What Is Blockchain and Where Will You See It Used?

July 4th, 2016

Fintech // Mykola

What is blockchain

Analysts say that 2016 will be the year of the blockchain, the year when it will penetrate all areas of our lives. More and more experts claim that this technology is as significant as the emergence of the Internet, social networking, e-money, and world wide web in general. Blockchain will change the way we do business life - from agriculture and medicine to banking services and education.

WHAT IS BLOCKCHAIN?

The name itself has a part of the answer to that question - it is a data blocks chain, built according to certain rules. Every unit is connected with the previous one and when new data is added, it goes at the end of the chain.

Blockchain is a means of storing data, or in other words, a principle of forming a database. Such database can store any kind of information - products, banking services, real estate agreements, any deals or financial transactions, etc.

The database has certain traits and peculiarities. First of all, this base is distributed: it is not stored on a single computer, but rather on different computers that belong to blockchain participants. Typically, each computer contains the entire set of all data blocks, but one can set it up so that only certain blocks are stored on one’s device. Because of this, breaking a blockchain is virtually impossible - one needs to break all computers down or make them all inoperative. Another thing is that blockchain technology is not tied to a geographical location and can unite people from different regions and countries, which is another hurdle in attempting to break it.

What does this all mean?

This means that data recorded in a blockchain don’t have to go through verification. This approach radically changes the existing relationships, for example, between people and the government when a person gets documents or their copies or makes money and keeps them in a bank. There’s an entire “army” of people whose only job is to make copies of certain documents, verifying their authenticity with seals. At the same time, there are a million ways how those documents can be falsified. Blockchain tech will combat those ways.

At first, blockchain was used in cryptocurrency system, and in particular, Bitcoins. Blockchain kept the records of financial transactions - how much virtual money was transferred or paid for certain services. The fact that blockchain records cannot be falsified raised the credibility of such currency.

Blockchain data, besides being impossible to counterfeit because of their closed structure and formation principles, has content that is open to all. This means that other people can check any unit to see its contents and verify the accuracy of the information or how it changed. This eliminates the need to authenticate information by other people. A person can check the contents himself and get the answer regarding the reliability.

Blockchain structure and ideology of such storage method eliminates the need for intermediaries, supervisors, and auditors to address various issues. Now you do not need to monitor the integrity of the bankers or insurance companies, you don’t need notaries to certify the authenticity of purchase/sale agreement. There are no privileges in a blockchain which means no one can alter the data reliability, making blockchain both desirable and dangerous technology.

WHO IS INTERESTED? (AND WHO’S NOT)

Blockchain technology has been examined extensively, especially by banking organizations. Last year, several large banks (Goldman Sachs, JP Morgan, Credit Suisse, and Barclays) have united in a consortium called R3 to study the effect of blockchain on traditional business and the subsequent implementation of this technology into the modern banking system. The bankers plan to store payments, credits, and financial transactions data using blockchain.

At the same time, there are opponents of the technology. Rand Corporation research center published a report called “The Value of Virtual Currency for National Security” where they call blockchain tech a “tool for terrorists” and claim that its use will threaten the US national security. To support the theory, the study authors used the example of Silk Road trading platform that was used to sell drugs, personal data, and perform other illegal operations.

SWIFT (Society for Worldwide Interbank Financial Telecommunication) also isn’t too happy about the technology and repeatedly pointed out the dangers of using blockchain and mutually distributed ledger systems as a whole in the banking system. (However, it looks like they are warming up to it after all.)

Blockchain will change the traditional way of life not only in the banking environment. For example, any Internet transaction may be considered valid if formed in a blockchain environment. No need to come up with digital certificates or antivirus software scans for incoming messages, and, if one thinks as a futurist, there’s no need to check facts about one event or other, because at least the author of the publication can be established unambiguously.

BLOCKCHAIN IN PRACTICE

A decentralized platform for developing applications - Ethereum - is based on the blockchain. Ethereum is also called a platform for the “smart contracts” creation, which can be implemented in different programming languages. It has been named “a new era in financial relations.”

Blockchain technology also found its application in public relations as a Bitnation project. It takes over the state functions, for example, storing data about people, their relationships, ownership rights, and more.  

Our next Blockchain blog post will focus on the projects that use the technology already and how it will develop in the future. Subscribe to our blog to get more articles about this and other technologies and IT news.

Author: Mykola

Having worked in IT development field as a Software Engineer, Team Lead and Head of IT department for a long time, Mr. Slobodian founded Grossum in December 2013, gathering a passionate team of professionals who together work on developing a better future. Since April 2017, Mykola is the CEO of the APP Solutions web & mobile development company that has acquired Grossum. Mykola Slobodian has participated in many IT events as a speaker. Audiences varied from first graders to IT-oriented teenagers to attendees of IT conferences. He holds a Ph.D. in Physical and Mathematical Sciences, which helps him find solutions to all kinds of IT challenges, including the Internet of Things.

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