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Bitcoin

What is an Inititial Coin Offering (ICO)?

It’s undeniable that bitcoin and other cryptocurrencies have been turning the financial world on its head in recent years. These decentralized digital currencies are unlike fiat currencies in that they do not rely on a central bank or another major financial institute for their production and credibility, instead making use of a technology known as blockchains to keep track of transactions via a public ledger. Given how unorthodox the entire world of cryptocurrency use and investment already is, it should come as no surprise that those startups tasked with creating new cryptocurrencies are also using some fairly unorthodox methods to raise venture capital. One method that has been swiftly growing in popularity despite regulatory concerns is known as an Initial Coin Offering, or an ICO.

What is an ICO?

An ICO is a largely unregulated method for raising venture capital to get new cryptocurrencies off the ground. It allows startups to bypass the highly regulated alternative of capital-raising through venture capitalists and banks. Instead, an ICO campaign sells a percentage of its future cryptocurrency, known as a token, to early backers in return for either fiat cash or another established cryptocurrency.

The ICO Process

When a firm decides it wants to raise funds via an ICO, its first step is to create a project plan known in the industry as a whitepaper. This document describes what, exactly, the project is about, including how much money will be required to complete it, how many of the new digital tokens will be kept by the project’s pioneers themselves and its initial backers, and how long the ICO campaign is intended to be run. A firm’s whitepaper also lays out what needs their project is intended to fulfill once it is completed and what type of money they will accept in exchange for percentages of its cryptocurrency.  If the firm manages to meet its minimum requirements for getting the project off the ground within the time frame specified in its whitepaper, it will then use its backers’ money to initiate or complete the creation of a new cryptocurrency.

Advantages Over Traditional IPOs

Some financial experts cite this process as being similar to that of a more traditional Initial Public Offering, or IPO, transaction; however, this new means of acquiring venture capital is still largely unregulated, making it potentially riskier than an IPO, which trades shares of the company rather than tokens.  That’s not the only difference between ICOs and IPOs, though. IPOs are designed specifically with venture capitalists and large-scale investors in mind, while ICOs are open to anyone and tend to draw in small-scale enthusiastic backers rather than major players within the investment world.

Unlike the venture capitalists investing in IPOs, those who choose to purchase ICO tokens are not offered partial ownership of either the project or its parent company. They do, however, still stand to reap substantial benefits in the event that the cryptocurrency is successfully adopted within the larger marketplace.

Risks of ICOs

While investing in ICOs can be quite lucrative for those who choose their cryptocurrency startups wisely, the process is certainly not without its risks. Many enthusiastic investors are unaware that the development of ICOs as an investment strategy is still in its infancy, so they will not have the same protections as venture capitalists do when they invest in more traditional IPO shares. In fact, even the blockchain technology itself that lies at the base of all new cryptocurrencies is still in development, which has the potential to leave investors vulnerable to both unanticipated code errors and intentional theft by hackers.

Digital theft isn’t the only thing investors should be worried about, though; ICOs themselves are, as they currently stand, an ideal platform for fraudsters looking to prey on enthusiastic but ultimately ignorant investors. Unfortunately, even legitimate ICO providers are often less than transparent in offering information to potential investors, making it even more difficult for them to distinguish legitimate startups from fraudulent projects. When combined with the fact that tokens are exchanged on specialized trading platforms that are not currently subject to financial supervision, it should be clear that ICO investors face substantial risks even in the event that they choose to invest in a legitimate startup.

International Regulations

The fact that ICOs, as they currently stand in their largely unregulated state, offer a perfect opportunity for those looking to defraud investors has played a large role in some countries’ decisions to ban this practice entirely. China and South Korea have both unequivocally banned the use of ICOs for raising capital and have required those companies that have already completed their funding cycles to refund any fiat currency or cryptocurrency altcoins invested.

Other major players in the international business world, such as Japan, Singapore, Hong Kong, Australia, the United States, and the European Union, are tentatively allowing the use of ICOs despite their risks and are beginning to implement market regulations such as licensing, consumer protections, and designation of altcoins as a security rather than a currency.

The Future of ICOs

ClockWhile critics, including many financial experts and government officials alike, say that ICOs constitute a serious risk to investors and should not be trusted, there are still plenty of proponents of this investment strategy who believe that ICOs are the wave of the future, but only if companies and investors start focusing on blockchain technologies rather than the cryptocurrencies themselves. Given that ICOs are both more cost-efficient and more time-efficient than traditional IPOs, and that they make global investment strategies much more feasible for a larger number of companies, they still constitute a practical means of raising venture capital for startups using blockchain technologies.

