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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.

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.

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.

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? These are only three 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.