First let’s look at Blockchain Technology as a player in the Financial Tech (FinTech) industry. FinTech is a disruptive industry, in the fact that its innovation is aiming for traditional financial methods. This industry is using technology to improve activities in the finance world. Blockchain is the driving force behind cryptocurrency. Without Blockchain technology crypto would not exist.
Ok now what is it? Basically, it is a non-changing ledger used for recording and tracking transactions and assets. By assets we mean anything of value from a houses and land, to copyrights, branding and patents. All of these can be tracked and traded with blockchain.
Now let’s break it down into its 3 key elements so that we can better understand the technology, and why so many people feel it is the future. Once you have an understanding of these elements the overall concept of blockchain becomes easier to understand.
Important Note: Keep doing your research, don’t just stop with this article. Keep pushing yourself to learn more.
3 Key Elements
1. Ledger (Distributed Ledger Technology)
You may be familiar with the ledgers used by/for accounting. Think of balancing a checkbook. Its used to record transactions measured by account types, debits, credits, etc. Basically, a book of financial accounts.
For Blockchain technology it is used as a database. This database is shared and synchronized across multiple locations, sites, and people. This database allows transactions to have public witnesses, and that witness is you and the person you’re doing the transaction with. Transactions are only recorded once, and only you and the person your doing business with are witnesses to the transaction in this ledger.
Note: The type of ledgers corporations use is called centralized ledgers and they can be subject to cyber-attacks.
2. Immutable Records
Immutable pretty much means unchanging, locked in place. The records created with each transaction can not be changed or tampered with once it has been recorded to the ledger we mentioned above. The records are locked and can only be seen by the parties involved. Let’s say there was ever an error with a transaction in the ledger. Because this is immutable meaning it can’t be change, the correction is done by creating a new transaction to reverse the error. Once the new transaction is completed, both the new and the transaction in error are visible to both parties.
3. Smart Contracts
Anytime you do official business and make a large purchase there is a contract. Think about when you purchase a house, car, or finance anything large there is a contract that you sign. With blockchain technology every transaction big or small will have a smart contract. Every smart contract is stored in the blockchain database. These smart contracts are executed automatically and instantly.
How Does It All Work Together?
As each transaction happens its recorded in the ledger as a “block” of data.
This transaction shows us the movement. The block of data can record whatever information the creator wants. It can hold the information like amount, who, what, time, location, and condition. For example, it can capture and track of the temperature of produce as it transition from packaging to shipping then to store.
Each block is connected to the ones before and after it was created. As these blocks are connected, they create a “chain” of data. As the ownership of this data changes the blocks confirm and link the transactions. They are secured in immutable records so that they can’t be altered. These transactions are blocked together creating an irreversible chain….get it “Blockchain”.
When it comes to the chain created, now that as each block is created and linked to the chain the chain becomes stronger. The block strengthens the verification of the previous block. This is how the record being recorded becomes immutable. All of this creates a ledger of transactions that networks can trust.
Why is Blockchain such a big deal?
Well, everything in our day to day lives pretty much runs on information. The world we live in continues to push the envelope with innovations. So the faster and more accurate something is, the bigger of a deal it is. Blockchain allows data to be shared immediately and securely. The data is transparent between both parties without any hidden agenda. Once the transaction is complete nothing can change or alter that data in anyway. The technology improves efficiencies in sharing a wide variety of data.
A technology is powerful when it is secure, accurate, and efficient. Imagine how important this technology is and will be in the medical industry as it evolves.
Secure – All transactions and trades are validated and immutable. Not even a system engineer or admin can delete or alter a transaction once its completed. Your Blockchain records are confidential and shared only with those granted access.
Accurate – Accuracy is required form all networks. The data that is received is the exact same data that was sent. The security in the technology provides greater trust against fraud and errors.
Efficient – No longer does ledgers have to be reconciled manually for audits. The transactions are also done at speeds never seen before. Remember smart contracts we went over that are stored and executed automatically on the blockchain.
Continue your growth of knowledge. Blockchain is just getting started, find out how you can be a part of the technology that will change our future.
Life doesn’t stop teaching, so never stop learning.