The Take-Away

While ICOs currently constitute an extremely high-risk investment due to their current lack of regulation, their future as a feasible method for gaining venture capital still looks bright. Potential investors should be hesitant to jump on the bandwagon today but should keep an eye out for regulatory and market changes that may make ICO investment a far more reliable strategy for moving forward with blockchain technologies in the future.

How Bitcoin May Affect The Worlds Future

Bitcoin is one of the oldest and most widely-known cryptocurrencies. There are no coins to mint or bills to print. It is decentralized, which means there is no banking institution or government in control. Owners remain anonymous; rather than using names, Social Security numbers, or tax IDs, bitcoin uses encryption keys to connect sellers to buyers. Bitcoin is mined by extremely powerful computers, rather than being issued like conventional currency. It involves math, technology, social dynamics, and economics, and although it has been around since 2009, it’s rapidly gaining traction. In this guide, readers can learn about some of the basic concepts of bitcoin while getting answers to some common questions.

The Effects of Bitcoin on the World Economy

During the last few years, bitcoin has rapidly risen to global prominence. In becoming the world’s leading cryptocurrency and a top performer among currencies overall, it has gained an astounding 35% over the past year. However, attaining this level of recognition hasn’t been easy. Bitcoin’s association with crimes such as the narcotics sales and money laundering that commonly occurred on dark-web sites like Alphabay and Silk Road, as well as its high level of volatility, left conventional financial market participants very wary of its risks.

How Bitcoin Has Changed Banking

skyscrapersBitcoin’s potential impact on the central banking system should not be underestimated. The BIS, or Bank for International Settlements, which is owned and operated by the world’s top central banks, observed that Bitcoin could potentially affect their ability to control the global economy and issue currency. As of the time of this writing, many of the world’s central banks are closely monitoring Bitcoin developments. Others, such as the central banks of Ecuador and Canada, have already taken action by creating proposals for issuance of digital versions of their countries’ fiat currencies.

Bitcoin’s Effects on Industry

Bitcoin has recently brought changes to a range of industries as well. Most industries that accept Bitcoins as payment are run online. For instance, Cheapname, which provides domain registry services, accepts payment in the form of Bitcoin. Other online companies like WordPress, which allows users to set up personal and professional blogs, also accept Bitcoin payments. Finally, Steam, a gaming platform, accepts cryptocurrencies as well. Bitcoin’s success has brought it from the online realm into the brick-and-mortar world. Virgin Galactic, a company with a known preference for state-of-the-art technology, research, and development, somewhat unsurprisingly accepts Bitcoin, as does Elon Musk’s Tesla car company.

Bitcoin’s Political and Societal Effects

Along with its benefits, Bitcoin brings a fair amount of political upheaval. As stated before, it is not controlled by any single government or bank. Because it’s a highly individualized type of wealth, and because of the cryptography involved, no state can take away that individuality. As people begin to understand that cryptocurrencies like Bitcoin are advantageous because they’re governed by code rather than by human bias, the political controversy is likely to continue.

Cryptocurrencies’ effects on society haven’t yet been fully realized, nor will they be felt immediately. Despite the rise of digital currency, it is just now becoming mainstream, and many people are still unsure how Bitcoin works. An increasing number of sellers are accepting cryptocurrency payments, and it’s a matter of time until more follow suit.

How Bitcoin May Affect the World’s Future

Most of today’s international and digital transactions use one type or another of virtual credit or currency. Bitcoin is built to provide the same convenience and security assurance afforded by credit, while bypassing additional processing fees and time requirements. International remittances, or payments sent home by those working abroad, are the area with the biggest growth potential for cryptocurrency. As of now, money sent home must pass through several wire services, banks, and currency exchanges.

According to a recent Businessweek study, the average international remittance fee was 9% of the total transferred, with cash conversion costing an average of 5% more. Companies like Western Union work on profit margins of nearly 16%, and many of their costs are incurred because of the technology involved in moving money from place to place and guaranteeing transactional legitimacy. In short, what these companies spend billions of dollars to accomplish, Bitcoin and other cryptocurrencies can do at no cost.

Which Sectors Will See the Most Significant Changes Because of Bitcoin?

Many of today’s financial experts predict that cryptocurrency and blockchain technology will be the biggest disruption since the Internet was created. With the number of industries that can potentially be affected by this technology, it’s easy to see the truth in these predictions. While the financial sector is testing and using blockchain tech to increase operational efficiency and decrease per-transaction costs, other sectors face potential effects, as listed below.

