Blockchain is a technology that mixes cryptography and decentralized peer-to-peer exchanges with the potential to improve the efficiency of worldwide financial transactions and to transform the global financial network. The three key blockchain features are: transparency, decentralized structure and multi-signature. The most emblematic blockchain-based product is the bitcoin, described in 2009 as a peer-to-peer network to generate a ‘system for electronic transactions without relying on trust’.
Any blockchain network is based on a unique cryptographic algorithm and protocol that allows secure and direct digital transfers of value and assets (such as money, contracts, and stocks, etc.), via open or closed networks that are backed by exchanges. While traditional ledgers are owned and maintained by one institution and access is restricted, a blockchain is hosted on a worldwide peer-to-peer network of computers to verify and validate batches of user transactions via a mathematic, cryptographic process. Once verified, this new block is added to the existing blockchain distributed ledger as a permanent database entry.
Blockchain and Bitcoin
There is no doubt that we are moving from a single cryptocurrency focus (bitcoin) to a variety of cryptocurrency-based applications, built on top of the blockchain. Before blockchain technology moves to widespread usage, concerns about scalability, costs and security however need to be overcome. The financial industry recognizes the potential of blockchain technology to fundamentally change the way the industry operates, with a strong use case for payments. This new technology could accelerate the velocity of money and provide a path for legacy banking systems to interoperate, thus greatly improving efficiency.
Blockchain technology has attracted interest from central banks, financial institutions and technology firms, who are investigating the opportunities and challenges in using the technology. Overall and beyond financial applications, the blockchain technology could pave the way to the ‘Internet of transactions’, thus changing up the way capitalism is currently running…