Several years ago, possibly at the turn of the 21st century, an anonymous person or a group of persons under the name Satoshi Nakamoto propounded the idea of bitcoin. Not much is known about this mysterious person except that he is of Japanese origin and has been working on the bitcoin project since 2007. This unknown person or persons also devised the first blockchain database as a part of the implementation of this new digital currency. Maintaining of blockchain database resolved the double-spending problem of digital currency, making it fraud-proof.
Bitcoin is a cryptocurrency or a digital asset designed to work as a medum of exchange for conducting commercial transactions. Cryptography is used in the creation and management of such digital assets, without relying on any central authority.
Some skepticism concerning bitcoin as a digital currency still persists and it has not become a mainstream currency yet. But blockchain, the underlying technology, has now become the buzzword in IT circles. Blockchain, the technology company headquartered in Luxembourg, provides the software platform for digital assets. It offers products that strive to advance the frontiers of blockchain technology.
Time magazine featured the story of internet on its front cover sometime in 1994 as some sort of a ‘dark net’. The astounding capabilities of internet that we see today were beyond anyone’s farthest imagination at that time. Two decades later, around mid-2016, the bitcoin and underlying blockchain technology too stare at the same dark and uncertain future.
Blockchain, supporting the bitcoin or digital currency, is nothing but a distributed ledger that allows transparent recording of permanent and immutable data concerning all kinds of transactions having real-time value, specifically the financial transactions such as a person sending payment to another without the intervention of any intermediary.
Thus, Bitcoin is the starting stage for an astounding digital future where everything of value can be traded or exchanged in a fraud-proof digital format, much faster and at the miniscule fraction of the conventional cost. Even the central banks of nations will gain from Bitcoin experience to build digital assets backed or authenticated by them.
The Essence of Blockchain Technology
The blockchain is an internet-based technology that has proven its ability to publicly record, validate and distribute all kinds of transactions, financial or otherwise, in encrypted and immutable ledgers. This technology was primarily invented to support transactions in digital cryptocurrency, such as bitcoin, that operates independently of a central bank. Essentially, the blockchain technology provides the platform for creating a distributed ledger to record every bitcoin transaction in a multitude of computers interlinked to networks all across the globe.
Because of the encrypted nature of these transactions and ledgers, the blockchain technology offers much more security than any banking model. Besides, the blockchain technology eliminates the banking systems’ slow process and huge costs of effecting money transfer from one account to another.
When internet finally took off on a grand scale, several companies took the similar path through intranets for internal connectivity. These intranets became part of a bigger ecosystem when they got plugged into the public domain. Thus, they allow the individual members of the businesses to interact with one another internally and with the public at large through a collaborative process of intranets. Same way, the private blockchains will fit into the public ones in the next stage of global blockchain revolution.
Increasing Use of Bitcoin by Common People
The current financial system serves well for common as well as financially well-placed people. But that does not mean that it is a good system. The current financial system does not serve almost one third of the global population. Even among those who use the current system, a sizeable portion of them is underserved by it. Moreover, those who use the current financial system, do so at a tremendous cost with avoidable hassles.
For example, a remittance of $200 from the United States to Philippines would cost about $12 under the current financial system. However, the same cross-border transaction can be done through the medium of Bitcoin, just at the cost of a couple of pennies or less than one percent of the cost otherwise.
The big banks across the world can use the Bitcoin model of financial transactions much more cost effectively. In fact, there is not a single industry in the business world that would not be touched by this new technology in the near future. The amazing scale of the future possibilities of Bitcoin and the underlying Blockchain technology are hard to predict at this moment. Could anyone predict the widespread popular use of Facebook at the advent of internet a couple of decades ago? The new technology unleashes tremendous power and freedom to ordinary individuals. It allows common people to own and transact assets at their own terms and value in digital formats.
The blockchain technology was initially created to support bitcoin transactions. But it has now unleashed its potential to transform the entire financial sector. It has proven its potential to turbocharge the profitability and effectiveness of most of the businesses.
Blockchins can do much more than mere transactions in digital currency. The blockchains can give unique identities to the members of floating populations such as refugees. Blockchains can give permanence and immutability to property records. When an earthquake occurred in Haiti (a small island state in the Caribbean Sea) a few years ago, most of the land records of the country stored in a single building got destroyed. Overnight, Haiti became a chaotic nation of lost land titles. Blockchain technology can prevent the occurrence of such situations by providing permanent and immutable property records.
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