  • Private transportation: The industry will see potential disruption in two forms; the development of eWallets for in-car use, and the advent of decentralized, blockchain-based, peer-to-peer ridesharing. For instance, companies like Innogy, ZF, and UBS are now developing eWallets that allow auto owners to quickly and seamlessly pay for parking, tolls, and electric car charging with the car’s blockchain-based, built-in eWallet. Ridesharing services are likely to increase as a part of the global sharing economy, and basing these services on blockchain tech takes the control away from central third parties. Here, owners and riders can agree on ridesharing terms and conditions via secure, smart contracts. Startups currently building such services include Israel’s La’Zooz and New Hampshire’s Arcade City.
  • Cybersecurity: This has become a popular topic among corporations and individuals as cybercrime becomes more common around the world. In fact, the World Economic Forum highlighted it as one of the biggest risks in the world. Because of its immutable, decentralized nature, blockchain technology can be utilized to prevent the theft of data, because that data is stored using secure, safe cryptography. Furthermore, blockchain tech can be used to build a more secure Internet that’s less vulnerable to distributed denial of service or DDoS attacks. Startups like Nebulis are developing new blockchain-based domain name systems, which can’t be harmed by DDoS attacks.
  • The distribution of music: Today’s music industry will also be affected as cryptocurrency changes the way things are bought and sold. Several startup companies are using blockchain to change the way music is shared and royalties are paid, further disintermediating an industry that has previously been heavily centralized. These companies are building new ways for artists to sell their albums and singles directly to fans, with no need to go through a record label or other distributor. This will create a more open, fair music industry where artists receive direct payment and are able to form closer relationships with listeners.
  • nurses and doctorsHealthcare: The health sector will greatly benefit from the use of blockchain tech. Hospitals and nursing facilities often struggle to securely warehouse and share data, and they regularly fall victim to cyberattacks. Using the distributed ledger method to safely share and store data will improve the security of that data while allowing for more accurate, faster diagnoses.
  • Storage in the cloud: Most sectors are wholeheartedly embracing the concept of cloud storage. However, with the current condition of the cloud, the sector’s users must trust third parties such as Dropbox and Google to safely handle their important data. However, by combining blockchain and cloud storage, that doesn’t have to be the case. Startup companies are now allowing users to share unused space with others for a low fee. This creates a crowd-sourced, decentralized storage solution that’s less likely to suffer from data loss and cyberattacks.
  • Management of the supply chain: This industry is primed for serious blockchain-related changes as it continues to focus on transactions that must be noted in a transparent but secure manner. There are multiple startups working on blockchain-related supply chain management methods.
  • Voting: One of the most significant areas of societal disruption will be the use of blockchain tech for vote tallying and voter registration. As the world saw during the last US presidential election, a process in which the Russians were alleged to have interfered, a publicly viewable, immutable ledger of votes would be a big step toward fairer, more democratic form of global politics. Several startups are trying to hack the democratic process by creating online identity verification and voting processes that use blockchain technology.

Some of the world’s biggest cryptocurrency skeptics are starting to accept that blockchain will play a substantial role in various industries by storing, recording, and sending data in a low-cost, secure manner.

Tips for Investing in Bitcoin

Bitcoin’s exploding popularity has created a significant buzz among investors, traders, and consumers. Low fees, high transaction speeds, increasing values, and other factors have convinced millions to adopt the cryptocurrency as a primary method of exchange. Large trading groups have capitalized on the Bitcoin boom, but in this turbulent environment, dedication and discipline are two requirements for success. Below are several tips to help investors turn that volatility into an advantage.

  • Become a technical analysis expert: Bitcoin’s nature makes it much different from other currencies. As there’s no governing body to affect its value, it’s highly susceptible to effects from outside sources such as news event. Bitcoin’s value model is highly speculative, and it disregards a large portion of conventional financial theory. Understanding how to perform technical analysis is an important prerequisite for entry into the cryptocurrency market.
  • Set a pace that’s sustainable for the long term: As in conventional financial markets, trading isn’t a sprint, but a marathon. One of the most vital steps cryptocurrency market participants must take is to establish a schedule that can be kept over weeks, months, or even years. No one can do their best trading at all hours of the day and night, and the ideal practice is to set a manageable timeline by focusing on optimal trading times.
  • Stay updated: Bitcoin and other cryptocurrencies are unique in that most news events’ effects on the market can’t be predicted. There are no inventory reports or GDP releases to influence pricing and increase participation. However, unexpected happenings can significantly affect the price of Bitcoin, and it’s a good idea to keep an eye on the news feed, just in case.
  • Implement a stop-loss policy: Long-term volatility is a Bitcoin attribute that’s especially compelling to active investors and traders. Valuations can fluctuate by up to 10% each day, which creates ample opportunities for traders who are willing to take a few chances. Whether a trader works in the Bitcoin futures, CFD, or cash markets, a stop-loss policy is essential. It’s important to use a stop-loss somewhere in the market to protect open positions.
  • Use leverage wisely when trading or investing in Bitcoin: While it seems cliché, leverage really is a double-edged sword. It magnifies one’s gains, but it substantially increases their losses as well. If leverage is excessive, an investor is more likely to mismanage their money and lose everything. However, too little leverage can inhibit performance because trades may not always perform to their full potential. In the end, effective management of leverage is a delicate balancing act, but it’s an important one for Bitcoin investors to perform.

