Recently Bitcoin, and the supporting blockchain technology, has made a splash on mainstream investor consciousness.
While Bitcoin has existed for nearly 10 years, main stream society has ignored cryptocurrency. Bitcoin’s and other cryptocurrencies’ decentralized and deregulated nature caused the slowness in which they have taken stage.
Consequently, no government can control or dictate cryptocurrency which makes investing and financial institutions wary.
The technology supporting Bitcoin, and up until recently anonymously synonymous with Bitcoin, is what makes Bitcoin and other cryptocurrencies work despite existing entirely on the web. Blockchains, public ledgers sitting on top of the internet, are open source transaction records which keep cryptocurrencies running with no governmental support.
What is blockchain technology?
There are complicated explanations for what blockchains are, and then there are simple flowcharts and metaphors. We will use the later for this article.
Let’s say you request a transaction, namely you want to pay WordPress for hosting your website. The transaction publicly broadcasts to a P2P network of computers, and these computers begin solving complicated mathematic equations. In other words, the network begins validating and creating a public ledger saying you agree to pay WordPress. Once verified, the block or transaction takes its place on a line of transactions. The line of transactions, known as a blockchain, becomes permanent and unalterable.
A very simplified explanation, but it serves its purpose. So why is this process making such waves?
The open source and public aspect of the entire process. Rather than having a transaction exist on a private server until pushed to another server, potentially causing variances for a period, the transaction is in public domain and transparent the entire time of processing.
Blockchain is a barter system. Complicated algorithms record the transactions permanently and publicly.
Think of it this way: traditional banks have one human enter information for a wire transfer. The transfer goes in the system, places a hold on the account, pushes the information to another server, and then updates the previous server once receiving confirmation. With individual humans verifying or pushing the data at various points along the process.
With a blockchain transaction, there are multiple verifications occurring simultaneously across the internet. If one computer in the system goes down, there are an unlimited number that were working on the same verification and will confirm.
What’s in it for business?
Businesses function on contracts and transactions. Every piece of business involves either a contract, or record of agreement between two or more parties, or a transaction transferring money, property, or services.
Companies record contracts and transactions as if on paper, saved digitally. The agreement process slows down, and there can be various differing versions of a contract or transactional agreement. Human error can complicate matters.
Blockchain offers a transparent, simultaneous, shared database. Information in a database embedded in code and protected from deletion and tampering.
Intermediaries like brokers, agents, contract lawyers, and bankers would no longer be necessary as the blockchain ensures verifiable and public account of an agreed upon transaction.
Far from the future
Despite the most recent interest in blockchain technology, true adoption is not likely to occur tomorrow. Blockchain is not easily understood, and the suggested business change is a foundational change. Meaning blockchain is not looking to be a UPS to the Postal Service in how to get packages delivered. Blockchain is be more like email replacing phones and faxes in ease and efficiency of business.
Technology changing the way businesses and governments function takes time.
That’s not to say it won’t happen, though. In the 1970’s no one thought communication from one machine to another would be the mode apparatus for 21st Century human communication. Microsoft and Intel are partnering to offer blockchain technology to large companies, set for open source in 2018. Investment groups such as Fidelity are becoming rapid supporters of Bitcoin and other cryptocurrencies.
Although not something to jump on immediately, blockchain is not going away and can offer a whole new horizon of business efficiencies and potential.
The first step for most businesses will be accepting Bitcoin and other cryptocurrencies as a form of payment.