Chances are you’ve heard the buzzword blockchain tossed around, but what does a blockchain actually do? Is it actually this ground-breaking technology that everyone claims it to be?
Blockchain, in essence, is nothing more than a digital, decentralized ledger. In other words, it’s an immutable record book publicly available for anyone and everyone to view. The blockchain does one thing above all else: It replaces third-party trust with mathematical proof that something happened. This breakthrough in cryptographic technology allows 2 separate parties to transact value over the internet without an intermediary, a feature impossible before blockchain.
The blockchain was invented by Satoshi Nakamoto in 2009 to power Bitcoin and has found new applications since. The main dilemma that the blockchain solves is what’s known as the double spend problem. A double spend is a fraudulent attempt where the given set of the digital asset is spent in more than one transaction. Double spending stopped value from being sent across the internet before the blockchain came along. It solves this by allowing digital assets to be distributed, but not copied.
This opens up endless opportunities for new business models competing against middlemen services that charge fees and have slow processes. A wire transfer at a bank can take up to a week with obscene fees. One can use bitcoin to move millions of dollars in a fraction of the time and cost. Bitcoin is currently the most widely used blockchain network. At $10,000 per coin, the Bitcoin blockchain supports nearly $200B in value.
Next generation blockchain applications are currently being developed through cryptocurrencies like Ethereum. These blockchains can support anything ranging from tamper free archives of sensitive information like medical records to gambling card games that are provably fair. Traditional assets can also be tokenized on a blockchain. You can take a piece of real-estate or a share of a company and assign it to a digital token that can be traded around the world 24/7/365.
Blockchain technology is still in the early stages of development – like the internet in 2002. There are thousands of blockchains being worked on by the brightest people in the world. The question is: what blockchain is Amazon and which is Pets.com?
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