An easy way to define a position’s size is to use the 3% rule. Under this guideline, only three percent of the trading account’s total is assignable to each trade. This ensures that the risk matches the reward in regards to stop-loss location and position sizing.

In Conclusion

The world is quickly approaching the ten-year anniversary of Bitcoin, and cryptocurrency, decentralization, and blockchain are continuing to evolve. Cryptocurrency is in a bit of a bubble right now, and like others, the bubble will burst eventually. Surviving currencies such as Bitcoin will become the Amazon, Facebook, Goldman Sachs, and JP Morgan of the next few years, and they may even form the basis of future governments.

As existing players enter the system, they will leverage their power to protect the system from outsiders. Decentralized currencies will become a parallel economic OS for the world, especially in countries that saw the most significant effects of the US dollar’s dominance. However, to accomplish these goals, Bitcoin and other cryptocurrencies have to become indispensable.

Blockchain

What is Blockchain and How Will It Change the Global Economy?

Blockchain is the new buzzword among bankers in the know. For those who are still new to the concept, this article will help explain how the technology works and how it is likely to impact the future of banking. Read on to find out more and learn, how a secure dataroom can be a useful technical basis for a Blockchain.

What is Blockchain?

A Blockchain is an unchangeable, secure, open ledger system. Unlike a conventional bank, everyone on the ledger is able to view the chain’s transactions across its entire lifespan. It is essentially a database that is copied and shared across all of its main users.

When using a Blockchain system, each monetary transaction is represented as one “block” online. This block is then shared using the web with all relevant parties via a closed network. Everyone in the network then approves the transaction, at which point the block is added to the chain and the money is transferred from point A to point B with less hassle.

Although it was initially created to record Bitcoin and other cryptocurrency transactions, the technology has begun to catch on in a variety of other contexts as well. It is moving in the right direction to become more widely adopted by mainstream society in the near future.

What are the Advantages?

Allowing all users access to the centralized database comes with a variety of advantages. The most obvious of these is that everyone has access to the exact same records, which removes the need for reconciliations. It also offers a long-term transparent record for future use.

Distributed ledger technologies can also significantly reduce the amount of time required to settle transactions. Once all of the system’s initial flaws are addressed, it will also add a good deal of security to transactions. As the technology develops, it could result in revolutionary new business models as well.

What are the Flaws?

Blockchain technology is still in its infancy. In order to be universally adopted, the technology will have to be perfect to remove any possibility of external editing.

What Does the Future Look Like?

BlockchainIt is very likely that banks and other financial firms will be the first entities to adopt Blockchain technology. Currently, nine percent of financial services firms are already investing in related technologies. It is predicted that 36% of those not yet actively engaged in investing will be within the next three years.

According to the IDC, by 2020 $45 million will be spent by financial institutions on enabling Blockchain technologies. By the same year, 20% of global trade finance will likely incorporate distributed ledger technology. Financial institutions are not the only businesses that stand to gain from the use of distributed ledger technologies, though.

The PwC recently found that 11 percent of leisure and hospitality companies have already begun to invest in associated technologies. They are joined by 12% of healthcare companies, 7% of energy and mining companies, and 6% of automotive companies. Ultimately, the possibilities are endless.

New Regulations

Because the technology is so new, most governments haven’t yet established set rules to govern cryptocurrency. This allows startups to use Blockchain technology in innovative new ways. However, it also makes more risk-averse businesses less likely to begin implementing their use until more regulations are put into place to mitigate risks.

Some international organizations and national governmental agencies have begun the process of establishing regulations. Japan has already recognized Bitcoin as a legal currency, and various U.S. agencies have begun to establish policies on virtual currency and its use.

Why Invest?

