Blockchain could potentially be the future of all future business transactions. But what is blockchain and what’s the big deal?
What is blockchain?
Put simply, it is a method of recording data. In effect, it is a digital ledger of agreements, contracts, and transactions that is distributed across many thousands of computers all around the world. Everyone who is a member of this network can have access to a current, real-time version of the ledger, making it totally transparent.
How does blockchain work?
The digital records to be included in the ledger are bound together in chronological blocks to form a ‘chain’ through the use of complex mathematical algorithms. Each block of data has its own unique digital signature.
The ledger cannot be altered, only added to, making it totally tamper-proof, completely secure, and much more difficult for hackers to attack.
In the event that the original transaction or document was altered, its digital signature would be completely different, immediately alerting the network to the mismatch. This makes blockchain pretty much fraud-proof and much more secure.
Why are banks so interested in blockchain?
At present, banks use computers to store client data and to keep track of who has what. However, it is difficult, complex, and expensive to get the computers to communicate with each other. Blockchain technology would remove the middlemen from the process, speeding up the process and reducing costs.
A transparent ledger would also be very useful for government regulators, helping to combat tax fraud. Although it’s still early days for this new technology, 11 banks globally have already taken part in a trial.
How could blockchain technology change business transactions?
Blockchain technology and the use of Bitcoin instead of cash would enable businesses to trade securely right across the world in the time it takes to send an email or a text. A hacker-proof environment would make online trading and the sharing of client data much safer, leading to increased client confidence and a healthier business environment.
Although this new technology is still in its infancy, it appears that its influence on the way in which firms do business in the future could be profound.