Major banks, McKinsey and even Walter Isaacson are calling blockchain among the hottest of 2016’s tech trends; but what is it and if you aren’t a tech nerd should you care?
What is Blockchain? In two words, trusted transactions. At a basic level, the blockchain is a database where all transactions are confirmed in a matter of minutes, by complex math. One step further, it’s a database that is typically controlled by no single entity but that can still reliably track the exchange of assets, thanks to the computer run algorithms.
Why is this cool? It saves those trading assets time, money and hassle. The core of blockchain technology is a shared database with a consensus model that removes unnecessary intermediaries (think clearing house for banks) and therefore creates efficiencies. Adios, clunky middleman.
Who controls it? In a public blockchain, no one does. Not the government, not your bank, not your insurance company. A public blockchain is a shared, trusted and public ledger that everyone can inspect but which no single user controls. However, the concept of a public vs. private blockchain does exist. Private blockchains have become an important topic of debate as banks and businesses address safety and privacy concerns.
What’s driving the current blockchain craze?
1. Given the potential to lower costs, speed-up transactions and improve security and trust the blockchain is drawing massing amounts of capital.
2. The application for blockchain tech is huge. While it all started with bitcoin, there is the potential to track the exchange of anything that carries value: stocks, bonds, financial securities, houses, cars, gems, art or even personal identification documents.
3. 30+ major companies including JP Morgan, IBM, Wells Fargo, State Street, Intel and the London Stock Exchange have joined together to build an open-source blockchain framework. Overseen by the Linux Foundation, this open source project aims to bring increased automation and transparency to financial markets and exchanges. This has the potential to save tens of billions annually.
5. Let’s stick it to the man. Blockchain provides a more reliable, transparent and automatic way of exchanging assets. Similar to sending emails, you can trade them without putting your trust in any one organization.
So, you don’t work at a major bank and certainly don’t own any bitcoin, should you care about blockchain? Yes, the global need to erase middlemen and increase efficiencies are endless. Think voting, international payroll, auto deeds, notary services, land transfers. The possibilities seem endless and compelling.