Venture capitalists are already rushing to invest in distributed ledger technologies. Nearly $1.8 billion in investment funding has already entered the market. Forward-thinking investment firms and businesses would do well to consider doing the same.

There are a number of tech companies engaged in improving existing distributed ledger technologies. As they progress in their projects, they will be able to further improve transaction speed and scalability. Those interested in getting in on the ground floor would be well-advised to look into investing soon.

Skyrocketing Demand

The future of cryptocurrency is looking promising. There are few universities that offer relevant courses through their computer science programs, yet the need for developers continues to grow. Experienced engineers are currently commanding salaries of about $250,000 per year, and these numbers are likely to increase to meet rising demands.

The impact that cryptocurrency and distributed ledger technologies are likely to have on emerging markets is almost certain to be particularly stunning. Across the world, developing economies could stand to gain quite a bit from Bitcoin and other similar technologies. The global economy is likely to experience significant changes as a result.

A Few Parting Words

The need for skilled developers and investment capital is predicted to grow exponentially in coming years. Forward-thinking companies interested in investing in Blockchain technologies stand to gain quite a bit as they continue to impact the modern global economy. Find out more about fintech, cryptocurrency, and distributed ledger technologies online today to discover why.

distirbuted ledgers

Distributed Ledgers: Providing Security and Efficiency

Conventionally, accounting information is held centrally and revisions or additions are carried out privately by accounts professionals. But when you are operating across borders and in cyberspace, this kind of system can become a liability, providing cyber-criminals with opportunities and leading to inefficiency. Read also about a virtual dataroom as solution for location independent sales managament.

Distributed ledgers may well be an effective solution to these problems. They take the form of databases which “distributed”. That is, they exist across a network of nodes and are not held in one particular place. Importantly, when the database is changed, every node on the network is notified. So whatever transactions take place, they don’t escape scrutiny.

How do Distributed Ledgers Work, and Why Are They Useful?

distributed ledgers blockchainThe underlying technology in distributed ledgers is based upon the Blockchain, which in turn forms the basis of the cryptocurrency Bitcoin. As with Bitcoin, distributed ledgers combine transparency and security – valuable commodities for all companies.

When a change is made to one node on the distributed ledger, this change is immediately communicated to all other holders in a peer-to-peer network. This means that if a cyber-attacker decided to launch an attack on your transactions system, they would find it much harder to take it down.

Corrupting one dataset or file wouldn’t be sufficient, because all other nodes possess a full record of the network’s transactions. To succeed, cyber-attackers would have to take down every node at once – a tall order.

But security isn’t the only advantage of running distributed ledgers. It’s certainly a major consideration, but other factors are stimulating interest in the technology as well.

Many complex international businesses see distributed ledgers as a way to cut costs and raise the efficiency of their administrative bureaucracy. Just to take one projection, the investment bank Goldman Sachs believes that distributed ledgers could save global businesses $6 billion per year.

These savings would come by reducing the cost of every transaction. With responsibility for managing a firm’s ledger distributed, centralized oversight can be slimmed down, reducing the cost of doing business.

So there are at least two major benefits associated with distributed ledgers. As well as providing security in an increasingly risky business environment, they are seen by many as a route to increased efficiency.

If these projections materialize, or come close to materializing, this is a technology that companies, governments and even (or perhaps especially) charities cannot afford to ignore.

Understanding the Links Between Distributed Ledgers and Cryptocurrency

We mentioned above that distributed ledgers are based upon the Blockchain, which has also formed the basis for Bitcoin – easily the most famous cryptocurrency in the world, but what form does this link take in reality?

Firstly, let’s quickly define what we mean by the “Blockchain“. Basically, this is a database that is distributed across a peer-to-peer network. As the name suggests, the chain is made up of “blocks”, each of which has a specific time stamp. This allows members of the network to know who amended the chain and when.

distributed ledgers dataChanges to the chain are generally not possible on the initiative of a single user. Instead, they have to be accepted by all network nodes in some form. When that happens, the whole chain is transmitted to every node, and the process can begin again.

There’s a good reason why a functional distributed ledger would be based on something like Blockchain.

It’s all to do with trust. In a distributed network like this, every member can see when changes are made. Nobody can fiddle with the data without every member being notified.

Naturally, in some cases, there will be dissent about what constitutes the most accurate version of the ledger. However, distributed ledgers generally work around that problem by specifying in advance what proportion of members need to agree before the chain is approved.

When that capacity to generate trust is allied to efficiency and security against outside interference, it’s easy to see why the technology is causing a stir.

What are the Prospects for Distributed Ledgers Moving Forwards?

