Blockchain is probably something you have heard of if you have ever heard of Bitcoin (which we’re betting you have), as Blockchain is the technology behind it. However, blockchain has far more use than digital currency alone. Many entrepreneurs admire this technology, including Richard Branson, and banks and insurers are fighting to use it first. We understand that blockchain can be quite confusing, so here’s a simple explanation that just about anybody could understand.
What Is Blockchain: In Layman’s Terms
In real life, we either hand an object to another person (no outside technology needed), or we rely on the bank as a middleman to make a transaction. However, blockchain allows consumers and suppliers to connect directly, which removes the need for any third party.
Blockchain provides a digital ledger of transactions that everyone on the network can see; this is a chain of computers, and all must approve an exchange before it can be verified and recorded. This helps to keep exchanges secure.
In the case of Bitcoin, blockchain stores the details of every transaction of the digital currency. The technology stops the same Bitcoin being spent more than once – just like it would happen in real life. Here’s a simplified account of events:
1. A wants to send money to B
2. The transaction is presented online as a block
3. The block is broadcast to every party in the network
4. Those in the network approve the transaction is valid
5. The block can then be added to the chain, which provides a transparent record of transactions in the ledger
6. Money moves from A to B
Is This Revolutionary Or Just A Fad?
Some say that this is revolutionary technology, while others claim that Blockchain is nothing more than a fad.
The technology can work for almost every type of transaction involving value, including money, goods, and property. It has a limitless number of uses. It can be used to collect taxes, for example. It can also help to reduce fraud, as every transaction would be recorded and distributed on the ledger – and these transactions cannot be changed afterward.
Research suggests Blockchain usage will increase significantly in the next decade, as banks, insurers and tech firms see the technology as a way to speed up settlements and cut costs. IBM has 1,000 employees working on blockchain-powered projects. They’ve also set aside $200 million for development. Financial and tech firms invested an estimated $1.4 billion dollars in blockchain in 2016, with an increase to $2.1 billion dollars in 2018. This goes to show that blockchain is more than just a fad. Sorry naysayers.
Blockchain differs from the bank in that if a hacker gets access to the bank’s ledger, they can change account balances, make it look like certain transactions never happened, and wreak even more havoc. This is bad news for the bank and the account holder.
Blockchain could actually be the future of safe transactions, minimizing risk, fraud, and other issues people face when banking and making various transactions.