE record of your balance and activities, this data will be distributed (encrypted and anonymously) across thousands of different databases. This means currency transactions can bypass organisations such as national and international banking institutions, making it the go-to currency for criminals, tax evaders and many other bad guys.

“Blockchain will do for business what the internet did for communication”

Yet it also promises enormous efficiencies, reduced costs and increased speed for just about any type if transaction, whether financial or otherwise. As every transaction is completely tamper proof and can’t be hacked or erased, it acts as a highly secure audit trail for any multi-transaction process, whether it be a currency exchange or tracing a diamond from the mine to the end buyer, providing an absolute guarantee of provenance and authenticity.

Blockchain will negate the need for middle-men and intermediaries in all sorts of industries and processes, from bureau-de-change and music royalties to house buying and supply chain management. Air B&B, Uber and other ‘sharing platforms’ will find their roles changing or even eliminated as their core functions of financial exchange and trusted authority are replaced by the blockchain. Perhaps more than any other, the legal profession will need to embrace and adapt to the blockchain world, as much of their current raison d’etre of contracting, securing and transferring assets between parties is taken by blockchain.

Any business that wishes to stay ahead of the curve should be asking themselves how they can embrace blockchain to their advantage before their competitors do. Failure to do so could threaten their very existence by this rapidly growing technology.

But back to crypto Currencies! it’s been a better month on my currency investment front, with both of my investments wiping out last month’s losses, but Bitcoin surging ahead to give a net gain of 19.1% since I purchased them.

ALAN’S CRYPTO CURRENCY TRACKER