At the moment, distributed ledgers are an immature technology. Many of the benefits are hypothetical, rather than real. We don’t yet know how valuable the technology will be for banks, retailers, government departments and aid agencies.

Some doubts have been raised. For instance, trading platforms may not prove practical owing to the demands for data storage about millions of transactions and the speed at which such platforms are updated.

However, there are likely to be many suitable applications. These stretch from registering property claims in areas where property rights are unstable, to mapping solar panel installation strategies, clearing loans and negotiating intellectual property rights for music.

One thing is very real: the excitement about distributed data storage systems. Over the next few years, that hype will start bearing fruit, as distributed ledgers start to solve real world problems. How revolutionary they will be is yet to be seen.

Blockchain Technology

Exploring Technology’s Cutting Edge: Can Blockchain Work for You?

Blockchain TechnologyAs cybercrime and snooping become increasingly common, more and more consumers, business leaders, and private individuals are getting quite concerned about the safety of their sensitive information online. This is particularly relevant when it comes to financial transactions, which often happen in insecure and dangerously transparent digital forums. If you’re dissatisfied with your current online security options, it’s time to become familiar with blockchain technology. This relatively not-so-new technology is gaining major traction in the business world for the myriad possibilities it offers for online security and anonymity. Also interesting: a secure dataroom for safe business transactions.

Blockchain Basics

What is blockchain? As with all complex technology, it’s difficult to give a quick, simple answer. Further complicating the linguistic distillation of the concept is the fact that this is a truly international technology that has been developed, altered, and defined by different people across the globe. Plus, translating complicated computing concepts into plain English can be quite difficult. Chances are that if you’ve heard of blockchain before and tried to read about it, you’ve walked away somewhat confused. Essentially, a blockchain is a database that’s used to create and store a series of chronological records relating to a specific item or event. The blockchain is often mentioned in the same breath as Bitcoin because it’s the technology used to track Bitcoin digital currency as it is spent, sold, or traded.

Bitcoin

The name “blockchain” is descriptive. These databases are a series of digital “blocks,” each of which is distinguished from the blocks ahead and behind in the chain through the use of timestamps. One great thing about this structure is that it’s nearly infinitely scalable, making it suitable for a variety of complex tasks. This recordkeeping system is also designed to be extremely secure and resistant to tampering, making it a top choice for a variety of different situations in which anonymity, protection, and integrity are at a premium.

Part of what makes blockchains so secure is that they can be decentralized, meaning they aren’t linked to a central authority or manager that’s responsible for overseeing the security of each record. This means that cybersecurity attacks in which millions of users’ data becomes compromised are highly unlikely with a blockchain. It also means that if one node in the network of databases stops operating, the entire system can continue operating. Blockchain applications that use this decentralized approach are known as decentralized applications or DApps.

Diving Deeper

Blockchain technology can trace its origins to the early ‘90s when developers worked on creating discrete records of cryptographically secured information they referred to as blocks. The goal was to create distinct data structures that could be kept private and secure through the use of encryption. The concept really took off when the digital currency Bitcoin was first under development. The anonymous cryptocurrency designer known as Satoshi Nakamoto needed a way of creating timestamped records to show the details of financial transactions. Thus, encrypted blocks were linked into a chain, and blockchain was born. Of course, this simple overview doesn’t even begin to scratch the surface of what blockchain technology is, how it works, and what it can do.

It can be helpful to compare and contrast blockchain with other digital technologies in order to understand its potential. One common analogy comes from journalist Sally Davies, whose comparison between blockchain/Bitcoin and the internet/email is frequently cited by those attempting to give a basic, beginner-friendly overview of the blockchain. Essentially, blockchain is to Bitcoin what the internet is to email. That is, just as the Internet can be used for much more than email, the blockchain technology that supports Bitcoin transactions has many potential applications beyond mere cryptocurrency exchanges. Limiting our Internet use to email only would be a mistaken waste of technological potential and, so the analogy goes, it would be a similar mistake to limit our use of blockchain technology to cryptocurrency transactions alone. Bitcoin is just one blockchain technology application out of potentially thousands.

In the context of this analogy, though, it’s important to note that there are some essential differences between blockchain and the Internet. One major difference is that the Internet is a communications network, while a blockchain is a database of information. On a very high level, the two technologies function in a theoretically similar way, but blockchain isn’t a replacement for the Internet as we know it. In fact, blockchain is more of a function of the Internet, like email, than a standalone communications network. At this point, you’ll need an Internet connection of some sort to access a blockchain.

