For those of us who've been in payments for a long time, the blockchain concept might land far outside the box. After all, a system that uses a shared, transparent database of cryptographic nodes and blocks to calculate, authenticate and monitor transactions - versus relying on the stability of third-party validation, time stamping and transmittals – sounds a bit farfetched. Yet some experts are predicting today's blockchain phenomenon holds as much promise for worldwide disruption as the Internet did in its early stages.
"You should be taking this technology as seriously as you should have been taking the development of the Internet in the early 1990s," a former banking executive, turned blockchain evangelist, told one audience.
Why is this fairly new platform employed by digital currency being heralded by so many? Some say it is the technology's transparent, open loop infrastructure. Others claim its flexibility and potential for diversity have opened up a new world of possibility for inventive commerce applications. Some point to its decentralized methods for validation and data storage, asserting it will be the catalyst for breaking down legacy financial and government system barriers.
Indeed, even the banks themselves are looking to blockchain technology for revolutionizing both internal and external processes. A Nov. 1, 2015, article published in the Financial Times stated, "Banks are now racing to harness the power of the blockchain technology, in a belief that it could cut up to $20 billon off costs and transform the way the industry works."
Many are aware of blockchain as the platform used for the exchange of bitcoin currency. And, it was bitcoin's success that ultimately put blockchain technology on the development map as a viable alternative for transacting business.
What may not be as widely known is how many others have deployed a blockchain framework to facilitate transactions, with several pursuing adaptations of the bitcoin protocol to fulfill a specific or even unconventional purpose.
Since a blockchain is built of decentralized nodes that operate under independent rules, nodes validate transactions offline and then broadcast ledger entries without disclosing sensitive information. This eliminates the need for a central database, or a middle man time keeper, which reduces several potential vulnerability points in the transaction. The information flow is also streamlined and easy to manage, giving blockchain technology universal appeal for handling various business needs outside of traditional transactions.
For example, blockchains have been used for distributing domain names, administering crowd-funding campaigns, deploying real-time ride sharing and even tendering online tips. In addition to exploring blockchain platforms to handle securities transfers, many banks have also created their own closed circuit blockchain payment systems, and governments are even looking into the use of blockchains to manage properties and oversee licensing.
Indeed, anything that can be exchanged could be managed through a blockchain. Redeemable assets, such as those predicated by contract fulfillment, can be programmed into a blockchain and deployed once the deliverables are validated within the chain. Multisignature account services for asset protection, estate planning, dispute resolution, leasing and corporate governance are also examples of functions that can employ blockchains.
Given the potential of blockchain technology and its propensity for diversification, it has become an appealing infrastructure among developers. Several development companies are already partnering with government entities, financial institutions and the like, to implement innovative blockchain-driven applications and revolutionize age-old manual systems for managing data, tracking activity and authenticating assets.
Predictions now have blockchains integrating even further into the social and economic framework of the world. Because of its transparent architecture, as well as efficient reconciliation and audit trail capabilities, some see it being used to deter government corruption and combat fraud.
A recent CoinDesk article forecasted blockchain technology will become "the de facto standard for audit and compliance." Abdi Dobhal, Vice President of Business Development at the decentralized record keeping startup Factom, stated in the article, "Pretty much everywhere data sharing takes place, blockchain has the potential to make it more efficient, create faster settlements and thereby higher economic activity with less corruption and fraud. Apart from that, it will lead to us living in more honest and transparent societies."
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