If you haven't heard of the blockchain yet, get ready to hear it discussed with much greater frequency, especially as it begins to permeate various elements of your everyday life. Most people refer to the blockchain in conjunction with Bitcoin, as it's the technology that made this world's first "crypto currency" possible, but there are much more sophisticated and relevant ways that blockchain technology is starting to shape our world.
The Basics of Blockchain
So what is the blockchain, anyway? The real technology driving blockchain is pretty complicated, but the high-level concept is simple. Today, most transactions are tracked using some kind of ledger; a consumer might keep track of his/her purchases in a budget spreadsheet, while a company might have a more complicated general ledger to track expenses.
The blockchain relies on an entire community of synchronized ledgers, operating on different individual devices, to publicly record transactions. These separate ledgers use consensus processes to note any discrepancies, dynamically generated cryptographic hashes to detect fraudulent adjustments, and digital signatures to protect user identities.
The Benefits
So why is a series of public ledgers, working together, better than the old-fashioned method of recording transactions?
- Tamper-proof recording. Today's economy is largely digital, with hundreds of ways to make money online available to anyone with an internet connection. Billions of dollars are exchanged on a daily basis, so it's more important than ever to protect users against fraudulent activity.
- Built-in handling of complaints or disagreements. If two ledgers don't agree with each other, they can look to other ledgers in the blockchain to resolve a dispute. Because of this, any issues with a transaction can be quickly and automatically resolved.
- Public nature. Don't let the name "public" fool you; cryptographic hashes still keep the nature of your transactions private in the blockchain. However, all recordings are publicly available in the sense that other ledger copies can view each other's activities, ensuring greater honesty and accuracy.
- Decentralization. It's also worth noting that there's an advantage in decentralizing ledger-keeping processes; by some estimates, banks could save up to $12 billion per year with this technology.
Upcoming Applications
That all sounds neat, but how is the blockchain actually going to change your life? There are actually a variety of different applications that exist for blockchain technology:
1. Crypto currencies galore.
It's unlikely that there will be a flood of different digital currencies that enter the market, since user valuation is so important to crypto currencies' survival, but it's equally unlikely that Bitcoin will remain the world's only digital currency. Expect crypto currencies to expand and become more commonly accepted throughout the world.
2. Safer financial transactions.
You can also count on most of your financial transactions being safer, once blockchain is further integrated into our current financial systems. Blockchain protects other users from spying on your transactions and simultaneously prevents any possibilities of fraudulent tampering.
3. Better file storage.
Blockchain isn't just for financial transactions, either. Many companies are experimenting with different potential uses for these mutually accessible, digital ledgers, including file storage. Think of an application like Dropbox, but with better encryption and almost zero risk of tampering.
4. Voting.
If there's any area as important to protect from tampering as individual financial transactions, it's voting. You may not think of voting as a transaction-based process, but it can be reduced to that functionality. Considering the allegations of voter fraud that arise every election cycle (and the embarrassingly underdeveloped forms of voting technology that exist in the polls), it's time we instate something with better security standards.
5. Identity management and protection.
Finally, blockchain could be used to protect your digital identity in a number of different ways, not limited to financial transactions. For example, you could keep your social media information safer, or exchange encrypted messages with your friends and family members without worrying about it being compromised. Any sources of tampering or listening could feasibly be traced back to their source.
It's important to remember that despite its potential upsides and current applications, blockchain technology is still in its infancy. It has room to grow and evolve, and it will probably be several years before enough of the population is on board to make blockchain transactions the norm. Still, it pays to be on the cutting edge, so watch for new blockchain developments and ride the wave early.