Think of it this way: There’s only one “big I” Internet that the average person use, but there are multiple different blockchains. You can create intranets and extranets, but when you’re talking about “the internet,” you’re talking about the network that uses TCP/IP protocol that you can access with a connection through an Internet service provider (ISP) like Comcast, Charter, or CenturyLink. You can also have “a blockchain,” referring to any distributed database of a specific type, but when you’re talking about “the blockchain,” you’re talking about a specific company or application’s database. Blockchain technology in its current form is strongly tied to Bitcoin, but it’s not the only blockchain that exists.

The Ledger: Blockchain’s Public Face

Blockchain’s Public Face

So, as an encrypted, decentralized, tamper-resistant database, blockchain is a completely opaque, shadowy world, right? Well, not exactly. Privacy and data security are top priorities, but there’s a degree of transparency involved in the standard blockchain. Bitcoin is actually a great example of this; you can see when Bitcoin transactions happen in the blockchain wallet. You just can’t see specific information about who was involved with a transaction.

Tech experts often describe blockchain technology as a “decentralized ledger,” with “ledger” being the operative word in this situation. A ledger is a record, and that’s exactly what a blockchain is. Data integrity is central to the blockchain concept. Each of the blocks in a blockchain serves as a record for an event and to go back and alter those events is next to impossible. If you want to go back and alter part of an agreement, for example, you’d need to add a new record stating that the change was made rather than going into the original record of the agreement and changing the terms. These features make trustworthiness an element of operation in blockchain technology, which is a somewhat unusual feature for this kind of tech tool.

The idea that there’s a degree of integrity, trustworthiness and public transparency associated with the blockchain concept may come as a surprise to some. If you don’t know a lot about Bitcoin, you may be wary of the association of a technology with currency that was hyped as a way for criminals to get paid online. This isn’t a fair characterization. In short, blockchain and cryptocurrency are not the sole provenances of criminals.

Though it can’t be denied that the anonymous, decentralized nature of blockchain technology makes it alluring to black market types, Bitcoin trading, much of which is carried out with blockchain wallets, is becoming a legitimate financial market of sorts. As of this writing, Bitcoin price is has skyrocketed, indicating the minting of some major financial players. Plus, the public ledger doesn’t lie. As mentioned earlier, it’s difficult—if not impossible—to alter the record of a blockchain. The participants in the transaction may remain anonymous, but the transaction itself typically is not.

All of this points to some highly disruptive potential for blockchain technology in the financial sector. It’s important to remember that blockchain is not proprietary to Bitcoin and that means there are lots of other ways to use this technology for financial transactions. At this point, blockchain is still a relatively inside-baseball topic in tech, but you can count on that changing in the coming years. Blockchain may even represent the future of banking. Blockchain wallets are streamlined and secure in a way most modern banks are not, which could be broadly appealing to consumers if they’re introduced to the technology in the right way. Also of potential appeal to consumers is the fact that participants in a blockchain transaction have equal status with respect to information access. This would put the customer on the same informational footing as a financier when monetary transfers are being made.

Other Uses for Blockchain Technology

Transactional financial applications aren’t the only way blockchain is set to shake up the way we do business and access personal information. The blockchain wallet is certainly useful, but that’s just the tip of the iceberg. There are already some interesting applications for blockchain being put in practice right now. One blockchain-based Bitcoin alternative is the cryptocurrency competitor Ethereum, which took the technology a step further by allowing computer programming code to run from its databases. As a distributed public network, Ethereum is becoming a playground of sorts for developers who want to build DApps of all sorts, not just those relating to cryptocurrency. This is a highly promising development that shows how powerful a blockchain can be.

One highly vulnerable area that blockchain technology can improve is the storage and retrieval of medical records. As our personal health histories are digitized, many people simply take for granted that their doctors’ offices are doing the right thing and protecting personal healthcare information in a reliably secure manner. Unfortunately, though, this is often not the case. Hospitals are major targets for cybercriminals looking to perform massive medical identity theft hacks, and the implications of these attacks are frightening. Medical identity theft exposes its victims not only to the stress, hassle, and financial ruin of traditional identity theft but also to potential criminal charges. If the person who steals your medical identity uses it to try to scam dangerous prescriptions from doctors and breaks laws relating to insurance fraud using your name, you could be in serious trouble. All of the blockchain’s powerful encryption, privacy, and decentralization abilities can revolutionize the way we think about protecting, sharing, and housing records of our healthcare.

In essence, anything that involves recordkeeping can make use of blockchain technology. As consumers become more concerned with what’s in the products they use, companies committed to transparency can easily use blockchain to automate supply chain transparency and make each step in the manufacturing process available to their consumers. Blockchain may even have a role to play in the future of elections, providing the right balance between privacy, integrity, and transparency.

