There are certain technological advances in history that have dramatically changed the way most people live. The invention of the telephone, automobile, airplane, radio, television, and the internet easily come to mind as game changing advances in recent human history. But there are often technologies that are developed which may not appear as profound initially to the general public. Yet, they have monumental significance in ways that become apparent years later. One of these advances is the development of blockchain technology.
Blockchain is most commonly understood in the context of cryptocurrencies. It functions as a decentralized public ledger that maintains a record of all transactions across a network of third parties, known as peers. Each time someone buys or sells a cryptocurrency, like META 1 Coin, a block of encrypted data representing the anonymized transaction is broadcast across the peer to peer network. A series of computers connected to the network, known as nodes, validate the authenticity of each transaction according to an algorithm.
Once a transaction data block has been validated by multiple nodes, it is deemed valid and added permanently to the prior chain of validated data blocks/transactions, namely the blockchain, without the need for a central authority such as a bank. This system accomplishes three important functions: it is transparent, decentralized and permanent.
The fact that all transactions can be publicly viewed by anyone in an anonymous blockchain provides trust through transparency. Since no one party controls the blockchain in its decentralized form, no one can seize control. It isn’t possible to edit validated transactions, so there is no way to alter information to suit anyone’s needs. This provides confidence through permanence of data.
This system decreases traditional risks associated with placing one’s money in a bank or invested in a company. With many anonymous third parties validating anonymous data, there is no chance of any one person or group of people controlling and manipulating the system. The encryption of data also protects the identity of people and data involved.
This decentralized system reduces time, costs, and human errors, since there is no need for a transaction processor between data and servers. This highly efficient and automated system processes transactions reliably and continuously across a global network.
The publicly available ledger information also makes it easier to keep track of transactions in one chain of validated data. The numerous virtues of blockchain technology are being considered for many other transaction-based purposes beyond cryptocurrency. Banking, voting, managing healthcare records, real estate transactions, legal documentation and government benefits distribution are just some use cases that may emerge with blockchain capabilities in the years ahead.