Smart Contracts and Modern Labor

One last example of blockchain’s potential to disrupt all aspects of our lives: Smart contracts. A smart contract is essentially a computerized agreement between two parties that makes the execution of that agreement dependent on specific conditions. For example, if a small business owner hires a graphic designer to create a logo for a rebranding effort that business owner and the designer could enter into a smart contract stipulating that $250 will be paid out upon the successful completion of the job. The business owner puts $250 into a blockchain wallet, which is then held by the blockchain application until the designer submits the logo and asks for funds to be released, which the business owner will do after agreeing that the job has been completed in a satisfactory manner. It’s quick, easy, secure, and possible without a middleman.

Business leaders in all fields should be particularly interested in the opportunities presented by smart contracts, a blockchain application that automates and digitizes contractual agreements for the sale or exchange of goods and services. One major reason is that smart contracts can easily cut out middlemen in the gig economy. Companies like Uber, Airbnb, Ebay, and even the Amazon seller marketplace may find that their contractors and merchants are fleeing in order to use peer-to-peer blockchain networks to conduct business directly with their own customers. Why pay a user fee when you can do business directly with a service provider?

Clearly, blockchain is a force to be reckoned with and it’s going to have a growing influence in all areas of business in the years to come. Stay on the lookout for news about blockchain, and as you make hiring decisions in tech positions, be mindful that those who are in the know about blockchain are likely to deliver value in the future.

Smart Contract Technology and the Future

Smart Contract technology has come a long way over the years. However, many people remain unaware of this technology or have heard of it, yet fail to understand what it can accomplish through the use of computers. What are smart contracts? How do they benefit individuals and organizations? What is the future of this technology? Can a secure dataroom be useful within this technology? These are only some  of the many questions one may have when they hear the term Smart Contract, and there are numerous others.

What Are Smart Contracts?

Wouldn’t it be nice to eliminate the middleman when conducting a wide variety of transactions? Smart Contract technology allows users to do exactly this. With this type of contract, assets can be exchanged with no need for a middleman, and the transaction is completely transparent and conflict free. They are similar to other legal agreements in that they establish the rules and penalties relating to the arrangement, but they also enforce these obligations.

How does this differ from a traditional agreement? Smart Contract technology allows the terms of the agreement to be written into computer code, and the code and agreements are maintained in a distributed, decentralized blockchain network. Originally created for bitcoin, the technology is now used for a variety of other purposes. Any transaction a person wishes to complete without the help of the legal system, some type of external enforcement mechanism or central authority, may be carried out with the help of this technological advance.

Case Studies

smart contract

Smart Contracts are able to strenghten the communication inside a company.

The Depository Trust and Clearing Corporation opted in 2017 to make use of Smart Contract technology to process in excess of $1.5 quadrillion in securities. Doing so helped to save the organization money by reducing communication problems and improving workflow. Independent processing discrepancies were eliminated, thus minimizing the risk of expensive lawsuits and delays in settlements.

In the past, financial institutions invested a great deal of time and manpower in handling customer accounts. Smart Contract technology helps to reduce the burden by taking on certain tasks, such as transferring payments to other financial institutions when they arrive at a bank and logging any change of ownership. Barclays Corporate Bank is now making use of this technology to carry out these processes and saves time and money by doing so.

The Future Of Smart Contract Technology

Individuals will find this technology being employed more frequently as individuals and organizations learn more about the benefits of using it. Experts predict it will take on routine tasks, such as risk assessments and real-time auditing, for credit companies, certified public accountants, and merchant acquirers, among others. Lawyers benefit from Smart Contract technology and will be able to make use of templates to produce contracts as opposed to writing them. Healthcare, the automotive industry, and real estate are other industries that may be impacted by smart contracts. It’s only a matter of seeing how far the technology can go and in what time frame.

The cost savings an organization can achieve by making use of the technology will benefit other industries too. No third party is needed in this situation, thus the risk of manipulation is eliminated. Documents are encrypted on a ledger shared by all parties in the transaction, which ensures no contracts are lost and less time is spent manually processing documents. Furthermore, human error becomes less of an issue as the contracts are all automated.

Smart Contract is a term every individual should know thanks to the anticipated expansion of this technology in the future. A person may find the way they conduct business changes as a result of this technology, for example. Although the process behind the creation of these smart contracts may confuse many, the benefits are easily seen. Individuals need to keep this in mind and embrace these changes. The technology is not going away any time in the foreseeable future and may never do so.